Costlier gas raises freight charges, leaves small transporters going through money crunch

Surging gas costs have led to extend in freight charges throughout modes of transport, which is prone to push up inflation. While transporters have largely been in a position to move on the price of a pointy rise in the price of diesel over the previous three months, some smaller gamers could wrestle with liquidity constraints, consultants imagine.
Oil advertising and marketing firms have hiked the costs of petrol by about Rs 10 per litre and that of diesel by about Rs 11 a litre throughout metros since final October-end, on account of crude oil costs recovering to close pre-Covid ranges and the federal government sustaining hikes in excise responsibility imposed final 12 months to spice up revenues. Petrol reached a brand new document of Rs 91.17 per litre in Delhi, whereas that of diesel hit a brand new excessive of Rs 88.60 a litre in Mumbai on Saturday, after the sixteenth upward revision in costs in February.
“The transport sector, be it passenger or freight transport, sectors where gensets are used, the telecom sector which uses diesel for their towers … in all of these sectors, the impact is high” stated Vineet Agarwal, managing director of Transport Corporation of India, including that logistics sector gamers had to this point been in a position to move on the rise in working prices on account of rising gas costs to customers.
Agarwal, who can also be the president of trade physique Assocham, nevertheless, famous that transporters had been solely in a position to move on prices to customers with a lag and that operators for whom gas price is a bigger proportion of working price could face extreme working capital constraints on account of rising gas costs.
The potential of truckers to move on the rise in gas value may be seen within the enhance in truck leases in January and February. Truck leases have seen a pointy enhance of 6-8 per cent in February alongside key routes up from a month-to-month enhance of 0.75-4 per cent in January, as per information collected by Indian Foundation of Transport Research and Training.

ExplainedOperation prices could add to woesHigher gas costs are pushing up freight charges, which may elevate inflation and influence demand, in response to consultants. While transport firms are at the moment passing on the upper price of gas to customers, some smaller gamers could face working capital points on account of increased operational prices.

SP Singh, senior coordinator and fellow, Indian Foundation of Transport Research and Training, stated that elevated motion of fruits, vegetable and meals gadgets coupled with a rise in dispatches from industrial areas had contributed to extend in the price of truck leases.

Agarwal too famous that rising gas costs had been having an inflationary influence on the financial system as an entire and that Assocham had instructed that logistics gamers be permitted to assert enter credit on gas. Fuels together with petrol, diesel and pure fuel are at the moment not underneath the Goods and Services Tax (GST) regime which permits companies to assert enter tax credit score on taxes paid on inputs once they pay items and companies on their services and products.
“In the short term, there is going to be an impact because higher freight costs can temporarily impact demand for end products and could impact demand for the products of MSMEs”, stated Sameer Gupta, chairman of power and engineering firm, Jakson group and co-chair of the CII process drive on Make in India. He, nevertheless, expects gas costs to stabilise over the subsequent few months which may come from a rationalisation in taxes or a discount in crude oil costs. Brent crude closed at about $64.4 per barrel on Friday, up from about $51 per barrel at the start of 2021.
RBI Governor Shaktikanta Das too has known as for a calibrated discount in central and state taxes on petrol and diesel to include any upward strain on costs. The Centre hiked taxes on petrol by Rs 13 per litre and taxes on diesel by Rs 16 per litre in 2020, with a number of state governments additionally elevating state taxes to spice up revenues through the Covid-19 pandemic.
Rajasthan, West Bengal, Meghalaya and Assam have already lower state taxes on fuels in response to rising gas costs. Das famous that inflation excluding meals and gas had remained elevated at 5.5 per cent in December on account of upper crude oil costs and the influence of excessive oblique taxes on petrol and diesel.