• Commercial Vehicles
  • Automobiles
  • GST
  • Research
  • Prasad Koparkar
  • Truck Makers
November 09, 2017 location Mumbai

Trucks plying just 25 km more per day after check-posts go

Random checks by state machinery, longer wait for freight curb GST gains

Before the advent of the Goods and Services Tax (GST), truckers spent 3-6 hours at one check-post –to get documents verified, goods vetted and freight weighed by the state apparatus.

This waiting time varied wildly across India, from a staggering 24 hours to as little as 20 minutes.


But since the implementation of GST on July 1, 2017, and with check-posts removed, there hasn’t beena significant speeding up of transport times.


CRISIL Research’s interactions with fleet operators and own calculations show that the net gain, atbest, is only of around 90 minutes.


Reason? Suspicious states, which now have to depend on the Centre to get their share of GSTrevenues.


Many of them are using flying squads (manned by their Road Transport Organisation/Authoritypersonnel) to stop vehicles on highways or at dismantled check-post zones to scrutinise the goodsbeing transported, in an apparent attempt to corroborate their GST revenues.


Before the advent of GST, a typical freight truck plying on national highways crossed a state checkpostonce in two days, given average speed of 35 km per hour in India, and average daily drivingdistance of 300 km.


Since the advent of GST, trucks are plying an average 25 km more every day (90 minutes gained x 35kmph every two days), or around 325 km per day.


That’s 20% lesser than the 400 km per day estimated before the implementation of GST.


Says Prasad Koparkar, Senior Director, CRISIL Research: “Apart from this, there’s anunintended consequence, too: while trucks are reaching their destinations faster than before,their wait for freight has become longer because there isn’t a significant and concurrentincrease in demand. This is leading to a fall in the utilisation rate of trucks, which, in turn,impacts demand for new trucks.”


That’s because fewer trucks are now required to move the same amount of goods because of theincrease in the daily distance covered and a lack of material growth in freight demand.


CRISIL Research expects this to impact original equipment manufacturers (OEMs, or truck makers).


Another fallout has been on truck dealers. Before GST, OEMs used to transfer a majority of their newtrucks to their regional stock yards and a few to dealers in order to avoid Central Sales Tax (CST).


OEMs have now started directly billing dealers for most of their sales. While this is a positive for OEMsbecause it reduces their working capital requirements, for dealers it is a negative for the oppositereason.


Net-net, CRISIL Research believes GST has been a mixed bag for the commercial vehicles industry.


Says Binaifer Jehani, Director, CRISIL Research, “For the full benefits of GST to be realised, itis critical that freight demand picks up in the coming quarters. Also, de facto checks on trucksneed to end to further improve turnaround times. OEMs may also have to help out dealers facinga stretch in working capital because of being billed directly.”


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    Prasad Koparkar
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    CRISIL Limited
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