In pursuit of business

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Lack of business has the transport industry worried.

Story by: Anirudh Raheja

Satwinder Singh Sukhala, a small time business man who repairs truck radiator is worried. He is in search of work, and there isn’t much coming his way. Until last month, that is before the GST rolled out, Sukhala did not get time to look up. There were times when he spent 12 to 14 hours working on radiator jobs at his small shop in Delhi’s biggest trucking hub Sanjay Gandhi Transport Nagar, without taking a break. There’s been a turnaround. Rather than carrying out repairs, Satwinder has come to spend time in worrying about meeting his expenses. Other than assure the people he deals with of a timely payment, Sukhala has little else to do. Time he knows is running out. But having spent so many years of his life repairing radiators, Sukhala is suddenly feeling like a fish out of water. The trade has taken a deep dive. Almost 90 per cent of it is lost. Pointing out to a line of trucks parked, he states that this is not a natural occurrence. Never did he see trucks standing for more than eight hours at a stretch he mentions. They can be seen parked at the same place for days together.

Post the GST roll-out, various stakeholders of the CV industry have been finding their means of livelihood go into a limp mode. Affected by demonetisation given the cash-intensive nature of the business, the CV industry last experienced a hike in freight rates in March 2017. Since April 2017, freight rates have been slipping. On April 01, 2017, the country migrated to BSIV emission norms. It proved to be a disruption. Sales shrunk. Business was already slowing down at the tyre shops, spares retailers, body builders, and dhabas. GST seems to have caused them slow down some more. Insisted Sukhdev Singh (name changed on request) that the cargo movement has gone south by almost 60 per cent. Fleets are not rolling the way they once did. Finding new load is proving strenuous. One gets a feeling that uncertainty has set in. The entire chain seems to have come to a halt. Malkit Singh, a transporter in Sanjay Gandhi Transport Nagar said that there has been a severe set back. “I don’t even get half the trips out of the eight to 10 trips of truckload I used to get until two months ago on the Delhi-Bangalore route,” mentioned Singh. Another transporter Ritesh Prasad averred, “I used to have six to seven orders every month for Mumbai. Half the month has already passed, and my third bill is waiting to take off.”

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Used to carrying out transactions without proper paperwork, the transport industry is finding it tough to crack the GST. Used to cash transactions with not much record keeping, spare parts retailers and shops selling lubes are seeing their business dwindle. The drop is said to be so drastic, that a six months timeline looks overtly optimistic. According to a report by the Indian Foundation of Transport Research and Training (IFTRT), almost two and a half million trucks are involved in cargo movement and just ten per cent of them comply with the carriage by road act. There have been very few takers for new orders what with the execution of older orders difficult. Many still don’t comply with GST norms, which is looked upon as a mechanism that includes vigorous tax checks across all levels. Transporters seem extremely wary about the new regime. They are very cautious, and have been pushing the traders for GST numbers. They are not willing to engage with them in case they do not furnish the GST details.

According to an industry source, the number of trucks entering Delhi, or passing through the capital city, has gone down by more than 50 per cent. He reasoned that companies are in a wait and watch mode because of the huge uncertainty that prevails. They are looking for a cleaner air, he said. Since 90 per cent of the transport industry falls under the unorgaised domain, it is looking difficult for them to sustain. The high costs associated with fulfilling the requirements of GST will simply make it unsustainable. About 25 kms from Sanjay Gandhi Transport Nagar, over 5000 trucks are said to have come to halt in Faridabad. A major drop in supply orders is said to be reason. The general secretary of All Faridabad Transporters Association, Subhash Kaushik, is known to say that a majority of trucks are parked in the Transport Nagar, and other places due to lack of orders.

Drivers are happy

With many trucks parked for days on end, drivers are a happy lot. A regular on the Delhi-Kashmir route, Mukesh Pratap is happy because it takes him four days to reach Kashmir. He used to take five days earlier, even six. The disappearance of VAT related check posts has ensured time saving. We no longer have to wait to pay inter-state taxes, mentioned Pratap. With the instances of regular stoppages and checks at the city entry and exits points having gone down, truck drivers are finding it easier to ply. They now spend more time on the road than off it The time taken to reach the destination has gone down, stated Mahadev Ghori, who shuttles between Delhi and Jaipur. Opined an expert, that the gains may be short-lived. Once more and more trucks hit the road, the density of traffic will increase. The time taken to reach the destination will go up. Over a cup of tea at the Sanjay Gandhi Transport Nagar, a driver expressed that checks are still continuing. Two other drivers said that arbitrary charges are still being levied. It is not as seamless as one would think of therefore, he mentioned. With over 50 per cent drop in fleet utilisation, parked trucks have begun to create a bottleneck. Transporters point at suppliers and express that they have stopped placing orders to avoid any problem during or after transportation. They fear that the business should not plunge below 20-25 per cent. We are already struggling to recover from the impact of demonetisation, and this development has hit us once again, said a transporter on the condition of not disclosing his name.

Looking at a buoyant future

If the ground reality at the Sanjay Gandhi Transport Nagar, and at Faridabad reflects a picture where business has been impacted by GST, union road transport minister Nitin Gadkari is claimed to have said that GST will curtail 14 per cent of the logistics costs the country incurs. Claimed an industry source, that transparency will increase, and bring down the costs incurred by logistics companies by over 20 per cent. Analysts at ICRA forecast that GST will improve the flow of goods due to the disappearance of multiple tax liabilities. They are of the opinion that the turnaround time will drastically improve. Truckers will no longer have to stop at borders, and to pay tax at various levels. With hubs determined on logistical considerations rather than state boundaries according to Prof. G Raghuram, Director, IIM-Bangalore, the hub and spoke model of transportation is expected to turn sharper. If this points at a buoyant future, the shift towards higher tonnage trucks and the need to maintain records is expected to influence a market shift to larger fleets. It is the large fleet operators who will make a large chunk of the organised sector. Organised players will help their customers get input tax credit. This will lead to smooth flow of goods albeit in the form of bigger trucks.

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The e-way bill

Starting October 2017, goods that cost more than Rs.50,000 will have to be pre-booked under GST, and an e-way bill will have to be raised. The e-way bill is aimed at seamless movement of goods between two destinations. The e-way bill will be supported by an infrastructure that involves tax officials who will verify with hand held devices. Currently under development at the National Informatics Centre (NIC), the e-way bills will be valid up to 20 days depending upon the distance to be traveled. This would most likely be one day for 100 km, three days for up to 300 km, five days for up to 500 km, and ten days for up to 1000 km. The central government has already relaxed the time-lime to 20 days (from the earlier 15 days) for a travel of over 1000 km. Even though various states like Andhra Pradesh, Bihar and West Bengal already have e-way bill in place, nation wide implementation will call for a frame work of rules. Industry stakeholders are of the opinion that it will take six months for sentiments to improve. For the business to get back to normal, they are divided in their opinion on how long it will take.