Diesel price hike pushes freight rates up by 15% on trunk routes
After being subdued for several months, freight rates on key trunk routes have gone up by 10-15 per cent following a steep hike in diesel prices. It even surpassed pre-lockdown rates, according to the Indian Foundation of Transport Research and Training (IFTRT).
The hike in diesel prices have a direct correlation with the freight rates with fuel as a percentage accounting for more than 65 per cent of the variable operating costs for transporters.
The increase in freight rates establishes the correlation. As on June 26, freight rate for a round trip to Delhi from Mumbai was up 16 per cent to ~1.05 lakh from ~88,000 on June 1. It was even higher than the rates seen before the lockdown. One had to pay only ~84,000 for a similar round trip on March 1. Other routes also showed similar spikes.
“In some routes where the demand is strong, the increase is as much as 20 per cent,” said SP Singh, senior fellow at IFTRT. “The manufacturers are panicking as they don’t want inventory pile up and are willing to pay more. First, they were not able to produce due to the lockdown. Then, they weren’t sure of the demand. Now that demand is picking up gradually, they don’t want to be saddled with stock and are therefore not complaining of high freight rates,” he said.
“This (hike in diesel price) will not help anyone, neither transporters nor users of the transport services,” said Balmalkit Singh, chairman of the core committee at All India Motor Transport Congress.
Shamsher Dewan, vicepresident and sector head, corporate ratings at ICRA, said, “The financial viability of fleet operators has been under stress due to the pandemic. The hike in diesel prices and low fleet utilisation left them with no choice but to pass on the increase in cost.”