Transport costs fall in November due to lower diesel prices and movement of goods, further correction expected in December
The road transport sector transports almost all of the country’s goods, from toothpaste to cars, and is a barometer of economic activity. Rising fuel prices had pushed up logistics costs for manufacturers, which was passed on to consumers in the form of higher sticker prices.
However, with the reduction in excise duty on diesel by Rs 10 per liter last month, freight rates have also come down. A few states have also reduced taxes on diesel.
Subsequently, according to a report by Crisil Research, freight rates declined in 70 to 75% of the 159 freight and route combinations examined. Rates remained stable for the remaining combinations.
While this bodes well for manufacturers and consumers, lower diesel prices have not resulted in better margins for carriers. Free cash flow generated by carriers fell from around 17% of revenue in October to 15% last month due to reduced movement of goods and the competitive nature of the transportation industry, the transportation industry noted. Crisil report.
The rate correction was smallest for the Fast Turning Consumer Goods (FMCG) sector due to strong demand, but it was proportionately larger than the decline in diesel prices in segments like autos, textiles, cement and steel.
âIn December, the rates will go down further,â said Sachin Haritash, director of Chetak Logistics. While large fleet owners in the organized sector will be more protected due to long-term contracts, freight rates will drop in the open market for smaller operators, he said, adding that even the FMCG sector will experience a decline. lower movements of goods this month.