IFTRT
While truck rentals stabilized during December 2010, but year 2010 witnessed phenomenal increase of 24.1% - 39.6% on trunk routes with robust manufacturing growth and high consumer spending on the back of over 8.5% GDP growth, contributing to runaway inflation in the economy
Inflation
While, Government has kept diesel price hike on some leash by restricting public sector oil companies to jack-up fuel prices despite increase in international crude prices, the truck prices, the tyre prices and other inputs which go into the operation of trucking industry have been moving up consistently during last 12-14 months. The price increases are more than double-digit for trucks and tyres along with regular upward revision in commercial vehicle finance rates by Banks and NBFCs. Supported by over 8.5% GDP growth and 10%-15% growth in cargo offering during the year 2010, the truck transport freight charges went virtually berserk, leapfrogging by 24.1% - 39.6% since December 2009. Incidentally, the manufacturing sector, import-export trade and producers of industrial raw materials and agri commodities have not only been able to pass on the steep increase in goods freight charges to the end consumer instantaneously on every occasion, but have also made considerable jump in their profitability. In addition to this, the fiscal stimulus offered by the Central Government during year 2008-09 has, generally, been usurped by the industry and trade in the country and therefore have kept the prices of products & commodities at the high level, thereby, strengthening inflationary tendencies in the economy.
As a matter of fact, the contribution to the inflation is not limited to fruits and vegetables alone. Manufacturing sector, across the board, has been pushing up prices of bulk items like cement, fertilizers, steel, copper, automobiles, tyres and components. In case of general merchandise, FMCG, consumer durables, electronics items, garments/hosiery, leather goods, paper & stationery products, the prices have jumped up by 10%-18% during last 12-14 months. While the Government seems to be displaying its anxiety in tackling the food inflation, it has not given much thought in curbing inflation in manufacturing sector, which has also contributed handsomely in fueling the inflation in the economy. The prices jacked up by transport sector, manufacturing sector and other services are not appropriately mirrored in the Wholesale Price Index (WPI). With the healthy growth in incomes of vast expanding middle class, the consumer spending remains unbridled and virtually least affected by the increase in prices of general commodities and products. For instance, this year, the apple fruit production touched a record 4.1 lakh crates in the apple growing belt from the previous year production of 3.2 lakh crates but the apple prices, on the back of increase in consumption, have gone up 20%-25% for different varieties. The same happens to be the case for manufacturing products and items due to increased demand from the middle class consumers across the country.
Truck Rental Trends
Unlike the annual feature of routine decline in truck rentals during December every year since year 2005, the December 2010 witnessed gains in truck rentals on the back of steep increase since December 2009 to the tune of 24.1-39.6% on trunk routes, as this was supported by consistent double-digit manufacturing growth, import-export cargo growing by 18%-20% and increased income levels & consumers’ spending resulting from over 8.5% GDP growth. The table explaining yearly truck rental growth for December 2009 to December 2010 period.
Truck Rentals Outpacing General Inflation
Apart from increase in diesel price totaling Rs.5.40 per litre since last year i.e. Rs.36.60 to Rs.42.00 per litre, the tyre prices too went up by 13%-15% i.e. from Rs. 24,000 a pair to Rs.27200/- a pair, resulting in monthly increase in tyre cost to a two-axle 16.2 ton truck by Rs. 2,400. The diesel and tyre constitute 90% of the variable operating expenses for a truck operating on trunk route. Combining the impact of variable operating cost increases and other related routine expenses, the truck rentals have been outpacing the increase in various costs per month because the freight offerings during year 2010 have gone up by over 10% in the case of bulk cargo like cement, chemicals, iron and steel, metals and marbles, 18%-20% in the case of general cargo/merchandise and over 25% from high value goods like white goods, electronic items, readymade garments, automobiles etc. By conservative estimates, the overall cargo loading/despatches by truck transport have touched 3,700 million ton during the year 2010 from 3,200 million ton during the year 2009. i.e. an increase of 15%. Moreover, rampant overloading of trucks by 50% to 150% in excess of their legal load limit has further added to the revenues of fleet operators with only 25% - 30% increase in operating cost. This practice of illegal overloading, however, has increased monthly outgo on highways for free movement through various RTOs across the States i.e. a monthly expense on this count for passing through 5 States has gone up from Rs.15,000/- to Rs.20,000/- during year 2010. The expansion in 25.2-ton multi-axle trucks have further helped the truckers to indulge in overloading with low per ton/km operating cost.
The 80% of the national cargo is moved by road transport through over 5.5 million goods carriages / trucks in the country.
While truck rentals stabilized during December 2010, but year 2010 witnessed phenomenal increase of 24.1% - 39.6% on trunk routes with robust manufacturing growth and high consumer spending on the back of over 8.5% GDP growth, contributing to runaway inflation in the economy
Inflation
While, Government has kept diesel price hike on some leash by restricting public sector oil companies to jack-up fuel prices despite increase in international crude prices, the truck prices, the tyre prices and other inputs which go into the operation of trucking industry have been moving up consistently during last 12-14 months. The price increases are more than double-digit for trucks and tyres along with regular upward revision in commercial vehicle finance rates by Banks and NBFCs. Supported by over 8.5% GDP growth and 10%-15% growth in cargo offering during the year 2010, the truck transport freight charges went virtually berserk, leapfrogging by 24.1% - 39.6% since December 2009. Incidentally, the manufacturing sector, import-export trade and producers of industrial raw materials and agri commodities have not only been able to pass on the steep increase in goods freight charges to the end consumer instantaneously on every occasion, but have also made considerable jump in their profitability. In addition to this, the fiscal stimulus offered by the Central Government during year 2008-09 has, generally, been usurped by the industry and trade in the country and therefore have kept the prices of products & commodities at the high level, thereby, strengthening inflationary tendencies in the economy.
As a matter of fact, the contribution to the inflation is not limited to fruits and vegetables alone. Manufacturing sector, across the board, has been pushing up prices of bulk items like cement, fertilizers, steel, copper, automobiles, tyres and components. In case of general merchandise, FMCG, consumer durables, electronics items, garments/hosiery, leather goods, paper & stationery products, the prices have jumped up by 10%-18% during last 12-14 months. While the Government seems to be displaying its anxiety in tackling the food inflation, it has not given much thought in curbing inflation in manufacturing sector, which has also contributed handsomely in fueling the inflation in the economy. The prices jacked up by transport sector, manufacturing sector and other services are not appropriately mirrored in the Wholesale Price Index (WPI). With the healthy growth in incomes of vast expanding middle class, the consumer spending remains unbridled and virtually least affected by the increase in prices of general commodities and products. For instance, this year, the apple fruit production touched a record 4.1 lakh crates in the apple growing belt from the previous year production of 3.2 lakh crates but the apple prices, on the back of increase in consumption, have gone up 20%-25% for different varieties. The same happens to be the case for manufacturing products and items due to increased demand from the middle class consumers across the country.
Truck Rental Trends
Unlike the annual feature of routine decline in truck rentals during December every year since year 2005, the December 2010 witnessed gains in truck rentals on the back of steep increase since December 2009 to the tune of 24.1-39.6% on trunk routes, as this was supported by consistent double-digit manufacturing growth, import-export cargo growing by 18%-20% and increased income levels & consumers’ spending resulting from over 8.5% GDP growth. The table explaining yearly truck rental growth for December 2009 to December 2010 period.
Truck Rentals Outpacing General Inflation
Apart from increase in diesel price totaling Rs.5.40 per litre since last year i.e. Rs.36.60 to Rs.42.00 per litre, the tyre prices too went up by 13%-15% i.e. from Rs. 24,000 a pair to Rs.27200/- a pair, resulting in monthly increase in tyre cost to a two-axle 16.2 ton truck by Rs. 2,400. The diesel and tyre constitute 90% of the variable operating expenses for a truck operating on trunk route. Combining the impact of variable operating cost increases and other related routine expenses, the truck rentals have been outpacing the increase in various costs per month because the freight offerings during year 2010 have gone up by over 10% in the case of bulk cargo like cement, chemicals, iron and steel, metals and marbles, 18%-20% in the case of general cargo/merchandise and over 25% from high value goods like white goods, electronic items, readymade garments, automobiles etc. By conservative estimates, the overall cargo loading/despatches by truck transport have touched 3,700 million ton during the year 2010 from 3,200 million ton during the year 2009. i.e. an increase of 15%. Moreover, rampant overloading of trucks by 50% to 150% in excess of their legal load limit has further added to the revenues of fleet operators with only 25% - 30% increase in operating cost. This practice of illegal overloading, however, has increased monthly outgo on highways for free movement through various RTOs across the States i.e. a monthly expense on this count for passing through 5 States has gone up from Rs.15,000/- to Rs.20,000/- during year 2010. The expansion in 25.2-ton multi-axle trucks have further helped the truckers to indulge in overloading with low per ton/km operating cost.
The 80% of the national cargo is moved by road transport through over 5.5 million goods carriages / trucks in the country.
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