Mumbai: In spite of the rise in diesel prices after the Budget 2019 imposed the Re1/litre cess, truck rentals have been under pressure. This along with falling truck sales underscores weakness in the economy.
According to the Indian Foundation of Transport Research and Training (IFTRT), truck rentals are down by 11-14% on major freight routes from November, when a firm southbound trend in rentals was seen. Hopes that the hike in fuel prices may result in an uptick in rentals were dashed when the mid-July hike of 2.5% failed to sustain. Low freight movement has been the trend for many months. Reasons include low arrival of fruits and vegetables and other agri-produce such as wheat, and weak consumer spending both in rural and urban markets, leading to low freight needs.
A report by Edelweiss Securities Ltd. explaining the severity of the situation says it its report, “Freight rate data show hardly any uptick over the past 15 months due to weak demand and high trucking capacity. The marginal changes in freight rates have been more of fuel cost adjustments with no real growth in core truck rentals."
A drop in fleet utilisation levels has led to some transport operators even downing shutters. The low demand for trucks reflected in 18-25% drop in medium and heavy commercial vehicle sales (M&HCV) sales is not surprising. Spreading economic gloom is now showing in a drop in even intermediate and light CV sales.
The only silver lining of higher diesel prices is that large fleet operators who have annual contracts with companies could use the escalation clause to raise rentals because of diesel price hikes. “Parcel booking goods transport agents have raised retail freight changes by 5% in the last ten days," adds IFTRT.