expensive diesel
The impact of rising crude oil prices in India is now clearly visible on the transport and logistics sector. Transport companies and truck operators say that if diesel prices increase, their expenses will increase significantly and profits may decrease. This may also affect the prices of freight and everyday items in the future.
Freight may increase for every increase of Rs 5
According to the CRISIL Intelligence report, for every increase of Rs 5 per liter in the price of diesel, transporters may have to increase freight rates by about 2.5% to 2.8% to save their profits. It has been said in the report that in the current situation the transport business is already under pressure and the situation may worsen due to cost of fuel.
Due to the ongoing tension in West Asia, crude oil prices remain high in the international market. Despite this, government oil companies are currently keeping the prices of petrol and diesel stable in the country and are facing huge losses.
Increasing pressure on oil companies
Union Petroleum Minister Hardeep Singh Puri had recently said that government oil companies are incurring a loss of around Rs 1,000 crore every day. The total under-recovery in this quarter has reached about Rs 1.98 lakh crore.
Companies like Indian Oil, Bharat Petroleum and Hindustan Petroleum are incurring losses of thousands of crores of rupees every month because crude oil remains above $ 100 per barrel.
Small transporters are most affected
Transport businessmen say that diesel accounts for 50% to 60% of their total expenses. In such a situation, as soon as the price increases, there is a direct impact on the earnings. Especially for small operators running one or two trucks, the situation may be more difficult.
According to a transport operator, the number of trucks in the market is already high while the demand for freight remains weak. In such a situation, companies are not able to completely pass on the increased costs to customers. Many operators say that they are not able to recover even 80% of the increased cost of diesel from customers. Due to this their margins are continuously decreasing.
The speed of freight transportation also slowed down
Crisil’s pan-India freight index declined to 100.5 in April from 101.4 in March. This means that there has been a decline in the activities of both industry and freight transportation. Apart from this, a decline was also recorded in FASTag transactions. Tires, toll tax, maintenance and increasing salaries of drivers have also increased the expenses of the transport sector.
Experts believe that if diesel prices increase, its impact will not be limited to the transport sector only. Due to increase in logistics costs, prices of everyday goods may also increase and pressure on inflation may increase.
