Home >News >India >Lockdown impact: In acute distress, many small fleet operators may exit business
Since the 25 March lockdown, only 10% of the around 1.2 million trucks with national permits have plied on the roads. (Photo: Reuters)
Since the 25 March lockdown, only 10% of the around 1.2 million trucks with national permits have plied on the roads. (Photo: Reuters)

Lockdown impact: In acute distress, many small fleet operators may exit business

  • With drivers unavailable, lack of cargo to ferry around and EMIs to be paid, it is an uncertain future for small fleet owners
  • Road freight transport industry, with an estimated size of 5,200 billion in FY20, could lose at least 15% in FY21

MUMBAI: 65-year old Gurdas Singh from Meerut is an anxious man these days. His two trucks, which he used to transport electronics goods such as air-conditioners, coolers and fans to cities like Ambala, Chandigarh, Lucknow, Kanpur, Bhopal and Jamshedpur, have been sitting idle for two months.

The lockdown saw his drivers head back home and now despite the relaxations, he has been unable to convince them to return.

Many small fleet owners across the country are facing similar issues. With drivers unavailable, lack of cargo to ferry around and EMIs to be paid, it is an uncertain future for small fleet owners.

The representative bodies of truckers and fleet operators believe that if the demand-supply situation does not improve, as much as 50% fleet operators---from single truck owners and those with more than five trucks--may be forced to liquidate and exit the business in 6-8 months.

"If 25,000 containers are to be moved daily at the Jawaharlal Nehru Port, only 5,000 of them are being moved due to shortage of trucks. These trucks are not operational because of the absence of drivers," Mahendra Arya, national president, All India Transporters Welfare Association (Aitwa) told Mint.

Arya said for fleet operators, liabilities have been mounting amid lack of business.

According to industry analysts, low utilization levels will make it difficult for small fleet operators to recoup operating expenses.

“The fixed cost, including manpower salary, vehicle maintenance, interest on loan, amount to 25-30% of the average monthly cost for a fleet operator. The remaining would be variable cost including fuel expenses. Long haul trucks will have to run at least 50% of the time to make money at PAT level. This is extremely difficult right now because of absence of adequate freight," said Hetal Gandhi, director, Crisil Ltd.

According to Gandhi, 30-35% of all trucks are operational at the moment.

She forecast that road freight transport industry, with an estimated size of 5,200 billion in FY20, could lose at least 15% in FY21.

Typically, the rainy season is a lean period for the business as truck drivers head to their villages for sowing of kharif crops. "They should return to work by August- September by when industrial activities are expected to resume thereby driving realizations and fleet utilization in H2 FY21," she added.

However, not all is doom and gloom.

Trucker Ladhu Ramji from Barmer, Rajasthan, who could not pay EMIs for April and May as his vehicles were idle during lockdown, resumed business from 15 May transporting wood and tiles from Kandla Port (Gujarat) to Jammu & Kashmir and bringing back rock aggregates to Punjab and food grains to Rajasthan.

“Now that we have resumed business, I will pay my EMI in June," Ramji told Mint.

According to Umesh Revankar, managing director and chief executive, Shriram Transport Finance Company Ltd, up to 70% of all trucks should be back on the roads as early as June.

Revankar said resumption of cement production, construction activity and rising consumption of power leading to coal movement and similar factors will gradually drive fleet utilisation.

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