Road transportation sector expected to contract by 18-20% in FY2021: ICRA

Maintaining the negative outlook on domestic road transportation sector, ICRA says, “The restrictions on cross-border movement, shortage in availability of drivers and manpower due to large-scale migration and lack of availability of return load, significantly impacted the road logistics sector during the first quarter.” According to Shamsher Dewan, Vice President, ICRA Ratings, “The aggregate revenues of ICRA’s sample of logistics companies contracted sharply by 35 per cent during the quarter. The impact was more visible on players operating on an asset-heavy model, due to high fixed costs for owned assets, while asset-light players fared relatively better. This decline was also corroborated by the generation of E-way bills, which contracted by 49% during the quarter. In addition to the impact on the road logistics sector, the macroeconomic slowdown and lockdown also had a bearing on the rail and seaways freight traffic that primarily comprises of bulk commodities like coal, cement, iron ore and crude oil with volumes contracting by 21.3 per cent and 19.7 per cent Y-o-Y, respectively.”
With the economy gradually opening up during unlock phases and industrial, manufacturing and construction activities resuming, freight activity too has also been gradually reviving. The latest E-way bill and Fastag data indicates that freight volumes have recovered sequentially and improved to 87 per cent of pre-COVID levels (for E-way bills) and 95 per cent of pre-COVID levels (for Fastag) by August 2020. This has potential to increase further going forward as the country gears up for the upcoming festive season.