Road Goods Transport Industry in India


In India, the Road Goods Transport  industry has traditionally been a heavily regulated one, often as a device for protecting the railways.

The road transport mode serves as one of the key factors in the  developmental process of any economy. While historically, the railways have played a dominant role in the overall transport system of many countries including India, the road transport mode has, over a period of time, come to occupy a pivotal role by virtue of certain inherent advantages. Over the past few decades, the share of road transport in the total surface traffic movement in India has been gradually increasing with a distinct shift away from the railways being observed. Latest estimates give the road mode a share of nearly 63 per cent in freight movement compared to its share of just about 10 per cent in the early fifties. According to these estimates, this percentage share is likely to stabilize around 85 per cent.

The road goods transport industry in India has never been regulated the way it has been in many other countries. But a regulatory framework in the form of the Motor Vehicle Act has been in place since 1939. However, an effective regulatory framework has, according to popular opinion, never been attempted to be put in place. This has emerged over the years as a major external impediment, in terms of a number of dimensions, to the effective growth of the truck transport industry in India.

There has  been only a gradual increase in freight rates in India due to the entry of a large number of operators. With increasing fuel costs, it is claimed that profitability has decreased considerably with many operators just able to break-even. According to the operators, the profitability of truck operations is said to have been adversely impacted due to increasing average operating cost, mostly due to hike in fuel cost, cost of lubricants, spare parts, tyres and falling  or flat freight rates.

The intermediaries have enjoyed higher margins and have been in such a position so as to exploit the market situation in their favour. However, over a period of time, the entry of a large number of players, both operators and intermediaries, is ensuring that the structure is driven by market forces. Given the dominance of small operators and the user requirements in terms of reliable haulage, loss protection, the role of the intermediaries is substantial and proving to be useful to both from demand and supply perspectives.

In the context of local operations, the Regional Transport Authority (RTA) can be moved to provide clean parking spaces by establishing Transport Nagar and Truck Terminals, where operators could be located and also to notify – based on discussions with the operators and users.  An effective public sector role (Central and State) can be in facilitating applications and adaptability of information technology and Intelligent Transport Systems (ITS) to all aspects of trucking operations so that information asymmetries which continue to plague profitable operations can be minimised if not eliminated.

It remains a fact that the quality of trucking services is poor – which does not augur well for our domestic as well as our international expansion efforts in terms of competitiveness of the economy. Advocacy should cover the quality aspect of the trucking industry also in terms of requiring proper enforcement of standards provided by the MV Act.

Central Government is required to initiate a review into the requirements for an efficient and sustainable nation freight transport system (encompassing all  freight transport modes). With an economy dominated by roads and road transport, it is increasingly important that truckers have much the same right as the railways to travel interstate with a minimum of delays. Legal and administrative reforms are needed in this area are needed for India to function effectively as a single market.

Though emerging as a dominant mode, the industry has not been able to emerge out of the traditional unorganized framework, being as it is dispersed in terms of a large number of small operators. In other words, the dominant feature even today is that a significant part of the vehicle fleet is under Small Road Transport Operators (SRTOs). According to a study almost 77 per cent of the fleet was under operators who owned up to a maximum of 5 trucks while about 10 per cent was under those who owned between 6 to 10 trucks. Further, 4 per cent were under those owning 11 and 15 vehicles while 3 per cent belonged to truckers with 16  to 20 trucks. Only about 6 per cent of the vehicles were with operators owning more than 20 trucks. The situation has apparently changed when we compare the situation in the late 1980s when it was claimed that 95 per cent of the vehicles belonged to those operators who had less than 5 vehicles.

The large number of operators constituting a fairly large unorganized proportion of the trucking industry (in terms of supply) has traditionally been the result of lower capital requirements, ease of obtaining truck driving licenses and permits, low mental skills as compared to physical abilities and easy availability of freight. The organised component of the industry consisting of the fleet operators is small in number and has a fleet with varying payloads.  The fleet is primarily used for general goods transportation with the operators working on the basis of a hub and spoke distribution model.

Profitability of truck operations depends on the factors viz: a) Capacity Utilisation, b) Number of trips made, c) Fuel Prices, d) Other Operating Costs. In order to maximize their profitability, truck operators can increase their revenue by overloading the vehicles, in general and maintain a suitable vehicle mix according to payload capacity of the vehicles based on the freight availability, type of freight carried and long term contracts with customers.

Like other transport modes, the operation of vehicles over the road infrastructure creates risks and nuisances for other vehicles, pedestrians, local residents and the environment. The control of suck risks and nuisances comes under the domain of safety and environmental regulations. But historically, there have been economic regulations, which have proved to be impediments for entry, exit, fixation of prices, provision of services and ownership patterns thereby resulting in efficiency losses.

In India, the industry has traditionally been a heavily regulated one, often as a device for protecting the railways. Deregulation of the tucking industry was predicted to increase competition, lower costs and thus rates, benefiting the nation.          Deregulation in the transport sector has taken place in many countries in the past two decades or so. It has been observed that the effects of deregulation have depended on the extent to which the industry was regulated earlier.

The contribution of road transport to the process of economic development could be greatly enhanced by the ability of this industry to provide superior quality service and reduce total distribution costs through reductions in freight charges. The key elements, which could make this reduction in cost and superior service possible, are of two types, namely, external and internal. Among the significant external factors are high levels of taxation, road conditions, detention at check posts and problems related to inadequate and high cost of finance. The internal element was mainly in the form of organisation of the structure of the industry. India has achieved a highly competitive, low-cost  road freight transport industry for basic services, with highway freight rates being among the lowest in the world. Truck delays at checkpoints have been estimated to cost the economy anywhere between Rs.9 billion and Rs.23 billion a year in lost truck-operating hours. To reduce delays at border crossings, particularly for high value or time-sensitive goods, consideration of a system is essential.

In the interest of the economy and trade and to decongest the entry points to cities, Truck Terminal are to be located at the junction points with easy access to city limits, Port and Railways. The Objective of Transport Nagar / Truck Terminal project is to provide modern and functionally efficient truck terminal for the city, beneficial to the transport operators, lorry booking agents and general public.

While Transport Nagars are planned and provided with adequate facilities for storage, loading / unloading of goods, vehicle repairs, idle parking, office space and other amenities and services required for the transport operators, provisions for Auto work shop , Administrative  Building , Electric Substation, Fire Station, Post Office, Police Station, Petrol Bunk, Warehousing, Truck Parking Area, Telephone Exchange, Weigh Bridge etc. Dispensary, Banks, ATM Counters are made for the convenience of the Industry workers.

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Executive Editor of Pratisruti Plus and a columnist