Fuel sales tax hike double whammy for struggling road transporters

Owing to reduced demand and a drop in global crude oil prices, freight rates on key trunk routes came down 2-3 per cent in February, according to the Indian Foundation of Transport Research & Training (IFTRT), based in New Delhi.
The road transport sector, reeling from poor demand amid COVID-19, and shrinking output in the manufacturing sector and the capital goods industry, will be hit further with the hike on fuel sales tax.

 

Owing to reduced demand and a drop in global crude oil prices, freight rates on key trunk routes came down 2-3 per cent in February, according to the Indian Foundation of Transport Research & Training (IFTRT), based in New Delhi.

 

The only reprieve for transporters in the near to medium term is a bumper rabi crop, the harvesting of which has begun.

 

The government raised fuel taxes by Rs 3 per litre on Saturday though global crude oil prices dropped 30 per cent, dashing hopes of fuel prices falling rapidly over the next few days.

 

“Whatever price reduction happened in the past fortnight has been more than neutralised. We were expecting prices to come down by Rs 10-12 (per litre),” said S P Singh, senior fellow, IFTRT.

Transporters are struggling because everything is in disarray, he said, adding that the government should have been compassionate. What worries him more is the inability of transporters to pass on the hike to their customers, owning to weak demand.

 

Bal Malkit Singh of Bal Roadlines agrees. “Prices of all the other inputs— be it insurance, toll, registration, or tyres — have gone up sharply. Lack of demand is a handicap in passing on the increase. Close to 40 per cent of the trucks in the market are idling. The only silver lining is the procurement of rabi crops, which has started.”  He said cargo volumes, under pressure due to slowdown, would go up by 25-30 per cent in the next 15 days.

 

Forty per cent of trucks are dependent on agri-produce. Bumper production will help in keeping their head above water, he said. According to the second Advance Estimates of production of major crops for 2019-20, released by the Department of Agriculture, grain production is estimated at a record 291.95 million tonnes, up by 6.74 mt over 285.21 million last year.

 

A record production of agri-commodities will help operators that are in the retail segment and whose vehicles run on routes that do not require national permits.  “Unless manufacturing and other core sectors pick up and demand starts improving, there’s no respite for our sector,” he said.



Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel