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Truck rentals take huge hit on drop in freight

R Ravichandran
Truck rentals take huge hit on drop in freight

Truck rentals across the country are in a jittery mode and the dealers and banks are holding a few queries for fleet replacement as compared to last year.

Reports coming from key trucking and trade centres as well as APMCs at a time when the national elections are in the last leg, the volumes are witnessing a deep cut with oversupply of heavy duty trucks in the freight market, said Indian Foundation of Transport Research and Training (IFTRT), the apex body tracking the truck industry for more than two decades.

In eastern-southern parts of the country, post Fani cyclonic storm damages and torrential rains in Assam, Bengal, Odisha and Andhra Pradesh, trucking activities have dropped between 30-40%.

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In rest of the country, the extra loads generated from summer fruits, vegetables and wheat/cereal were not adequate enough to make up for the sharp drop in cargo offerings from factory gates as consumers are holding back or have reduced their regular purchases of non-durable and high value durable items like white goods and electronic items and automobiles. There have been production cuts and intermediate inputs were getting piled up at production centres, the foundation pointed out.

Moreover, the cloud over steep hike in fuel prices is hovering around for sometime now and is expected to go up once polling is over across the country. The Brent crude oil price is hovering above $70 per barrel, therefore one can understand that the domestic market will be in dizzy as well as worried. Most likely, the truckers may not be able to absorb the impending diesel price hike by the OMCs, who are currently holding back daily fuel revision for various reasons, IFTRT further said.

On top of this, with six phases of election getting over, reports from 75 trucking and trade centres have shown extreme nervousness owing to uncertainty on who will form the new government at Centre, including the possibility of a hung Parliament, despite predictions of NDA having a bright chance.

Given the above scenario, the truck rentals are likely to remain in uncertain territory, at least till September 2019 although unscrupulous businesses and their ilks among transporters/GTAs/unregulated common carriers, IFTRT pointed out.

The foundation further said that refinance by NBFCs on encumbrance free truck fleet is going to be a key route to generate working capital by liquidity starved truck owners to survive in a weak freight market. There is no shortage of liquidity with NBFCs/auto finance banks for truck fleet expansion as fleet owners are saddled with excess fleet, low utilisation for last 6 months and the situation gets accentuated in trucking business with steep drop in revenues and resulting cash flow problem.

Hence, with heavy truck sales getting postponed till next quarter end, there is significant delinquencies building up towards CV financiers.

Not only market load has dropped sharply since last month, but also fleet employment in infrastructure projects top has dwindled and so are repayment to fleet owners from big infrastructure companies. The 30 days credit has jumped to 60 to 90 days now.