Truck rentals skid 25-30% after currency purge

A transporter said trucks on rent for Rs 50,000 are now being hired at Rs 37,500

Truck rentals witnessed a sharp drop of 25-30% in November, especially after the announcement by Prime Minister Narendra Modi to scrap currency notes of Rs 500 and Rs 1000 denomination on November 8.

There was an uptick in truck rentals in the month of October.

"Trucks that were available for a rent of Rs 50,000 are now being hired at Rs 37,500," a transporter said.

There was a steep drop in cargo offerings across the board as retail cargo booking came down leading to a decline in the optimum utilization of the truck's loading capacity by 40% as all the stakeholders in the sector are under tremendous stress, he said adding that the entire value chain has broken.

Truck rentals plunged immediately after currency demonetisation as the business, sale and purchase across the board and despatches from different delivery centres virtually came down significantly with immediate effect.

There are almost 85 lakh goods vehicle permit holders for 5 tonnes to 49 tonnes motor vehicles in the country. Another consequence of the overnight demonetisation decision was a 40% drop in sales of heavy trucks.

The exchangeable money in the transport trade, which has been battling cash shortage for the past 2-3 years, has dried completely, S. P. Singh, a senior fellow at Indian Foundation of Transport Research and Training, said.

He said that the truckers have largely been unaffected by demonetisation despite the latter crying foul over the sudden government decision.

The variable cost comprising diesel, tyre wear and tear and the toll has gone down.

On the contrary, a large number of common carriers or transport intermediaries have been able to sink their unaccounted cash via diesel purchase by truck operators, to whom they hire for cargo deliveries received from consignors resulting in almost Rs 85,000 crore of old invalid currency having been converted into new in next few months, Singh said.

He said that otherwise normally cash-starved transporters or transport intermediaries suddenly opened their cash chests to truckers with Rs 500 and Rs 1,000 currency notes as full truck rental advance payment for full round trip on trunk routes for paying diesel expenses.

Under normal circumstances a truck driver is given 25% -40% advance for their journey to transport cargo provided by the transport intermediaries, this payment would now be received at a later date in the new currency.

The truck rentals went up during October by 3%-3.5% on the back of extra pick up in the festival season, Kharif crop harvest and substantially high consumer spending with low food, fruit and vegetable inflation providing a quantum improvement in cargo offerings.

Medium and heavy commercial vehicle sales witnessed a double-digit drop in sales in the month of September, however, truck rentals displayed a jump of 4%-5% increase on trunk routes due to Rs 2.98 per litre hike in diesel price and improved round trips due to significant jump in cargo arrival into anaj mandis by 20%-25% from fruits, vegetables, pulses and other food items, IFTRT said in its report.