Capacity utilisation was 30-35% in May with transport of essential goods — including medicines and specific food items — at pre-Covid levels, according to several industry associations and fleet operators. However, fleet operators say that unless economic momentum gathers pace, many transporters may be forced to fold up in the next few months.
Mumbai: The number of trucks moving freight doubled to 2.2-2.5 million in May from the month ago, reflecting the gradual resumption of economic activity as lockdown restrictions were eased. Capacity utilisation was 30-35% in May with transport of essential goods--including medicines and specific food items—at pre-Covid levels, according to several industry associations and fleet operators. However fleet operators say that unless economic momentum gathers pace, many transporters may be forced to fold up in the next few months.
Transport Corporation of India (TCI), India's largest logistics provider, sees fleet utilisation rising to 50-70% by the end of June with more sectors opening up.
Demand for essentials is being fully met and the supply chains for the segment have worked smoothly during the lockdown, said Jasjit Sethi, CEO, TCI Supply Chain Solutions, adding that all the components of GDP have started moving.
“May has been a crucial month of the restart with the ‘new normal.’ The flows are still not perfect with backhauls a concern, port congestion in evacuation, but they are improving,” Sethi said. “We see the last week of June coming to a 70% level in run rate.”
TCI uses 12,000 trucks to move goods; it owns 2,000 of them. It has six ships that operate along the west and east coasts. The company has a joint venture with Concor to transport freight by rail and 12 million sq ft of warehousing space.
With industries restarting and the kharif harvest under way, capacity utilisation is set to rise. For instance, the passenger car and two-wheeler segment is planning to increase output to 25-30% of capacity from 10-15%, calling for increased freight movement.
Auto retail registrations, a barometer of on-ground demand, have shown an uptick in the past 10 days, ICICI Securities said in its June 5 Covid Recovery Pulse note. That’s at about 30% of pre-Covid levels on an overall basis, it said.
The note added that E-Way bill generation for May was clocked at 2.6 crore in May. If one compares this to the average bill generation in the months prior to Covid-19 (October 2019-February 2020), it has reached 46% of the average 5.5 crore bills. April E-Way bill generation hovered at 16% levels.
While sentiment has improved, the pickup in activity is gradual and essential goods still dominate, said Bal Malkit Singh, chairman of the core committee at the All India Motor Transport Congress (AIMTC) lobby group.
“Strong agriculture output boosted truck utilisation,” he said. “Now there is significant overcapacity in the market, and the demand environment is quite tepid right now.” The next two months will be critical and will determine whether the jobs of truck drivers can be saved, he said.
Consultancy Deloitte pegs the Indian logistics market at $160 billion, of which road transport is a key element.
Truck utilisation was already down to 65 % in January 2020, before the pandemic struck, due to the economic slump. With a recession looming, fleet demand is still poor, said SP Singh, senior fellow, Indian Foundation of Transport Research and Training (IFTRT).
More than 60% of transporters and fleet owners have opted for the extended moratorium on repayment of equated monthly instalments (EMIs) that ends in August. Most fleet owners may not be able to resume EMI repayments and mass repossessions could result, he said.
“The situation, unfortunately, looks to be very bleak as a large number of operators may exit or consolidate in the freight business as the recession is going to prolong in the entire current fiscal,” Singh said.
Transporters may not be eligible for the soft loans on offer for micro, small and medium enterprises (MSMEs) as part of the Atmanirbhar Bharat Abhiyan. Only 10-15% of 250,000 transporters are registered as MSMEs and less than half of them may get support from banks through the loan window opened last week by the finance ministry, IFTRT’s Singh said.
In the next few months supply side issues may be resolved to a great extent, but demand side issues may not be resolved as uncertainties attached to COVID-19 are not going to push consumer spending due to low income and job losses, fears experts. Hence, the freight market being dependent on business recovery might take much longer for tangible and sustainable results.
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