Issues and opportunities of truck operating costs in india

An Integrated Research and Action for Development (IRAD), report finds that the trucking industry is vulnerable to higher fuel costs, and supports the earlier evidence that the fuel costs account for around 55 per cent of their total operating costs. The industry’s weakness is primarily grounded in structural constraints that have squeezed profit margins, The industry suffers from oversupply of trucks due to the lack of training stipulations, relaxed registration requirements and easy financing. Eighty per cent of truck operators are small truckers who own less than five trucks. Such small operators cannot reap the benefits of economies of scale and cannot afford to obtain the necessary business information and thereby depend on brokers.
Due to oversupply of trucks and fierce competition, freight rates are mostly determined by demand for trucking and thus, increased fuel costs have little influence on them. But fuel costs being the major cost component of the total operating costs, truck operators are vulnerable to increased diesel price.
Since January 2013, the Indian government has introduced gradual increases to the price of diesel. Fuel subsidies have significantly contributed to the deterioration of India’s fiscal balance. Last year, under-recoveries-the difference between a desired price (based on international prices and other cost elements) and the actual (depot) price charged to dealers-cost INR 81,192 crore (USD$15 billion).
A substantial amount of evidence suggests that a reduction in diesel under-recoveries will have significant fiscal and economic benefits to India’s economy as a whole. However, higher prices will negatively affect industry and diesel-intensive sectors-of which the trucking industry is one of the most obvious. The article focus on allocation of variable cost components in the trucking industry and the techniques that are available to reduce the operational costs currently there by increasing the truck operators profitability.