Freight rates have come down in May as transporters passed on the benefit of the lower diesel prices due to a cut in excise duty, credit rating agency Crisil said in a report on Thursday.
Cement and mining applications saw a flattish trajectory in freight rates in the previous month owing to the high base of April, while for the auto-carriers, agri-products, container, FMCG/FMCD, petroleum tankers, textile and steel, these rates saw a lower single-digit drop, it added.
In May, transporters passed on the benefit of a fall in diesel prices by decreasing freight rates on several routes, the credit rating agency said.
Finance Minister Nirmala Sitharaman had on May 21 announced a cut in excise duty on petrol by a record Rs 8 per litre and that on diesel by Rs 6, helping the OMCs lower the prices of the two commodities.
CRISFrex indicates that freight rates have dropped month-on-month with free cash flow (pre-equated monthly instalment) decreasing 100 basis points, Crisil said.
CRISFrex captures the changes in freight rates on a sequential basis. Besides, it also tracks the free cash flows (FCF; pre-EMI) of transporters on an ongoing basis. Higher FCF would typically support demand for commercial vehicles.
However, fleet utilisation was flat month-on-month and while for the market load, it was higher, which was offset by slightly lower utilisation for parcel/loose goods, mining (largely coal and iron ore), and agri-products, the remaining commodities, including auto-carriers, container applications, fast-moving consumer goods and durables, steel, textile, and petroleum tankers, saw flattish trajectory in utilisation, as per the report.
Freight rates, too, declined for most commodities but were stable for mining and cement. Freight rates declined month-on-month for consumer essentials, such as agri-products, FMCG/FMCD, loose goods and discretionary goods, it added.
The complete effect of this duty cut would be visible in the index from next month. This is because the central government set an extrinsic decline in excise duty at the end of the month, whereas CRISFrex represents freight rates and fuel prices for the entire month, it noted.
In May, around 60% of the combinations saw a decrease in freight rates, while around 16% were stable, as per the report.
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