Despite the rise in diesel prices by about 1.65% (in Delhi) during December, freight rates declined by nearly 3-4%, according to transport research body Indian Foundation of Transport Research and Training (IFTRT). However, neither declining freight rates nor higher diesel prices impacted sales of commercial vehicles (medium and heavy trucks used for carrying goods), which grew 39% month-on-month in December. Demand for freight movement came mainly from the steel and cement sectors, while weakness was seen in the agriculture and SME sectors. What also contributed to the depression in freight rates, according to SP Singh, senior fellow at IFTRT, was the oversupply of trucks in the open market, as heavy discounting of around 12-15% and price hikes by truck makers due to the mandatory ventilation system in the vehicle cabins from January 1 led to some pre-buying in December.
Freight rates for trucks that work on a contractual basis with corporates or logistics firms did see an increase of up to 5% in December, but they constitute only about 25% of the total industry freight carrying capacity, according to IFTRT. Freight rates have stayed flat in January too, said Singh, despite diesel prices touching a high of Rs 61.74 per litre in the first half. Freight rates may remain negative-to-flat this month owing to the uncertainty over the impact of introduction of the E-way bill from February 1, he said. Trials for the E-way bill have begun on Tuesday. Vinod Sahay, CEO, Mahindra Truck & Bus, feels that the freight rate movement is not going to impact demand for trucks, at least in near term. He said, “While freight rates going higher is a positive sentiment for transporters, it does not necessarily impact sales of M&HCVs.
