Consolidation has begun, due to which some are trying to trim the business and others are seeking an exit. The situation would worsen after August 31.
Transporters are on the verge of surrendering 50,000 vehicles to financiers, after being hit by sluggish economic activity, low freight availability, and end of the moratorium on August 31.
This is based on the estimates of the Indian Foundation of Transport Research & Training (IFTRT), a New Delhi-based think-tank.
A sharp month-on-month drop of 10 per cent in freight rates for August has also added to woes.
“The situation is very fragile,” said S P Singh, senior fellow at the IFTRT.
Consolidation has begun, due to which some are trying to trim the business and others seeking an exit, he said, adding that the situation would worsen after August 31.
“We see 45,000-50,000 vehicles getting surrendered as transporters will not be able to meet payment obligations,” said Singh.
With no sight of recovery in loans already disbursed, getting credit for new vehicles is a major issue and loan rejection rates are very high, he added.
However, Umesh Revankar, MD and CEO, Shriram Transport Finance, has dismissed suggestions of any crisis.
“I don’t see repossession or surrendering of vehicles happening. It’s just a hype. Financiers will allow customers to sort ot their problems and return,” he said.
He pointed out that financiers including Shriram Transport have been providing working capital requirements.
With the lockdown easing, things are improving month-on-month, he added.
Meanwhile, an end to the holiday from paying road tax on September 30, among others, is also bothering truck owners.
On June 9, the government extended the validity date of motor vehicle documents till September 30.
Balmalkit Singh, former president of the Bombay Goods Transport Association, seconds IFTRT’s Singh.
“Demand is extremely sluggish. Only 40 per cent of the fleet is being utilised.
"Most transporters will not be able to meet their commitment, leading to a default.
"It’s going to be a huge crisis if the moratorium is not extended.”
Transporters have survived for so long because of the EMI holiday.
High diesel prices and low freight have also weighed on the business, he added.
Photograph: Amit Dave/Reuters