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MAY 20 2015

Transporters keep freight increase on hold, want govt to rollback diesel price hike

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 20th MAY 2015

Transporters have kept the freight increase at bay in spite of 11 per cent increase in diesel prices since the beginning of May. The transporters will find it difficult to pass on the impact, even as their operating cost has increased by five to six per cent.

 Industry body All India Motor Transport Congress, or AIMTC, said it has approached the government seeking a rollback in prices, primarily through a reduction in the excise duty. Diesel, like petrol, is a deregulated fuel and the oil marketing companies increased prices on two occasions this month from Rs 47.20 a litre to Rs 52.28 (Delhi prices).

 When international price was on a declining trend late last year and early this year, the government did not pass on the entire benefit to the common man. A chunk of the gains was taken away in form of Rs 6.50 increase in the excise duty on every litre of diesel. Transporters want a reduction in the excise duty to cushion the impact of recent hikes.   

 AIMTC President Bhim Wadhwa said a correction in freight is highly unlikely due to sudden fluctuation in the diesel price since transporters are bound by contractual obligations.

 “Given the unorganised nature of this sector and highly competitive market it is not always possible to increase freight. Forces of demand and supply are at work and operators have to run their vehicles even in losses,” he said.

 Rabi crop production has been impacted by unseasonal rains, meaning a lower quantity will have to be transported. Industrial growth in volume terms saw a subdued growth in March, after registering a jump in February. The growth fell to a five-month low of 2.1 per cent in March against 4.9 per cent in the previous month. Data for April will be available next month.

 Interestingly, there was no change in freight when diesel prices came down by 5 per cent in April. Rentals fell by 4.5 per cent in February but corrected by 4.5-5.5 per cent in March. Diesel prices account for about 50 per cent of the operating cost for the transporters. If the transporters succeed in passing on the impact, it will lead to an increase in prices of food and household items and impact overall inflation. The good news, however, is that the Wholesale Price Index is in a negative zone for the last six months. 

 S P Singh, senior fellow and coordinator at the Indian Foundation of Transport Research and Training (IFTRT), said if the transporters do not pass on the increase now, they might find it even difficult to do so a month later when monsoon arrives.


Delhi Oil Diesel Oil Marketing Companies Petrol Diesel Prices wholesale price index Inflation Excise Duty India

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