Truck rentals up 9-14% in first half of June on low base and unlocking

Analysts attribute it to diesel price hike, caution of a long road to recovery

Truck rentals have risen sharply across key trunk routes in the past fortnight as states started unlocking in phases.  Helped by an increase in the factory output of most bulk goods and last year’s low base, freight rates--a proxy for economic activity--rose by an average 12 per cent, according to the Indian Foundation of Transport Research & Training (IFTRT), a New Delhi-based think tank.

After the IFTRT statement on Tuesday that truck rentals were up 9 to 14 per cent, senior fellow and coordinator SP Singh said,  “Though on a low base, this is the highest jump in the fortnightly rental we are seeing since March.”

But analysts are cautious. Ajay Srinivasan, Director, CRISIL Research, said while the increase in the freight rates looked encouraging, the road to full recovery would be long. “While it does reflect the demand recovery to some extent, a lot of it is a natural pass-through due to the hike in diesel prices.

The demand and supply dynamics will define the future trajectory of freight rates,” he said.

With more than a third of the trucks still idling, the recovery would not be complete till most of the current fleet is deployed, he added.  Western and northern states are leading the demand momentum and an increase in offtake in the agri commodities and bulk goods has also helped.

Diesel prices have gone up by Rs 2.60 per litre, touching Rs 87.50 a litre (excluding Delhi-NCR) from Rs 85.01 a litre during the last fortnight. Truck tyre prices too have hardened in the market by 6-8 per cent. The two constitute 90 per cent of variable operating costs of medium and long haulage heavy multi-axle 18 tonne trucks , which are most used by fleet owners to ferry cargo of all loads and sizes, IFTRT pointed out.

Jasjit Sethi, CEO, TCI Supply Chain, said it could take up to a month for normalcy to be restored. “The spate of lock-downs has affected both industries and retail,’’ he said. It has resulted in an imbalance leading to a 5-20 per cent hike in freight rates, according to Sethi. The steep fuel prices and driver shortage have added to the problems, he pointed out.

Following a relaxation of lockdown across the country,  factory output of bulk goods, merchandise and witnessed a 25-30 per cent jump on a low base. Fruit, vegetable and other consumables have maintained a steady flow in the last 15 days, said the think-tank.

The jump in rentals has cushioned the impact of the diesel and tyre price hike, while the higher factory output has helped in improving the fleet utilisation. From 45-50 per cent last month, fleet utilisation has reached around 65 per cent.

“Close to 30-35 per cent trucks are still idling,” said Balmalkit Singh, chairman, core committee, All India Motor Transport Congress. Though it’s a marked improvement from last month, the pain for the transport sector will linger on till all the trucks are deployed and rates continue to firm up, according to Singh. Meanwhile, truckers fear rising defaults if no relief is granted.