Diesel price hike to up freight rate by 5 % Analysis

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New Delhi, June 6 (UNI) The Rs 3 per litre hike in diesel price will lead to a 5 per cent increase in freight rates on contractual fleet but spot rate could go up as high as 15 per cent, a market intelligence agency said today.

But pricing flexibility and profitability of transporters, who will pass on the hike to consumers, could get a hit if the industrial growth moderated, leading to an increase in their freight carrying capacity, Crisil said.

It said since railway freight rates are not expected to rise, the cost competitiveness of road freight will reduce further.

In any case, transporters have started reporting sluggishness in freight availability since February when industrial production also began slowing down, the agency said.

It said hike in spot freight rates on some routes could go up by 10-15 per cent initially but would eventually stabilise at lower levels due to market dynamics.

At present, the fleet is almost equally divided between spot and contractual arrangements.

Crisil said operating cost for transporters are estimated to have increased by 8 paise per tonne-kilometre (tkm) since January -- 7 paise per tkm on account of increase in fuel cost and 1 paise per tkm due to increase in the cost of tyres and other inputs.

Truck freight rates increased by nearly 2 paise per tkm follwing the diesel price hike in February, and are expected to go up by another 6-7 paise per tkm now, Crisil said.

The agency said its analysis has taken into consideration competition from railways and the demand-supply scenario of trucks.

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