Lockdown bottom: transportation industry is watching potholes and speed bumps
Fleet owners battle falling rents and flattening business as pent-up demand fails to take off
Lockdowns led by COVID – both in 2020 and 2021 – have made a huge dent in the operations and revenues of most industries. Both times the transport sector has been among those most affected.
However, there is a clear difference between last year and this one that transport sector players find worrying. After containment in 2020, pent-up demand for transport was substantial. Fleet operators have been busy as the economy struggles to recover.
This year, however, the recovery in demand has been timid. Additionally, rental rates are falling as smaller players cut costs to keep their businesses afloat. A decrease in diesel consumption in a context of rising prices is also a key indicator of the decline in travel for the transport sector.
The visible reduction in demand could be due to user industries this time around being better prepared for the lockdown, industry watchers have said.
“The demand for transport decreased during the second wave (of COVID),” said S Yuvaraj, president of the Lorry Owners’ Association, Chennai. Federal. “After the first containment, there was a strong demand for transport. Whereas before the second containment, traders had time to stock up, and therefore a very low demand for trucks and trucks was observed. “
Citing an example of the high demand seen last year, he said: “In April 2020, we drove to Pune from Chennai with an empty truck just to get a shipment of onions. We were unilaterally running empty at the time – that was the demand. “
Rental rates go down
In addition to the drop in demand, the transport sector is also seeing rental prices drop sharply. “If a vehicle was charging 75,000 TB to get to Maharashtra (Pune or Mumbai) before the second lockdown, it has now come down to almost 50,000. The number of trips has decreased, ”said Yuvaraj.
All prices have fallen by at least 30% during this confinement, against increases of 50% in rentals during the first.
Naveen Kumar Gupta, Secretary General of the All India Motor Transport Congress (AIMTC), said Federal: “The pent-up demand has not yet started and a large part of our fleets are inactive. Operating costs have increased due to soaring diesel prices and demand is weak.
“However, the small operators who are responsible for paying IMEs for vehicles and run their households tend to reduce their margins and spin their wheels. This translates into a further drop in rentals.
Truck rentals in Delhi have fallen by at least 5-25% compared to last year. The Delhi-Mumbai round trip which would yield a rental of 1.05 lakh fell to 96,500 while the Delhi-Chennai round trip fell 8% to 1.2 lakh.
Overall, drivers’ reluctance to leave their home countries, reduced rentals and declining trips have severely hampered business, Yuvaraj observed. Citing safety concerns, driver associations are demanding rapid COVID vaccination for their members. Once that was done, at least one issue of the transport sector would be addressed.
Diesel consumption indicators
The decline in diesel consumption in the country is also a key indicator of the decline in transport demand. Amid falling demand, diesel consumption saw only a small drop due to lockdown in April 2021, unlike last year.
Consumption of petroleum products in India (April 2020 to June 2021)
According to official data from the Ministry of Petroleum, diesel consumption fell 7.5% to 6,679 metric tons (MT) in April 2021, from 7,224 MT in March. In the corresponding period last year, the drop was 42.5%.
On a related note, gasoline consumption (called motor gasoline, or MS) was down about 13% in April 2021, down from 54.9% last year, the data reveals.
Evolution of consumption after confinement
Aviation Turbine Fuel (ATF) recorded a giant drop of 88.6% in April 2020, compared to only a 13.9% drop in April 2021. ATF consumption has yet to recover its loss from the first lockdown – from 739 MT in January 2020, it stood at 409 MT in April 2021, according to official data.