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High interest rates on vehicle loans to put pressure on freight rates

Freight rates are likely to move up in the next few months following truck operators deferring purchases of new vehicles due to the steep increase in interest rates.

Apnaloan.com Research Bureau

10 Aug 2007

Freight rates are likely to move up in the next few months following truck operators deferring purchases of new vehicles due to the steep increase in interest rates.

Ariff Patel , vice-chairman, Patel Roadways, was quoated in Business Standard saying freight rates on major routes might see a rise of 5-8 per cent owing to the shortage of trucks. The freight rate on the Delhi-Bangalore route is currently around Rs 2,400 per tonne, while on the Delhi-Chennai route it is hovering around Rs 2,650 per tonne.

A report by Kotak Securities says the brokerage's proprietory diesel-adjusted freight index, which tracks rates on 26 routes across the country, was 2.3 per cent higher in May than April.

R Sridhar, managing director, Shriram Transport Finance, which gives loans to truck buyers was quoted as saying, "Freight rates are stable at present, but operators will want to recover the higher cost of money, because it makes a difference to their economics."

In addition to interest rates, high insurance costs are eating into transporter's margins.

Sridhar confirmed that operators are postponing buying trucks because of the 400-450 basis points increase in interest rates in the last three months or so.

On an average, about 3 million trucks carry goods across the country every day, with about half of this number estimated to have taken to the roads in the last five years.

 

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