Lower diesel prices, moderation of freight transport after the pre-festive rush eases freight rates
MUMBAI: India’s freight rates fell sequentially in November, following lower diesel taxes and slower movement of goods during the month, Crisil said on Friday.
In its research report on freight activities, the rating agency said the volume of freight moved was flat to negative in the month just passed after the pre-festive October buzz.
Discretionary goods such as autos and textiles suffered the biggest correction in freight rates, around 10%, as shipments came under pressure, Crisil said.
Industrial products such as mining products (coal, iron ore, limestone), cement and steel experienced a slight moderation in freight rates compared to the decline in the price of diesel.
Weak demand for mining / construction aggregates, cement and steel haulage was reflected in the lack of interest from carriers in purchasing new high-end tippers and semi-trailers. tonnage generally used in these segments.
As a result, the CRISFrex index fell to 114 in November from 122 in October, the rating agency said.
But the drop in margins from one month to the next was relatively less because the FCF (pre-EMI), as assessed by CRISIL Research, is estimated at 15% of freight revenues compared to 17% in October. However, margins remain slightly above August levels.
In early November, the Union government announced a ??10 per liter reduction in central excise duty on diesel, followed by some states reduction in VAT (value added tax) on fuel.
While this may seem like a good omen for the profitability of carriers, the freight industry is dynamic and competitive, so supply and demand also play an important role in freight rates.
The reduction in excise duties translates into a 3-5% reduction in a carrier’s cost structure. Add the reduction in VAT, and the reduction will be 4-6%.
According to FreightSigns, essential consumer goods such as agricultural products and FMCG / FMCD are the most resilient and stable segments driving the trucking industry, even in today’s environment. This was also seen in November, when FMCG / FMCD transport recorded the smallest correction among any product types tracked by FreightSigns.
CRISIL analyzed the views of 100 to 150 carriers to understand freight dynamics and operational aspects such as the number of trips made and costs (fuel, driver, toll, tire and maintenance).
The exercise was conducted on a closed sample of 159 product route combinations covering 32 routes, 11 product types and five truck platforms with different load bodies.
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