Impact of Diesel Price Hike on the Logistics sector

Impact of Diesel Price Hike on the Logistics sector

According to Mr. Vineet Agarwal, Executive Director, Transport Corporation of India, “The hike of Rs.3 in diesel price will have an impact on the freight cost. Fuel constitutes 50-60% of the total cost, therefore, this time it will be difficult for logistics companies to absorb the hike. The cumulative increase of Rs.4 (including the Re.1 hike in february) will transalate in to a 5% increase in the freight rates.

However, due to season of low demand, as of now the freight rates would witness an increase of 3-4%. As 70-75% of our customers operate on a contractual basis, the hike will be passed on to them immediately unlike retail clients who are likely to feel the pinch over the next one or two months.”

“We do not expect any fall in overall demand due to existence of alternative modes such as rail freight, which has not witnessed any hike. However, the shift to rail freight would be marginal due to the absence of last mile connectivity as in the case of road freight.”