Covid-19 impact: As debt piles up, transporters surrender or sell trucks

Financiers say they have not started repossessing vehicles just as yet.
Hit by fewer trips, high operating costs, and low freight, transporters in the unorganised road transport sector are either surrendering their trucks to financiers or selling them.

Since the end of the moratorium on August 31, truck operators have been struggling with their loan repayment. An estimated 30,000 trucks have either been impounded by financiers or surrendered to them, said S P Singh, senior fellow at the Indian Foundation of Transport Research & Training.

At least 40 per cent of the trucks were purchased just last year.

“The situation is bad and worsening,” said Balmalkit Singh, president of the Bombay Good Transport Association. Most of these are small operators, who account for 85 per cent of the transport sector.

Even as small and light commercial vehicles deployed by e-commerce companies and by the farm sector have been recovering at a fast pace, demand for medium and heavy commercial vehicles, particularly the ones used for haulage, remains subdued.

An overcapacity of such vehicles, low freight, and increase in input costs have weighed on the operators’ viability. During the moratorium, they couldn’t save enough and now they are unable to repay loans.

“Financiers are after the defaulters,” said Singh, pointing out that it was a secular situation across the country. A clearer picture will emerge by the end of the month, he added.

Inderpreet Singh Bhatia is a Navi Mumbai-based transporter whose trucks are deployed for the bulk transportation of LPG cylinders. Last month, Bhatia had to surrender 16 of his 23 trucks to the banks from which he sought loans. The banks sold them to clear Bhatia’s liabilities.

“Due to the sudden lockdown, the drivers fled to their native places, stranding the trucks in various parts of Maharashtra and West Bengal. With great difficulty, I managed to get the trucks back, but there was no business to keep them running. I was under pressure from the banks to pay,” he said.

Such are tales are aplenty. Gunjeet Singh Sangha, a New Delhi-based driver-turned transporter, had a fleet of 40 trucks. He has surrendered and sold 22 of them and wants to get rid of the remaining ones too and walk out of the transportation business.

“It has become an unviable proposition and my children are not keen to pursue this,” he said.

His trucks carry fresh fruit and grains from Nashik and Pune to the National Capital Region. The number of trips has shrunk to one or two a month as against five to six earlier. On the other hand, prices of diesel and tyres, and tolls have gone up, Sangha said.

Financiers say they have not started repossessing vehicles just as yet.

“While the stress was expected, one should guard against painting everything with the same brush,” said T T Srinivasraghavan, managing director, Sundaram Finance.

“Impounding is not done on impulse because it’s a serious decision. One has to look at the intention of the borrower and his circumstances, and then take a call.”

Those operating in the haulage segment have been hit the most because manufactured goods are not moving, he added.

Sundaram Finance’s gross non-performing assets have traditionally been below 2 per cent. “Based on the conversation we have had with our customers, 4-5 per cent of our loan book is likely to be restructured,” he said.

A top official executive of a vehicle finance company said: “We are not initiating any repossession of trucks now. We want to give our customers time to see if they can revive their business to at least 80 per cent of pre-Covid levels. If customers are surrendering trucks, they are doing so on their own.”

Another senior executive said most lenders (banks and non-bank finance companies) are assessing the working capital requirements of fleet operators.

“We are willing to fund 80 per cent of the working capital requirements based on FY20 projections. This should help them start taking orders once again,” he said.

While even before Covid, credit companies were offering working capital loans, for banks, this is a relatively new move to ensure financial stability.

But transporters like Bhatia say the reality is different.

“I have approached quite a few banks for a Rs 15-lakh working capital loan against the property I have but they have all refused.”

He also disagrees that financiers have not started repossessing.

“They have been after those who haven’t paid, I see it every other day,” he said.

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