For the road transport industry, demonetization has meant an unprecedented crisis. Every second truck is either sitting idle due to lack of cargo or because the transporter is unable to pay cash at toll stations on state highways and municipalities – where no infrastructure exists for cashless payments. Result? The trucking industry is one of the worst affected sectors of the economy. Remember, these truckers transport most of the essential and daily-need items by road across the country and continued inconvenience to them is bound to affect the aam aadmi sooner or later. The president of the All India Motor Transport Congress (AIMTC), S K Mittal, says his association has supported the Prime Minister’s demonetization drive despite failing to find a patient ear to truckers’ demands. But patience is running thin now. “Strike is our last option. We will wait for some redressal till December 31 but will then have to go for a strike,” says Mittal.
AIMTC is body of transporters and claims to represent approximately 75 lakh truckers and another 40 lakh bus and tourist operators. It is an umbrella body, covering over 2,500 taluka, district and state level transport associations. Mittal says the truckers are willing to abide by the PM’s diktat, but necessary infrastructure is just not in place. Truckers need cash for payment at two places: to buy diesel and for paying toll at toll plazas. Close to two crore debit cards are needed for buying diesel and an equal number of fast track cards are needed for toll payment by the trucking industry. But enough such cards are not immediately available.
Besides, there is still no option but to pay cash at state highways and smaller municipal toll roads. Mittal points towards long pending industry demand of an alternate toll policy to make such payments annual – no such move seems to be afoot. Meanwhile, turnaround time for truckrs has more than doubled to 25 days for a round trip against an average 10 days earlier due to absence of a seamless, cashless payment system.
According to a ground report filed by analysts at brokerage IIFL, both loading of trucks and utilization of each truck has reduced in Punjab. Loading has reduced from five trucks every day to three and business is down almost 50 percent. Also, EMIs for CVs have been paid for November but future EMIs may be impacted, given weak business sentiment. Stoppage at state borders has increased as regulators take time to clear cheque payments for entry taxes. The upside for consumers is that freight rates have seen a marginal moderation.
Not just trucking, sales of automobiles – especially two wheelers – have been impacted in a big way post demonetization. A significant portion of two wheeler sales happens through cash – this has stopped completely and even remaining buy orders are suffering as buyers postpone purchases. According to the Society of Indian Automobile Manufacturers (SIAM), total two-wheeler sales fell almost 6% in November. Motorcycle sales were down 10.21%.
According to IIFL analysts, a Bajaj Dealer in Punjab said he sold only 11 bikes in November as against average of 30-35 sold each month. That means business dropped to a third. Almost half his sales used to be in cash and the rest were financed. He would get the bikes from distributors rather than directly from the company. IIFL said distributors were no longer pushing inventory and thus the dealer ordered just five bikes in November. The spares and servicing business of this dealer is also got hurt (down 50 percent) as people were not bringing their two-wheelers for servicing.
In Nagpur, Andhra and Telangana, IIFL analysts found a similar scenario. In Nagpur, two wheerler sales were down 30-40 percent across OEMs. Dealers were hopeful that sales would normalise once cash availability improves though. Car sales are also under pressure since demonetization, with increase in cases of booking cancellations/delivery postponements due to lack of funds. Even for car purchases, a portion of customers paid cash for down payments and purchase of accessories. In case of Maruti, the impact is lower due to outstanding order book (result of waiting period). Car dealers also mentioned that banks have introduced 100% loan-to-value financing schemes.
From roads, let us move over to the skies. Though the government has been at pains to say that domestic aviation industry has not suffered after demonetization as traffic growth continued to be over 20 percent for November as well (it has been along similar levels for the entire year), sharp fare cuts have helped save the industry the blushes. Airlines advanced fare cuts, which they typically offer in the traditionally slow March quarter, as soon as demonetization was announced. So this has resulted in a surge in traffic but a sharp fall in airline yields (revenue per passenger). Last month, AirAsia India unveiled all-inclusive fares from Rs 899 SpiceJet offered Rs737 on short-haul sectors and others also followed suit. Vistara offered Rs 999 tickets. The fares have been cut ironically when jet fuel prices have begun rising – creating a double whammy for airlines.
Updated Date: Dec 26, 2016 11:15:50 IST