Rising fuel prices and quiet road freight (transport) fraternity may well indicate a lull before the storm.

Story by Bhushan Mhapralkar

Rajesh Patil (name changed on request) is a small transporter at Belgaum with eight tankers that carry molasses from sugar factories in the region down south for further processing. Seven out of the eight trucks he owns are in operation currently. While one truck is undergoing repair (an activity hampered by the shortage of skilled workers), he is experiencing little demand for his operational fleet. The lack of demand after two months of the compulsory shutdown is adding to his worries. He is also worried about the onset of the rainy season and the floods it could bring. Floods last year in the region not only hampered business but also damaged many trucks. Stating that the compulsory shut down for two months led to drivers, workshop technicians, spotters and many such people with a hand-to-mouth existence to turn to weird jobs like selling fruits, vegetables, and liquor to make a living, Patil informed that the fate of transporters and engineering goods manufacturers is the same. “We have trucks but no drivers to drive them, likewise the engineering goods manufacturers have the machines but no workers to operate them,” he added.

Of the opinion that the skilled workers who were until now making his profession and many others professions tick have warmed up to new streams of avenues and are not keen to return to their earlier work areas, Patil averred that his priority is to stay afloat. “For us, the foremost challenge is to survive,” he said. Battling shortage of drivers among others against the background of steady fuel price rise, Patil is worried that he will have to fold his business very soon. From his talk of despair, it does not take long to understand that he is trying hard to not join the ranks of many fellow businessmen who found it prudent to close down their business and simply sit at home. The going is tough than it was last year, when demand started waning, he rued. The Covid-19 induced lockdown has completely changed the business environment and there is no handholding from the government to ensure survival, he expressed. Stating that he can’t even think of availing a loan to save his business that is about the same scale as a typical SME, Patil remarked that he is hoping for demand to make an early comeback. If it will make an early comeback, is hard to answer. What in part could answer if demand will make an early comeback is the price of the fuel, said an industry analyst. He pointed at the everyday fuel price rise currently on (diesel at the time of writing this article had gone up by roughly Rs.10 per litre), and opined that the downside risk to the economy seems to have further increased.

While truckers and bus operators fight for waiving of road toll tax, protection for drivers against health hazards, no hike in insurance cover, and a few other things until the business environment and the economy improves,, the rise in fuel prices is baffling all and sundry. Remarked a medium-scale transporter from Pune on the condition of not revealing his name, that the fuel price rise has led to an ironic situation where players with deep pockets seem to eat into the business of those players whose pockets are not as deep. Not agreeing to the prospect of big fish eating the small fish however, he averred that a new business order is in the making as the country and its businesses come out of the shadow of Covid-19. Said a truck operator from Indore, again on the condition of not revealing his identity, that there is no one to listen to their plight. Not even those at the local and regional level, and nor those at the centre.The recent phenomenon of continuous fuel price rise looks like ‘the fence is eating the crop,” he rued. Of the opinion that not a single fuel hike has been rolled back in the last 30 years, Mahendra Arya, President – All India Transporters Welfare Association (AITWA), mentioned that (fuel) it is perhaps the only source of income for the government. Stressing on the current environment, which is demanding, Arya expressed, “No matter how much one protests, there will be no roll-back.” So, it is better that we transporters concentrate on more important and immediate challenges at hand, he added.

On the condition of not disclosing his name, a Nagpur-based transporter said that he expects a big chunk of single or two truck operators to shut shop in the current environment where the fuel prices are being hiked every day. There’s already low demand, and the constant rise in fuel prices is only depleting any possibility of making money, he added. With the single and two truck operators amounting to roughly 75 per cent of the road freight (transport) fraternity, it would be safe to assume that a big chunk of the road transport is badly affected. If it will perish will depend on how soon or how skillfully they pass on the fuel price rise to their clients, mentioned a transporter from Mumbai. He stated that the consumer should have benefited from lower (international crude) fuel prices, but it is the government that seems to be rather keen. Remarked an industry observer that the structure of fuel in the country is such that the government is always the winner. It is the one that subverts price decontrol. It is the one that leaves the consumers and fuel retailers behind to trail along; to play catch up. Coming at a time when trucker and bus operators are resuming business after a compulsory leave of over two months due to the Covid-19 induced lockdown, the fuel price rise is said to be hurting where commodity prices, and in-turn inflation would shoot many times up. Informed Prasanna Patwardhan, President, Bus & Car Operators Confederation of India (BOCI), that the fuel price hike would have a debilitating effect on public transport sector. It would push the sector, which is already under severe duress due to policy apathy, further down.

Of the opinion that the (fuel) price hike will force operators to pass on the hike to passengers, sending ticket prices through the roof, Patwardhan remarked that fuel price rise is driving up the prices of all the commodities and services. Mentioned an industry analyst, that the current fuel price rise is wiping away almost any chance of businesses getting back on their feet after a two-month long hiatus. As they open their businesses, they will suddenly warm up to the fact that the people of this country are seriously lacking in buying power. The very ability that would put the country on a high growth trajectory. With the government said to manage its deficit against the lack of sizeable income sources in the backdrop of Covid-19, the worry of inflation rising are making a comeback. If inflation does rise, it will create ugly and unprecedented challenges, said an analyst. With taxes making up for nearly two-thirds of the retail selling price, the recent phenomenon of fuel price hikes is going to burn a deeper hole in the already depleted pockets of Indian consumers, further subduing the chance of an early economic recovery, said the industry observer. He informed that a typical truck consumes 45000 litres of diesel at a rate of 2.5 km per litre per year, which amounts to Rs.34 lakhs approximately.

Stressing that fuel costs amount to roughly 57 per cent of the total operating costs of a CV operator, he reasoned that truck and bus operators look to be under severe duress. Mentioned an industry analyst that the rise in fuel prices starting early June 2020 is partly linked to a 162 per cent rise in Brent crude oil prices, from a low of USD 16 per barrel in April 2020 to rough USD 42 per barrel by June 19, 2020. Providing a peep into the other side of the development, he remarked further that the Indian OMCs suffered heavy losses when global crude oil prices crashed in March 2020. Due to the lockdown, the rise in excise duties and cess was not passed on to the consumers but absorbed by the OMCs. It is only now that they have begun to pass them to the consumers. As CV operators struggle to get back on their feet, claiming to have received no attention from the government and in the face of little demand for work, the hike in diesel prices is said to to be affecting the demand for BSVI vehicles as well. With many state governments hiking VAT in addition to an increase in excise duties, rising diesel prices are said to be putting CV operators in a spot against numerous other challenges they are facing.

Many, mentioned a state transport association member, will be wiped out as they are already on the verge of going under. He pointed at how their debt is rising and the chances of the situation spiralling out of control once the bank moratorium period is over.
The most challenging period for the 70 to 80 per cent of the road freight (transport) fraternity will be only after the moratorium period is over and the operating costs simply go out of control, stated another industry observer. He mentioned that the rise in diesel prices may help the governments to keep their revenue streams alive, it is very likely to come at the cost of the country’ supply chain collapsing. Explaining that transporters with fixed (longer-term) contracts will have only limited scope to renegotiate their contracts on account of the rise in fuel prices, the observer said that only those who have the ability to absorb the price increase to an extent will very likely stay in business. Against the lack of demand, the hefty diesel price increase will only lead to truckers refraining from bringing their trucks on the road, said an observer. Those who have realised the value of their trucks or close to doing so will quite likely to scrap them and reduce the scale of their business in an attempt to sustain their business, he added. He said further that the better road quality network has ensured that the CVs are able to return higher efficiency, but that is not all, as freight rates haven’t increased in the recent times, the earning ability of truckers in the face of regulatory changes, compliance needs and market requirements has taken a beating.