With the monsoon withdrawing, consumption recovering, and infrastructure activity picking up, freight rates saw a sequential recovery in October. However, with diesel prices ruling high after a scorching run-up, the overall profitability of transporters remains below levels seen in the closing quarter of last fiscal, ratings agency Crisil has said in a report.
CRISFrex or pan-India Crisil freight index captures changes in freight rates on a sequential basis. What makes it first-of-its-kind in India is that it also tracks the free cash flows, or FCF (pre-EMI) of transporters on an ongoing basis. Higher FCF would typically lead to higher demand for commercial vehicles.
Over the past 2-3 years, the domestic road freight transportation industry ran into many speed-breakers. The axle load norms caused a discernible drop in fleet utilisation levels in fiscal 2019, while the BS-VI norms led to a 10-15 per cent increase in the prices o f new trucks in fiscal 2020. Then came the Covid-19 pandemic and the sharp economic contraction.
In the first quarter of fiscal 2021, fleet utilisation rates plunged with most consumption and demand centres locked down. A sequential recovery was visible with a gradual reopening of the economy over the next three quarters. Amid all this, freight demand recovery was sporadic across segments; FMCG/FM CD recovered faster than discretionary segments such as readymade garments/textiles, and other consumer durables. Even within states, recovery varied based on the pandemic caseload and unlocking levels, the report said: In such scenarios, transporters, logistics service providers, original equipment manufacturers and financers need to know the predicament of freight use rs, taxonomised by sectors, routes, applications and platforms.