Study on Economic Cost of Inter-State Barriers in Goods Traffic

FINAL REPORT STUDY ON ECONOMICS OF TRUCKING INDUSTRY

Submitted to: The Under Secretary Ministry of Shipping, Road Transport and Highways Department of Road Transport and Highways Parivahan Bhavan 1, Sansad Marg New Delhi - 110001

Oct, 2011

JPS ASSOCIATES (P) LTD. CONSULTANTS

NEW DELHI

TABLE OF CONTENTS Sl. No

Contents

Executive Summary

Page Nos.

E – XIII

1

Introduction

1 – 11

2

Scope, Approach and Methodology

12 – 30

3

Organizational Structure of the Trucking Industry

31 – 43

4

Ownership Pattern of Trucking Industry in India

44 – 53

5

Nature and Volume of Goods Transported

54 – 67

6

Contribution of the Trucking Industry to the Economy

68 – 76

7

Economic Parameters of Trucking Industry

77 – 87

8

Problems Facing the Trucking Industry and Recommendations

88 – 102

ANNEXURES

Annexure – I

Selected Urban Localities (Towns) in Different Strata in the Selected States Table – I: Selection of cities and towns in Stratum I States

103 – 165

103 – 105

Table – II: Selection of Locations in Stratum II States Annexure – II

List of Villages (28 Villages)

106 – 107

Annexure – III

Region Wise Summary of Total UFS Blocks and Selected UFS Blocks

108– 111

Annexure – IV

JPS Transport Studies – Multipliers for Estimation a) Urban Areas b) Villages

112 – 119

Annexure – V

Survey on Economics of Trucking Industry: Questionnaire – A: Composite Questionnaire for Agents/Transport Operators/Brokers/Truck Owners

Annexure – VI

120 – 129

Survey on Economics of Trucking Industry: Questionnaire – B: Survey on Economics of Trucking Industry (For Truck Drivers)

130 – 134

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

Sl. No

Contents

Page Nos.

Annexure – VII

Classifications

135 – 136

Annexure – VIII

Distribution of Transport Operating Units by Number and Type of Vehicles Owned

137 – 141

Annexure – IX

Distribution of Transport Operating Units by Type of Unit and Regular Employment

142 – 144

Annexure – X

Distribution of Transport Operating Units by Gross Value Added (GVA)

145 – 152

Annexure – XI

Calculations for BTKM per Vehicle & Total BTKM based on Vehicles as per Survey

153 – 156

Annexure – XII-A

Basic data from Sample Cities of Orissa after application of multipliers

157 – 157

Annexure – XII-B

Calculations for estimates for contribution of Orissa to the All India Estimates

158 – 158

Annexure – XIII

Calculations for TKM per Vehicle as per Survey

159– 162

Annexure–XIV(a)

Example Chattisgarh - Gross Value added by per unit and by GVA per worker

163 – 164

Annexure–XIV(b) Example Chattisgarh-Raw Data for GVA Calculations

165 – 165

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

LIST OF TABLES Sl. No

Contents

Page Nos.

1.

Table 1.1: Trends in Rail-Road Modes in Freight & Passenger Traffic

2

2.

Table 1.2: Share of Various Modes of Transport in Gross Domestic Product

3

3.

Table 1.3: Road Length (in 000 kms) in India (1950-51 to 2005-06)

4

4.

Table 1.4: Growth in Number of Registered Motor Vehicles in India

5

5.

Table 1.5: Projections of Number of Goods Vehicles Required Annually During the Eleventh Five Year Plan (2007-08 to 2011-12) under 9% GDP Growth Scenario

8

6.

Table 2.1: States Selected in Stratum-I of Different Regions.

14

7.

Table 2.2: Process of Selection of States in Stratum-II

15

8.

Table 2.3: States Selected for the Study

16

9.

Table 2.4: Selected Urban Localities (Towns) in Different Strata in the Selected States

18

10.

Table2.5: Region wise Summary of Total UFS blocks and selected UFS blocks

20

11.

Table 2.6 Number of Identified Goods Transport Units in the Selected Blocks

22

12.

Table 3.1: Distribution of Goods Transport Operating Units by Type of Units in Different Regions

34

13.

Table 3.2: Distribution of Goods Transport Operating Units by Type of Units in Different Classes of Cities

35

14.

Table 3.3: Multiple Activities of the Goods Transporting Units (All Regions)

36

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

Sl. No

Contents

Page Nos.

15.

Table 3.4: Distribution of Goods Transporting Units by Class of Cities and Legal Status

37

16.

Table 3.5: Distribution of Goods Transporting Units by Type of Transport Unit and Legal Status

37

17.

Table 3.6: Distribution of Goods Transporting Units by Regions and their Legal Status

38

18.

Table 3.7: Association Membership Status of Goods Transporting Units

39

19.

Table 3.8 Distribution of Goods transporting Units by Source of Business (All States)

40

20.

Table 3.9: Distribution of Goods Transport Operating Units by Operational Channels (All States)

40

21.

Table 3.10: Distribution of Goods Transporting Units by Their Usual Area of Operation

41

22.

Table 3.11: Distribution of Goods Transporting Units by Employment Levels

42

23.

Table 3.12: Distribution of Transport operating units by type of unit and regular employment

42

24.

Table 3.13: Distribution of Employees in Urban Areas by Goods Transport Operating units and Type of Workers

43

25.

Table 4.1: Distribution of Vehicle Owners by Fleet Strength in Different Regions

46

26.

Table 4.2: Distribution of Vehicle Owners by Fleet Strength for different size class of cities

47

27.

Table 4.3: Distribution of Vehicle Owners by Fleet Strength for different classes of transport operators

48

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

Sl. No

Contents

Page Nos.

28.

Table 4.4: Distribution of Goods Transport Vehicles by Type, of vehicles and type of operators

50

29.

Table 4.5: Distribution of Goods Transport Vehicles by Type, of vehicles over cities of different size classes

51

30.

Table 4.6: Distribution of Goods Transport Vehicles by Type, of vehicles over cities of different size classes

51

31.

Table 4.7: Proportion of Vehicles with National and Local Permits in different Regions

52

32.

Table 4.8: Proportion of Vehicles with National and Local Permits in different Vehicle Ownership Patterns

53

33.

Table 5.1: Distribution of Utility of Vehicles by Different Regions

59

34.

Table 5.2: Distribution of Utilization of Vehicles Covered by Survey

60

35.

Table 5.3: Estimated Annual Volume of Freight Hauled Per Vehicle for Different Classes of Vehicles in 2009-10 (in Million TKM)

62

36.

Table 5.4: All India Estimates of Volume of Goods Carried per Annum in 2009-10 expressed as Billion-Tonne-Kilometers (BTKM) State and Region Wise

64-65

37.

Table 5.5: Distribution of Volume of Freight by Industrial Sector (2009-10)

66

38.

Table 6.1: Gross Value Added (Rs. Lakhs) per Unit through Goods Transportation by Road for Each Region

72

39.

Table 6.2: Gross Value Added (Rs. Lakhs) per Unit through Goods Transportation by Road for Each Type of Unit-owner

73

40.

Table 6.3: Gross Value Added (Rs. Lakhs) per Worker through Type of Goods Transportation by Road for Each Type of Unit

74

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

Sl. No

Contents

Page Nos.

41.

Table 6.4: Gross Value Added (Rs. Lakhs) per worker through Goods Transportation by Road for Each Region

75

42.

Table 7.1: Distribution of Owned Vehicles by Age (in years) Regionwise

78

43.

Table 7.2: Distribution of vehicles by type of vehicle and age of vehicle from Driver’s Survey

79

44.

Table 7.3: Distribution of Owned Vehicles by Age (in years) by Size Class of Cities

79

45.

Table 7.4: Fuel consumption of Vehicles by Type and Age

80

46.

Table 7.5: Average Distance Covered by Trucks per Year by Age of Vehicle

81

47.

Table 7.6: Disposition of Trip Time by Activities

82

48.

Table 7.7 : Distribution of Drivers by Driving Experience

84

49.

Table 7.8: Pattern of Expenditure of Goods Transporting Units by Type of Unit

50.

Table 7.9: Changes in Delhi-Mumbai and Delhi-Kolkata Freight Rates for 9-tonne Truck and Diesel Prices (2002 to 2010)

87

51.

Table 8.1: Freight Rates (September 2008)

99

84-85

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

Executive Summary

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

EXECUTIVE SUMMARY

A) 1.

Objectives and Methodology This Report relates to a study on the economics of transportation of goods by road. The study is one of three transport sector studies assigned by the Department of Road Transport in the Ministry of Shipping and Road Transport and Highways, Government of India (GOI) to JPS Associates Ltd New Delhi.

2.

The Terms of Reference of the study covered a) identification of the structure of the goods transport by road industry, b) study of the organization of the industry, c) estimating the volume of goods transported by road, sector-wise / States-wise, d) estimation of the contribution of the goods transport by road industry to national economy, e) estimation of various economic parameters relating to productivity and efficiency in the industry, and f) making suggestions for improving the performance of the industry.

3.

The study made use of the results of a sample survey of goods transport units carried out by JPS Associates, as well as secondary data available from various sources. In addition to the sample survey of goods transport units, a small sample study of truck drivers was also undertaken.

4.

The sampling methodology adopted is one of stratified multi-stage random sampling of States, urban locations and villages within the States and Blocks within the urban locations, as described below: The country is divided into seven regions for the purpose of selecting the states within them. The seven regions are as follows: (i)

Northern (Plains) Region (Haryana, Rajasthan, Delhi, Uttar Pradesh, Punjab and Chandigarh)

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-I

(ii)

Northern (Hills) Region (Himachal Pradesh, Uttarakhand and Jammu & Kashmir)

(iii)

Western Region (Maharashtra, Gujarat, Goa, Dadra & Nagar Haveli, Diu & Daman and Lakshadweep)

(iv)

Southern Region (Andhra Pradesh, Karnataka, Kerala, Tamilnadu, Andaman & Nicobar Islands and Pondicherry)

(v)

Eastern Region (Orissa, West Bengal, Jharkand and Bihar)

(vi)

North Eastern Region (Assam, Arunachal Pradesh, Meghalaya, Mizoram, Tripura, Manipur, Nagaland and Sikkim)

(vii)

5.

Central Region (Madhya Pradesh and Chhattisgarh)

In each of the seven regions, two strata of States have been formed – the first stratum comprising the State with the largest number of registered mechanized goods transportation vehicles (used as a proxy for the number of mechanized goods transportation units), and the second stratum comprising all other States in the region. While the State in the first stratum is invariably selected, the second stratum has been covered on a sample basis with one State selected with probability proportional to the size measured by the number of registered goods vehicles in the State. Thus a total of 14 states were selected for the sample survey.

6.

In each state, 3 cities were selected. The Capital city was invariably selected and from the balance cities, on city of above I lac population and another of less than 1 lac population were selected on a random basis. Thus a total of 42 cities were selected.

7.

While it was felt that the goods transport units in villages may not be substantial, it was decided to cover a few villages on a sample basis. Two villages per state were selected randomly.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-II

8.

Sampling within the selected locations was carried out by selecting randomly from the NSSO urban frame blocks categorized as Business/Industrial Blocks and Residential/other blocks. For the survey 20% of the Business/Industrial blocks were selected and 2.5% of the Residential/Other blocks were selected. Thus a total of 2306 blocks were selected from a total of 60648 blocks.

9.

In each of the sampled blocks, listing of all goods transport units was done and all such units were covered on a census basis. In this manner a total of 1212 goods transport units were covered and a total of 754 drivers were covered.

10. For estimation of various parameters the results will be combined to get estimates of each location. Multipliers were derived for each location to extrapolate these results for the state and then the region. The summation of all region gave us the All India Estimates. 11. The Volume of Goods Traffic was estimated by using the survey results to arrive at the Tonne Kilometres per vehicle. This was then multiplied by the estimated number of ‘goods vehicles in-use’ derived from secondary data to estimate the total Volume of Goods Traffic for ALL INDIA. 12. For estimation of GVA, data was collected on all the items relating to transport sector in the NSSO schedules used in 63rd round and CVA estimated as per block 4.2 of the NSSO schedules.

B)

Current Trends in Goods Transport Industry

13. Estimates made by the Eleventh Plan Working Group on Road Transport indicated that the share of road transport in movement of goods by railways and road taken together, which was just 13.8 % in 1950-51, has grown enormously to 61.3 % of the freight traffic by 2004-05. 14. Statistics on the number of goods vehicles registered with the appropriate State Transport Departments indicate that during the first five years of the current Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-III

century the annual growth rate has been 10.2 against 7.4 over the period 19512001. 15. Projections made by the Working Group on Road Transport Sector for the Eleventh Plan showed that the demand for goods transport by road is expected to grow from 844 BTKM (billion tonne kilometers) in 2007-08 to 1,231 BTKM by the end of the Plan period (2011-12) under the 9 % overall GDP growth scenario, or by 10.8 % per year. 16. Road transport of goods is almost entirely is a private sector operation. It is also characterized by operations of a very large number of individual truck-owners and several layers of intermediaries like agents, brokers and transport operators. 17. Bad roads, aged vehicles, inter-State barriers and other interfaces with officialdom, result in losses in efficiencies of operation and productivity. Transit times are found to be nearly double those of developed countries. Equipment utilization rates for the Indian trucking fleet, which average 60,000 km to 100,000 km per truck-year, are less than a quarter of those in developed economies. Despite many such impediments, India has achieved a highly competitive low-cost road freight transport industry, with highway freight rates among the lowest in the world.

C)

Structure of Goods Transport by Road

18. Barring some captive freight movement operations of the government and some public sector enterprises, the entire goods transportation by road is in private sector. An important aspect of the trucking industry is the existence of a chain of intermediary transport entities. Between the actual consignor and the consignee, the ultimate receiver of goods, there exist a series of links in the form of transport booking agents, transport operators, brokers and the vehicle owners, though not all the entities of this chain may be present in all operations.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-IV

19. Of the 1212 units covered in the main part of the survey, 5% were agents, 53% operators, 6% brokers and 35% vehicle owners. The classification boundaries are often blurred as many units classified as of one type also perform the roles of units of other types. Thus, the industry is characterized by considerable extent of informality. 20. About two-third (60%) of the units were individual proprietorships and one-third (34%) were private/public companies. Partnerships are rather rare, being only to the extent of just 3%. 21. About two-third of the units (68%) were members of the goods transporters’ associations (local or national). 22. About 13 % of the units employed between 1 to 5 employees and about 50 % employed between 6 to 15 employees.

D)

Ownership Pattern

23. The trucking industry continues to be dominated by small players. 24. Among the units classified as vehicle owners, about 83% had between 1 to 5 trucks. Of these 41 %t had just one truck, 42 % had between 2 to 5 trucks. Another 6% owned fleets of size between 6 and 9. 25. Apart from the units classified as vehicle owners, many units (about threefourths) classified as transport operators also had their own fleets. 26. About 52 % of the vehicles had national permits. 27. Analysis by type of vehicle showed that about 9 % of the vehicles owned were multi-axle vehicles (MAVs), 33 % were heavy commercial vehicles (HCVs), 42% were medium commercial vehicles (MCVs) and 16 % were light commercial vehicles (LCVs).

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-V

28. The Drivers’ survey conducted as a part of this study also threw up a similar vehicle mix.

E)

Nature and volume of goods carried

29. The study attempted an estimate of the total volume of freight in terms of billion tonne kilometers (BTKM) carried by mechanized road transport during 2009-10 making use of the data on per vehicle annual distance and tonnage hauled collected through the survey. 30. According to these estimates, the Volume of Goods hauled has been estimated at 1291 BTKM per annum for 2009-10. The Working Group on Road Transport Sector for the Eleventh Plan projected the likely demand for goods transport by road at 844 BTKM in 2007-08 and estimated a growth rate of 10.8 percent per year. On this basis our estimate is close to that of the working group upon adding the projected growth. 31.

Of the total freight carried, industrial products accounted for 40 %, and Agricultural Commodities accounted for 22 %. About 17 % of the freight was made up of construction materials.

32. These above mentioned estimates of freight carried are sensitive to the estimated total in-use vehicle population. We have estimated it for 2009-10 by projecting the in-use vehicle population in 2006 from secondary sources. A vehicle utilization factor of 0.78 has been determined based on the survey and has been used for estimating the freight hauled per vehicle per annum. 33. The estimation of volume of road traffic movement of goods on the above basis can be no permanent substitute for a more methodical system of data on actual movement of goods by road that needs to be established.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-VI

F)

Contribution of the Industry to the Economy

34. Gross Value Added (GVA) by trucking units surveyed has been derived, in accordance with the Factor approach, as the excess of total receipts over expenses less indirect taxes and wages and salaries to the pay roll and nonpayroll staff and income of proprietors and unpaid family members. 35. Based on the total GVA by the surveyed units, estimates of GVA per unit and GVA per worker have been derived. For all the locations in the seven States put together, GVA per unit came to Rs.11.8 lakhs and GVA per worker to Rs 123000. 36. Total contribution of the goods transport industry as a percentage of the national GDP has been estimated at 1.93% on current money basis. The ministry estimates for the entire transport sector (mechanized and non-mechanized) including passenger transport is 4.5%. G)

Productivity and other parameters associated with the Industry

37. About 69% of all goods carrying vehicles were less than 10 years in age. About 30% were less than 6 years old. On the other hand, about 31% of the vehicles were over 10 years of age. 38. In the category of vehicles below six years of age, the vehicles were covering an average distance of 88800 kms. per year. Those which are 6 to 9 years in age had done 85000 kms per year, those vehicle which are 10 to 14 years covered 82000 kms. while those aged 15 years or more had done 78000 kms. per year cumulatively. 39. On an average, a commercial vehicle gave 7 kms. per liter of diesel. The consumption rate was 3.5 kms for MAVs, 6 kms. for HCVs, 7.9 kms. for MCVs and 10.5 kms. for LCVs. This appears higher than general belief, but may be reflecting the improved efficiency of modern goods vehicles.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-VII

40. On an average, goods carrying vehicles were utilized to the extent of 76 per cent. 41. The total turn-around time was 21 hrs for trips of less than 500 km, 50 hrs for trips involving a distance of 500 to 999 km, and 110 hrs for distances longer than 1000 km. Of this total trip times, actual running times accounted for 33 % for trips of less than 500 km, 36 % for trips of distance 500 to 999 kms and 43 % for longer distances. 42. Check-post halts accounted for about 16 % of the total trip time and other official delays for another 8 %. 43. Overloading has not been admitted to by the respondents, even though the practice appears to be rampant. 44. From the drivers surveyed it appears that maximum number of drivers are well experienced with 6 years or more experience. 45. It is seen that direct costs account for more than 80 percent. A lion’s share of this expenditure is consisted of diesel (around 40%) and wages (around 30% for wages and payroll). 46. Similarly expenditure for taxes shows 5.5 percent of the total expenditure and expenditure on interest and depreciation shows only 5.0 percent of the total. 47. Fuel is an important component of the operational expenditure of truck owners, and periodic increases in fuel prices erode the profit margins unless the vehicle owners increase their rates periodically. The truck freight rates for a standard 9 tonne truck for the Delhi-Mumbai stretch during 2002- 2010 are increased by 28 % and for Delhi-Kolkata stretch during same period are increased by 20%.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-VIII

H)

Problems and Suggestions

48. Small owners should be encouraged to come together in cooperatives and operate as a single unit. With the pooling of resources, it should be possible to invest for technological up-gradation. Another advantage out of several small operators coming together is that they can better resist the pressures from the consignors and transport operators to indulge in overloading as a measure of cutting transport costs. That will also result in better utilization of available vehicles. 49.

More efficient multi-axle trucks are relatively hard to come by, though in recent years there is a tendency on the part of the goods transport vehicle owners to switch over to such vehicles.

To further encourage the use of multi-axle

vehicles, suitable incentives such as lower transit tax and toll rates may be considered. The cost of such incentives would be more than paid back by way of lower levels of damage to the road system. 50. Rising fuel costs and competition preventing corresponding hikes in freight rates has been cutting into the margins of the transport operators.

To ease the

problem, a policy of dual pricing of diesel favouring goods transportation could be thought of, at the same time taking appropriate steps to prevent misuse of the benefits. 51. There does not seem to be any need or justification for a regime to regulate freight rates as there is enough competition in the industry to drive the freight rates to reasonable levels. 52. Overloading trucks is a common problem, though not brought out by the present study, and affects the quality of roads that have been built for lesser axle loads. A system of penalizing for overloading is installed to discourage overloading but it is not effectively implemented 53. An insurance regime linking premium to past performance could be devised to promote road safety.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-IX

54. Halts at check-posts result in loss of about 16 % of the trip time. Simplification of procedures, paper work and installing green channel system for movement of specified vehicles would result in better performance. 55. Rationalization of taxation regime could also result in speedier passage of trucks along the roads and improve the services. 56. Road transport of goods sector suffers from the absence of a sound statistical collection system. Apart from periodical special surveys on different aspects of the industry, it is necessary to put in place regular automated data collection systems on goods movement at least on national and state highways to begin with. An accurate and up-to-date data base on vehicle owners will also help in planning and executing sample surveys more efficiently.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-X

Summary of Findings and Recommendations at a Glance A. I.

II.

Findings Organizational Structure •

Vehicle owner :

35%

•

Transport Operators:

53%

•

Agents:

5%

•

Brokers:

6%

Ownership Pattern •

Single truck owner

41%

•

2 – 5 trucks

42%

•

6 -9 trucks

6%

•

> 10 trucks

6%

III. Volume of goods transported •

Estimated No. of goods vehicles in use (2009-10)

39.4 lakhs

•

Estimated volume of freight

1291(BTKM)

IV. Contribution of trucking industry to the economy

V.

•

Share of Transport in GDP

4.38%

•

Gross value added per unit of transporters

Rs.11.8 lakh

•

Gross value added per worker in transport sector

Rs. 1,23,000

Economic Parameters of Trucking Industry •

Vehicles of age below 6 yrs

30%

•

Vehicles of age 6 – 10 yrs.

41%

•

Average fuel consumption

7kms./Ltr

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-XI

B.

•

Average distance covered /yr.

85000 kms.. (7083 km./month)

•

Total average trip time

59 hrs.

•

Exp. on fuel, maintenance & wages

80%

Recommendations •

In view of fragmented structure of the trucking industry, it is suggested that small owners should be encouraged to come together and operate as a single unit (like cluster concept being propagated in the case of MSMEs)

•

To encourage the use of MAVs, which are more cost effective, introduction of incentives such as low transit tax and toll tax may be considered.

•

In order to achieve better fleet utilization, consolidation of vehicle owners into co-operatives or similar entities should be considered so that loads can be easily distributed.

•

Excessive overloading should be strictly curbed to protect the road network since very often the consignors indulge in pressurizing the truck owners to overload. A system of penalizing the consigner in addition to the vehicle owner for overloading may be evolved.

•

Greater use of tractor trailer multi axle vehicles will improve turn-around times and reduce costs. World Bank estimates that a 10% increase in the usage of such vehicles could reduce transport cost by Rs. 5 billion /Yr. Introduction of lower excise and toll and permit charges for such vehicles could encourage increased usage.

•

The time lost at the check posts can be reduced by having a system of a certification and sealing of trucks at point of origin and the certificate acting as a through pass.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-XII

•

There is a need to improve the statistical base to monitor the performance of this highly fragmented sector. It is suggested that all states should set up a monitoring unit in the transport department and provide regular feedback to impact policy initiatives.

•

To contain rising cost, particularly of fuel and spares, dual pricing policy should be evolved. While lower price of diesel used for freight movement would work as a measure to check inflation the higher pricing policy should be used in the industry and the private passenger vehicles. However, one has to guard against the possibility of misuse of the duel prices and diversion of fuel purchased for freight movement to other purposes.

•

Lnking the amounts of insurance premiums to the past records of accidents caused by the vehicle, apart from the past insurance claims, might act as a deterrent and improve road safety. This, however, requires an integration of information on road accidents and vehicle insurance.

•

It is essential to identify all major data gaps relating to goods transport by road and establish suitable statistical systems in place.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

E-XIII

Chapter – 1: Introduction

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

CHAPTER – 1 INTRODUCTION

1.1

Road Transport and National Economy

1.1.1

An essential prerequisite of rapid economic growth is the availability of adequate support from the infrastructure sector that includes energy, transport and communications. One of the factors that has been inhibiting faster growth than is currently achieved and substantial inflows of foreign direct investment to the Indian economy is the relative scarcity of high quality infrastructure vis-à-vis many of the East Asian and South East Asian countries. It is estimated that the growth rate of 9 % per annum targeted by the Eleventh Five Year Plan (2007-12) would require massive investments in the infrastructure sector to the tune of 9 % of the GDP by the terminal year of the Plan (2012) compared to just 5 % of GDP in the initial year (2007)1.

1.1.2

The network of roads that enables transportation of people and goods is one of the most vital components of the country’s infrastructure. Together with railways, the road transport sector (including both the road network and the enormous edifice of road transport services) forms the lifeline of the entire economy. Because of the existence of wide road network, though not always the best possible, and easy accessibility to even the remotest corners of the country irrespective of the terrain, flexibility of its operations, availability of door-to-door service and reliability, transportation of passengers and goods by road has been expanding rapidly over the years in comparison to railways. The share of road transport in movement by all forms of land-based transport (railways and road), which was just 13.8 % of the freight and 15.4 % of the passenger traffic in 1950-

1

Ministry of finance, Economic Survey, 2007-08, Chapter 9 Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

1

51, has grown enormously to 61.3 % of the freight and 87.1 % of the passenger traffic by 2004-05. This trend has occurred in spite of the existence of several inter-State barriers to the movement of goods and even passengers by road, which is an indication of the extent of the relative edge road transport has over rail transport. Table 1.1 shows the trends in the shares of railways and road transport in the movement of people and goods over the period 1950-51 to 2004-05. Table 1.1: Trends in Rail-Road Modes in Freight & Passenger Traffic Year

1950-51 1960-61 1970-71 1980-81 1990-91 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05(P)

Goods(Billion Tonne KM )

Passenger(Billion Passenger KM)

Road

Railways**

Road

6.0 (13.8) 14.0 (16.2) 47.7 (30.1) 90.9 (38.1) 145.1 (38.1) 467.0 (60.5) 494 (61.3) 515 (60.7) 545 (60.7) 595 (61.0) 646 (61.3)

37.6 (86.2) 72.3 (83.8) 110.7 (69.9) 147.7 (61.9) 235.8 (61.9) 305.2 (39.5) 312.4 (38.7) 333.2 (39.3) 353.2 (39.3) 381.2 (39.0) 407.4 (38.7)

23.0*(15.4) 80.9 (51.0) 210.0 (64.0) 541.8 (72.2) 767.7 (72.2) 1831.6 (81.0) 2075.5 (82.0) 2413.1 (83.1) 2814.7 (84.5) 3070.2 (85.0) 3469.3 (87.1)

Railways** 66.5 (84.6) 77.7 (49.0) 118.1 (36.0) 208.6 (27.8) 295.6 (27.8) 430.7 (19.0) 457.0 (18.0) 490.9 (16.9) 515.0 (15.5) 541.2 (15.0) 515.7 (12.9)

Figures in parentheses indicate percentage of modal share (P)- Provisional Note : 1. Figures for Road Transport from 1960-61 to 1990-91 are estimated based on percentage share of Road Transport and Railways given in the Working Group Report on Road Transport, Tenth Five Year Plan 2002-07 2. Figures for Road Transport from 1999-2000 to 2000-01 have been estimated by Transport Research Wing, Ministry of Shipping, Road Transport & Highways, Government of India 3. Figures for Road Transport from 2001-02 to 2004-05 have been estimated by the Sub Group Source : * Tenth Plan Document ** Data on rail freight traffic from Ministry of Railways

Source: Report of the Working Group on Road Transport for the Eleventh Five Year Plan

1.1.3

Road transport sector contributed to the nation’s Gross Domestic Product (GDP) to the tune of 4.5 % in 2006-07 while the contribution of railways was only 1.2 percent. What is more, over the period 2000-01 to 2005-06, the sector’s contribution to GDP has grown at an average annual rate of 9.5 % in comparison to an average rate of 6.5 % in the overall GDP, thus steadily pushing up the share of road transport in the GDP. The comparative performance of various sub-sectors of the transport sector in terms of their

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

2

contribution to GDP over the period 1999-2000 to 2006-07 is given in Table 1.2. The data reveal that the entire increase in the percentage share of transport sector as a whole in GDP since 1999-2000 has come from road transport sector only. Table 1.2: Share of Various Modes of Transport in Gross Domestic Product

Transport, of which:

5.7

2001- 2002- 2003- 2004- 200502 03 04 05 06 As percentage of GDP (at factor cost and constant 1999-2000 prices) 5.8 5.8 6.1 6.2 6.4 6.5

Railways

1.2

1.2

1.2

1.2

1.2

1.2

1.2

1.2

Road Transport

3.8

3.9

3.8

4.1

4.3

4.5

4.5

4.5

Water Transport

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

Air Transport

0.2

0.2

0.2

0.2

0.2

0.2

0.2

0.2

Services *

0.5

0.5

0.5

0.5

0.5

0.5

0.5

0.5

Sector

19992000

200001

200607 6.4

* Services incidental to transport. Source Central Statistical Organization: The share in GDP of Railways is exclusive of Financial Intermediation Services Indirectly. Measured (F.I.S.M.); for other modes it includes F.I.S.M.

1.2

Road Length and Vehicle Population

1.2.1

The steady expansion in the volume of demand for movement of people and goods by road has been accompanied by an increase in the road length and the vehicle population over the years. The total road length has increased significantly from 3.99 lakh Km as on 31.3.1951 to 9.15 lakh Kms in 1971 and further to 42.36 lakh Km as on 31.3.2008. This translates to a CAGR of 4.2%. However, a bulk of this consists of rural roads (25.77 lakh km or 60%). Less than 6 % of the total road length is made up of national highways/expressways and State highways, which are of relatively better quality, though many of the roads are nowhere near international standards. Though National Highways formed only 2 % of the total road length, they carried about 40 % of the total road traffic. Single/intermediate lane roads make up about 32 % of the National Highway road length, while standard 2-lane roads cover 55 %, while 4 or more lane roads account for

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

3

only 13 %. The quality aspect has been receiving considerable attention, particularly since the last decade, with the initiation of Golden Quadrilateral and the East-West and North-South Corridor projects and other projects to up-grade other segments of the National Highways. Quantitatively, road length has expanded at an average annual rate of 4.3 % since 1951, primarily in the form of rural roads (average annual growth rate of 4.5%). The length of national highways increased by no more than 1.5 % per annum over the period 1951 – 1991, but since then a greater sense of urgency shown by the government in the wake of liberalized economic policies initiated in 1991 resulted in an acceleration of the growth to 5.1 % per annum during 1991-20022. As on 31.3.2010, the road length under National Highways was reported at 70,934 kms. Table 1.3: Road Length (in 000 kms) in India (1950-51 to 2008-09) Year 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2005-06* 2006-07 2007-08 2008-09

All Roads Total Surfaced 400.0 157.0 524.5 263.0 915.0 398.0 1485.4 684.0 1998.2 1024.4 3325.8 1573.8 3929.4 1846.6 4003.9 1910.8 4140.5 1997.3 4236.4 2090.2

National Highways Total Surfaced 22.2 19.8 23.8 21.0 24.0 23.3 31.7 31.5 33.7 33.4 57.7 57.7 65.6 65.6 66.6 66.6 66.6 66.6 66.8# 66.8

State Highways Total Surfaced NA NA NA NA 56.8 51.7 94.4 90.2 127.3 124.8 132.8 130.6 144.4 142.9 148.1 146.3 152.2 150.7 154.5 152.7

Source: Government of India, Department of Roads and Highways, Basic Road Statistics of India (2004-05, 200506, 2006-0 & 2007-08) * Provisional # As on 31.3.2010, the total Road length under National Highway is 70934 kms.

1.2.2

If the expansion of road length over the years has generally been sluggish, except in the recent years, due to inadequacy of invisible resources and other reasons, the growth in the number of vehicles using the available road network has been rapid as well as steady. During the first five years of the current century, the annual growth rate has been 9.3 for

2

Planning Commission, Report of the Working Group on Road Transport for the Eleventh Five Year Plan Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

4

all vehicles and 10.2 for goods transport vehicles. These are only slightly different from the corresponding historical rates of 10.9 and 7.4 respectively over the period 1951-2001. Table 1.4: Growth in Number of Registered Motor Vehicles in India Year 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2001-02 2002-03 2003-04 2004-05 (P) 2005-06 (P) % Growth 1951-2001 % Growth 2001-06

No. of registered vehicles (000s) All vehicles Goods vehicles 306 82 665 168 1865 343 5291 554 21374 1356 54991 2948 58924 2974 67007 3492 72718 3748 79473 4393 85896 4782 -

Annual Growth Rate during the period All vehicles Goods vehicles 8.1 7.4 10.9 7.4 11.2 4.9 14.8 9.4 9.9 8.1 7.1 0.8 13.7 17.4 8.5 7.3 9.3 17.2 8.1 8.9 10.9 7.4 9.3 10.2

Source: Government of India, Department of Roads and Highways, Reproduced from Ministry of Finance, Economic Survey 2007-08, Statistical Table 1.28 P – Provisional Note: All vehicles include heavy and light commercial vehicles, buses, cars, three and two-wheelers

The disparity between the expansion of road length and expansion of vehicle population has pushed up the vehicle density (number of vehicles per km of road length) from 0.76 in 1951 to 31.7 in 2005-06. Among all registered vehicles, two-wheelers accounted for 71 %, followed by cars with a share of 13 % and other vehicles (a heterogeneous category including 3 wheelers, trailers, tractors etc) with 9.4 %.

1.3

Road Transport of Goods3

3

Conceptually, road transport of goods would include movement by goods by mechanized and non-mechanized means of road transport. This study, however, is restricted to mechanized road transport only. Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

5

1.3.1

As observed above, movement of freight by road was only to the extent of 14 percent in 1950-51. This share has grown to 65 % by 2004-05. The National Transport Policy Committee (NTPC) in its report submitted in 1980 had recommended that at least 67 % of freight traffic should move by rail by the turn of the century (2000). However, this has not happened, as evidenced by the pattern of freight transport by road vis-à-vis by rail. Goods transportation by road has increased relatively faster than that by railways, particularly during the decade 1990-91 to 2000-01 when the Indian economy witnessed a sea change because of the liberalization of the policy regime. The shift in freight movement from railways to roads has taken place despite railways’ advantages in terms of bulk freight movement, carrying potential and economical land and the disadvantages of road transport of goods due to various inter-State barriers and other bureaucratic hurdles.

Trend in shares of railways and road transport in movement of goods 100 80 60 40 20 0 1950‐ 1960‐ 1970‐ 1980‐ 1990‐ 2000‐ 2004‐ 51 61 71 81 91 01 05 year

Railways

1.3.2

Road

The demand for road transport has increased faster than the demand for other modes. This growth could be attributed to both demand-side and supply-side factors. On the supply side, intense competition from the mostly privately run road transport services, coupled with operating inflexibilities and capacity constraints on key Indian Railways

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

6

routes, increased the modal share of roads4. Future demand for freight traffic is expected to be strong, growing at 1.5 times the economic growth rate for freight and 2 times the economic growth rate for passenger traffic5. Between 1992-93 and 2004-05, the demand for freight transport by road is estimated to have grown at an average annual rate of 6.7 % against the GDP growth of 6.2 %. Considering that the Eleventh Plan aims at a growth rate of 9 % per annum, it is expected that the demand for movement of goods by road would expand by at least 10 % annually over the five years 2007-08 to 2011-12. Using the elasticity of 1.1 for billion tonne kilometres (BTKM) with respect to GDP observed during the years 1992-93 to 2004-05, the Working Group on Road Transport Sector for the Eleventh Plan projected the likely demand for goods transport by road to grow from 844 BTKM in 2007-08 to 1231 BTKM by the end of the Plan period (2011-12) under the 9 % GDP growth scenario adopted finally. Thus, the average annual demand for road transport of goods during the Eleventh plan has been projected at 1028 BTKM. The projected annual growth rate during the Plan period is, thus 10.8 percent. Projected demand for goods transport by road during the Eleventh Plan

BTKM

1500 1000 500 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Year Demand for road transport of goods (BTKM)

4

Transport Sector in India – Focusing on Results, Sector Assistance Programme Evaluation, Asian Development Bank, June 2007. 5 Committee on Infrastructure www.infrastructure.gov.in Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

7

1.3.3

Data on vehicles actually plying on roads is not available. As per the RITES study on Road Traffic Flows (1998), the number of trucks was expected to rise to 26.90 lakh by the turn of the century and to 28.70 lakh in 2005. Here again, projections made by the Working Group on Road Transport for the Eleventh Five Year Plan are available for various growth and efficiency of truck use scenarios.

Table 1.5: Projections of Number of Goods Vehicles Required Annually During the Eleventh Five Year Plan (2007-08 to 2011-12) under 9% GDP Growth Scenario Type of Vehicle

Average annual vehicle fleet requirement (thousands) Without efficiency gains

With efficiency gains*

Light Commercial Vehicles

2416.4

1599.4

Medium and Heavy Commercial Vehicles

2673.5

1769.6

51.4

34.0

Multi-axle Vehicles

Note: With an efficiency gain of 10 percent increase in lead per year during the Eleventh Plan Source: Report of the Working Group on Road Transport for the Eleventh Five Year Plan

1.4

Some Features of Road Transport of Goods Industry

1.4.1

There are certain features of industry of transportation of goods by road that distinguish it from railway mode of freight movement in this country. While railways are a well organized departmentally undertaken industry of the central government, road transport, particularly of goods, is almost entirely is a private sector operation. It is also characterized by operations of a very large number of individual truck-owners scattered all over the country, in urban as well as rural areas, the presence of several layers of intermediaries like agents, brokers and transport operators between the actual consignors and consignees of goods and the fleet owners. The bulk of the truck-owners are generally owners of just one or two trucks, often self-driving. Bad roads, aged vehicles, inter-State

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

8

barriers and other interfaces with officialdom, causing delays and additions to costs, often unofficial, slow speeds of movement, particularly in congested areas, result in losses in efficiencies of operation and productivity. Transit times are found to be nearly double those of developed countries. Equipment utilization rates for the Indian trucking fleet, which average 60,000 km to 100,000 km per truck-year6, are less than a quarter of those in developed economies. Despite many such impediments, mainly concerning the existing infrastructure, India has achieved a highly competitive low-cost road freight transport industry for basic services, with highway freight rates among the lowest in the world.

1.5

Lack of Regular Statistics

1.5.1

Again, unlike transportation by railways, which has a well-organized system of generating detailed operational and financial statistics that enables planning for improved performance, transportation of goods by road suffers from a complete lack of essential statistics. As observed by the Working Group on Road Transport for the Eleventh Plan “There is complete lack of regular and reliable data on freight movement, passenger movement on private buses, trucking industry; transaction costs involved in inter state movement of goods ….” the motor vehicle registration, apart being variable across States, does not give any indication neither of the actual number of vehicles in use at a particular place nor about the current owners of the vehicles. The Working group suggested measures for making the registration data more useful and recommended surveys on: •

Freight movement by Road: Origin, destination, size, type of freight and its movement by type of vehicle and age.

6

India Road Transport Efficiency Study, November 2005, World Bank Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

9

•

Passenger movement by Road: Passenger movement and related parameters by private bus operators need to be captured.

•

Trucking Industry: Survey of domestic trucking fleet covering operating cost, financing, vehicle technology, vintage, turn around time, utilization etc.

•

Time Motion Surveys: Assess time spent on various activities related to document compliance/clearances at barriers to ascertain transaction costs faced by road freight/passenger industry.

1.6

The Present Study

1.6.1

It is in the above context that the Department of Roads and Highways in the Ministry of Shipping and Transport has decided to have a series of studies conducted on the road transport industry in the country. M/s JPS Consultants, New Delhi, have been assigned studies on the following three aspects: a) Volume of goods and passenger traffic on Indian roads b) Economic cost of inter-State barriers in goods traffic c) Economics of trucking industry

1.6.2

This report is based on the study conducted on the economic s of trucking industry. As per the Terms of Reference, this study is expected to make available the following outputs: i)

Ownership pattern of the trucking industry

ii)

Organizational structure of the existing truck industry in India

iii)

Volume of cargo handled per year sector-wise/state-wise in terms of Tonne-Km.

iv)

Percentage share of revenue of trucking industry in GDP

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

10

1.6.3

v)

Other peripherals viz., vehicle productivity, operational cost, various cost parameters, time spent on various halts and check posts running time of vehicle performing the journey between origins to destination

vi)

Suggestive measures to improve/systematization of trucking operation in India

The study has been conducted by M/s JPS Consultants during February – August 2008. The field operations were carried out by the Society for Natural Resource Management and Community Development, New Delhi, and data processing by M/s B.R. Software Services, New Delhi.

1.6.4

While Chapter-1 deals with introductory references on trucking industry, Chapter 2 of the report presents the methodological details of the study. Chapter 3 analyses the organizational structure of the trucking industry and Chapter 4 the ownership pattern of trucking industry in India. An assessment of the volume of cargo handled per year is presented in Chapter 5 and an estimate of the share of trucking industry’s contribution to GDP in Chapter 6. Issues like vehicle productivity, operational costs, various cost parameters, journey time and time spent on halts at the check posts and other barriers are covered in Chapter 7. Finally, some issues relating to goods transport industry and suggestions for improving the trucking operations in the country are presented in Chapter 8.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

11

Chapter – 2: Scope, Approach & Methodology

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

CHAPTER – 2 SCOPE, APPROACH AND METHODOLOGY

This Chapter outlines the scope of the present study and the approach and details of the methodology adopted. 2.1

Scope

2.1.1

Conceptually, transportation of goods by road has two distinct segments based on the technology adopted in such transportation. The National Classification of Industries, 2004 thus distinguishes between freight transport by motor vehicles (NIC Sub-class 60231) and freight transport other than by motor vehicles (i.e. man or animal drawn vehicles like bullock carts, cycle rickshaws and the like) (NIC Sub-class 60232). The present study is confined to freight transport by motor vehicles only.

2.2

Objectives

2.2.1

As required under the TOR, the present study aimed at collecting information on a) The ownership pattern of trucking industry in India, b) The organizational structure of the trucking industry c) The volume of cargo handled sector-wise and State-wise d) The contribution of goods transport industry to GDP e) Peripherals like the vehicle productivity, various cost parameters, time loss due to inter-State barriers, etc.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

12

2.2.2

Approval of Methodology: It may be mentioned that the methodology outlined below has been finalised on the basis of various comments received from and discussions held with the Ministry of Shipping and Road Transport who had constituted a panel comprising representatives of Directorate of Transport Research, the CSO and NSSO to review and approve the appropriate methodology for the study. The sampling methodology thus finalised is completely probability based and has been approved by the Ministry vide their letter of 29th July 2010, and the study has been carried out in accordance with the approved methodology.

2.3

Sampling Methodology The sampling methodology adopted is one of stratified multi-stage random sampling of States, urban locations and villages within the States and Blocks within the urban locations, as described below:

2.3.1

Regions: The country is divided into seven regions for the purpose of selecting the states within them. The seven regions are as follows: (i)

Northern (Plains) Region (Haryana, Rajasthan, Delhi, Uttar Pradesh, Punjab and Chandigarh)

(ii)

Northern (Hills) Region (Himachal Pradesh, Uttarakhand and Jammu & Kashmir)

(iii)

Western Region (Maharashtra, Gujarat, Goa, Dadra & Nagar Haveli, Diu & Daman and Lakshadweep)

(iv)

Southern Region (Andhra Pradesh, Karnataka, Kerala, Tamilnadu, Andaman & Nicobar Islands and Pondicherry)

(v)

Eastern Region (Orissa, West Bengal, Jharkand and Bihar)

(vi)

North Eastern Region (Assam, Arunachal Pradesh, Meghalaya, Mizoram, Tripura, Manipur, Nagaland and Sikkim)

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

13

(vii) 2.3.2

Central Region (Madhya Pradesh and Chhattisgarh)

Selection of States: In each of the seven regions, two strata of States have been formed – the first stratum comprising the State with the largest number of registered mechanized goods transportation vehicles (used as a proxy for the number of mechanized goods transportation units), and the second stratum comprising all other States in the region. While the State in the first stratum is invariably selected, the second stratum is covered on a sample basis with one State selected with probability proportional to the size of registered goods vehicle population. The Variable ‘the number of Registered Goods Transportation Vehicles’ is taken as the size measure of probability as it is expected to be highly correlated with the variable ‘mechanized goods transportation units in use;’

Selection of states in stratum-I: Thus, the seven states with the largest number of registered mechanized goods transportation vehicles selected from various regions are: Table 2.1: States Selected in Stratum-I of Different Regions Sl. No.

Region

1 1. 2. 3. 4. 5. 6. 7.

2 North (Plains) North (Hill states) West South East Central North East Total ( 7States) All India

State Selected for Stratum I 3 Haryana Himachal Pradesh Maharashtra Tamilnadu West Bengal Madhya Pradesh Assam

No. of Registered Goods Transport Vehicles (2004) in Lakh 4 2.06 0.44 4.99 4.81 2.41 1.07 0.98 16.76 37.48

Figures in brackets are numbers of registered goods transport vehicles as on 31 March 2004. The data are provisional. Source: Road Transport Statistics, Department of Road Transport and Highways

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

14

The seven States selected in Stratum I together accounted for about 45 percent of the total number of such registered vehicles in the entire country. a)

Stratum II

Similarly the Process of selection of States from Stratum II with probability proportional to size, size being the number of registered goods transport vehicles is explained in Table 2.2 and the selected states shown in the last Column of this table (Table 2.2). Table 2.2 Process of Selection of States in Stratum-II Region

1 North (Plain)

North (Hills) West

South

East North East

Central

States in Stratum II (i.e. excluding the States in Stratum I) 2 Chandigarh Delhi Punjab Rajasthan Uttar Pradesh Jammu & Kashmir Uttarakhand

No. of regd. goods vehicles (lakhs) 3 0.09 1.52 1.10 1.87 1.52 0.42 0.15

Cumulative total in the regions (lakhs) 4 0.09 1.61 2.71 4.58 6.10 0.42 0.57

Dadra & N. Haveli Daman & Diu Goa Gujarat Lakshadweep A&N Islands Andhra Pradesh Karnataka Kerala Pondicherry Bihar Jharkhand Orissa Arunachal Pradesh Manipur Meghalaya Mizoram Nagaland Sikkim Tripura Chhattisgarh

0.07 0.04 0.26 3.87 0.00 0.02 2.10 1.92 2.09 0.04 0.63 0.63 0.86 0.03 0.07 0.14 0.05 0.50 0.02 0.07 0.57

0.07 0.11 0.37 4.24 4.24 0.02 2.12 4.04 6.13 6.17 0.63 1.26 2.12 0.03 0.10 0.24 0.29 0.79 0.81 0.88 0.57

Random State number selected selected 5 6 (between 1 and Rajasthan (0.307) 610) 449

(between 1 and Uttarakhand 57) (0.263) 56 (between 1 and Gujarat 424) (0.913) 262

(between 1 and Karnataka 617) (0.311) 258

(between 1 and Orissa 212) (0.406) 174 (between 1 and Meghalaya 88) (0.149) 13

Automatically Chhattisgarh selected, as (1.000)

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

15

Region

1

States in Stratum II No. of regd. Cumulative Random State (i.e. excluding the goods vehicles total in the number selected States in Stratum I) (lakhs) regions (lakhs) selected 2 3 4 5 6 there is only one State

Notes: 1. Random number in each region has been chosen between 1 and the total number of vehicles (in thousands) in the Region (excluding Stratum I States), using Random Number Generator from Internet. 2. Figures in brackets in col. 4 are the probabilities of selection of the respective States.

The States thus selected for the study from the two strata in each region are given in Table 2.3 below: Table 2.3: States Selected for the Study Sl. No.

Zone

States selected

No. of Registered Goods Transport Vehicles (2004) in Lakh Stratum I Stratum II

Stratum I

Stratum II

3 Haryana Himachal Pradesh Maharashtra Tamilnadu West Bengal

4 Rajasthan Uttarakhand

5 2.06 0.44

6 1.87 0.15

3. 4. 5.

2 North (Plains) North (Hill states) West South East

Gujarat Karnataka Orissa

4.99 4.81 2.41

3.87 1.92 0.86

6.

Central

Chhattisgarh

1.07

0.57

7.

North East

Madhya Pradesh Assam

Meghalaya

0.98

0.14

1 1. 2.

Total All India

16.76

9.38 37.48

Thus, the 14 States selected into the sample cover about 70% of all registered vehicles in the country.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

16

2.3.3

Selection of Urban Locations In each of the selected States in Stratum-I and Stratum II, the urban localities have been stratified as follows: •

Sratum A : The State Capital

•

Stratum B: Large Towns other than State Capital

•

Stratum C: Other Towns

In all States, towns with a population of a lakh or more (according to 2001 Census) formed Stratum B and all other towns Stratum C. The only exception is Himachal Pradesh, where there is no town with a population of over 50,000, except Shimla, which has already been covered as State Capital. In this case, the cut-off point was taken as 20,000. While the State capital town is selected invariably in all States, one town each (locations) has been selected on simple random basis from the other two strata. Thus, a total of 42 urban locations have been selected from the 14 States in Stratum I and Stratum II. In all cases the alphabetical lists of cities and towns in different States published by Registrar General of India in their web-site www.censusindia.gov.in have been used for random selection of towns in Stratum B and Stratum C. Selection from the Stratum comprising the larger towns (Stratum B of localities) was completed first by assigning serial numbers to the individual towns and selecting one of them at random. Selection for Stratum C towns was then done from all the towns in that stratum randomly. The locations so selected are shown in Table 2.4. Further details of selection are given in the ANNEXURE – I.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

17

Table 2.4: Selected Urban Localities (Towns) in Different Strata in the Selected States

State

State Capital

Town more than Town less one lakh one population population

1

2

3

1. Haryana

Chandigarh

Rohtak

Haileymandi

2. Rajasthan

Jaipur

Jodhpur

Phulera

3. Tamilnadu

Chennai

Tiruppur

Chetpet

4. Karnataka

Bangalore

Belgaum

Karwar

5. Maharashtra

Mumbai

Solapur

Chakan

6. Gujarat

Gandhinagar

Vadodara

Kheda

7. Madhya Pradesh

Bhopal

Burhanpur

Hoshangabad

8. Chhatishgarh

Raipur

Durg

Sakti

9. West Bengal

Kolkatta

Raiganj

Memari

10. Orissa

Bhubaneswar

Baleswar

Jharsuguda

11. Assam

Guwahati

Tinsukia

Makum

12. Meghalaya

Shillong

Tura

William Nagar

13.Himachal Pradesh

Shimla

Chamba

Kulu

14. Uttarakhand

Dehradun

Haldwani

Pauri

than lakh

4

Note: In Himachal Pradesh, the cut off population adopted was 20,000

2.3.4

Selection of Rural Locations (Villages) Mechanized road transportation of goods may be urban to urban, urban to rural, rural to urban or rural to rural. The goods transport enterprises also may be located either in rural

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

18

or urban areas in the form of owners of trucks and truck drivers residing in rural areas. It is considered that omission of such rural based enterprises would not impact much on the study of various parameters relating to the economics of trucking industry. However, the situation relating to the density, pattern of operations and other characteristics of rural-based truck owning units will be assessed through a small sample study of villages. For this purpose, in each of the 14 States selected as indicated above, one district and one (CD) Block within the selected district and two villages in each selected Block have been covered. Thus, in all, 28 villages have been covered. The list of villages so selected is given in ANNEXURE II 2.3.5

Sampling within the selected locations The procedure for covering goods transport enterprises within the selected localities/villages as approved by the panel constituted by the Ministry on 3 March 2010 was adopted. a) Urban areas In the case of urban locations, lists of the NSSO Urban Frame Blocks (available from their 2002-07 Urban Frame Survey) were obtained for each of the selected locations, categorised by Type of Block (business, industrial, residential, etc as per the classification followed by NSSO). As the transport units would be located mainly in business and industrial areas, blocks have been selected using the following sampling fractions, and simple random sampling. • 20% of the Business and industrial Blocks and • 2.5% of other Blocks (residential, slum, hospital areas, etc.) In each of the sampled blocks, all the foods transport enterprises identified through listing units have been covered on a census basis. b)

Rural areas In the case of rural locations (selected villages), all the goods transport units in each selected village have been covered on a census basis.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

19

c)

Sample Size The rural sample, as mentioned above, consisted of 28 villages. In the case of the 42 urban locations, there were a total of 60,648 NSSO UFS Blocks, of which 4,400 are business/industrial blocks and 56,248 are residential and other blocks. Using the sampling fractions of 20% for business and industrial blocks and 2.5% for residential other blocks, subject to a minimum of 1 block of a type at the locality level, the total number of sampled blocks came to 2,306, of which 886 were business./industrial and 1,420 others. The sample size of UFS blocks for each locality and block type is given at Annexure III and a Region- wise summary is given below: Table2.5: Region wise Summary of Total UFS blocks and selected UFS blocks

S.No.

Region

1.

North (Plains)

Total BA/IA UFS blocks 634

2.

North (Hills)

112

1030

1142

3.

West

1709

20256

21965

4.

South

975

14948

15923

5.

East

495

8268

8763

6.

Central

402

3875

4277

7.

North East

73

1465

1538

4400

56248

60648

ALL INDIA

Total RA/Other UFS Blocks 6406

Total UFS Blocks 7040

Sample Sample Sample BA/IA RA / Total Others 126 161 287 24

28

52

342

509

851

197

376

573

99

209

308

81

98

179

17

39

56

886

1420

2306

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

20

2.4

Coverage of Transport Companies, Brokers and Agents, Truck Owners and Drivers in the selected blocks/villages

2.4.1

Motorised goods transport industry is not made up of a single homogeneous set of players. Between the consignor of the freight and the consignee who are the actual users of the goods transport services, there is a long chain of entities, though not all of the links of the chain necessarily play a part in all transport operations. In its simplest form, the consignor may directly engage a truck owner to deliver the goods to the consignee. In some cases, he may approach the truck owners through a broker. A more complicated operation, common when the business is large, is the involvement of intermediaries like transport companies and booking agents who are engaged by the consignor and who in their turn reach the truck owner for the actual haulage of freight directly or through a broker.

Various models of operation are possible and exist. The study has targeted to

cover all the types of players in the road transport of goods industry, and also the actual drivers of goods transport vehicles.

2.4.2

Since drivers are also a good source of information regarding the operations of the trucks on road, all the drivers found in the selected blocks were also covered.

2.4.3

The number of goods transport enterprises identified in the selected blocks of the two types is shown in Table 2.6.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

21

Table 2.6 Number of Identified Goods Transport Units in the Selected Blocks Region

BA/IA

RA & Others

Total

1

2

3

4

North-East

4

17

21

North Region

98

49

147

North-Hill

18

11

29

Central Region

55

49

104

Western Region

289

170

459

Souther Region

162

136

298

Eastern Region

77

77

154

All India

703

509

1212

2.5

Development of Survey Instruments

2.5.1

A composite questionnaire (Questionnaire – A at ANNEXURE-V) has been developed for collecting the information from the sampled transport operating units on various aspects relevant to address each of the items included in the TOR. In addition a separate questionnaire (Questionnaire–B at ANNEXURE-VI) has also been developed for interviewing truck drivers.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

22

2.6

Field Operations

2.6.1

The field operations were carried out by the investigators and supervisors engaged by JPS. The investigators and supervisors were given adequate training in the concepts and definitions used in the two questionnaires and in the techniques of data collection and related matters. A pilot was also carried out at Rohtak, Jaipur and Phulera besides one village. The collected data were also scrutinized.

2.7

Reference Period

2.7.1

Keeping in view the relevance, convenience and the need to minimize recall lapse on the part of the respondents, different reference periods have been used for different types of data. For instance, data on expenditure and receipts of the transport units collected through Questionnaire A related to the financial year 2009-10. Data on number of workers related to end of March 2010. Utilization of vehicles was collected with reference to the month preceding the data of survey. Detailed information on the recent trips collected through both the questionnaires was in respect of the week that ended on the date of the survey.

2.8

Data from Secondary Sources Used

2.8.1

Apart from the primary data collected through the sample survey of goods transport units described above, material from a number of other secondary sources have been utilized in this report. Such material included the serial official statistics on the number of goods transport vehicles registered with the Directorates of Transport in different States and the reports

on

a

number

of

earlier

studies

on

goods

transport

industry

commissioned/conducted by various agencies from time to time such as the World Bank, the Competition Commission of India and the Working Group of the Eleventh Five Year Plan for the Road Transport Sector, freight rates reported in Economic Times, etc. Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

23

2.9

Estimation Procedure The estimates of various parameters will be obtained first for each sampled location, then combined to get estimates for each of the sampled States and then combined to get regional level and national estimates. The procedure followed for estimation within any particular selected location and then combining them is as follows: The estimate of a parameter for a selected location is obtained first as the sample means for each Type of Blocks and combined by weighting them by the inverse of the sampling fractions for different types of blocks. These location level estimates will then be combined for all selected locations in the location stratum to get the estimates for each location stratum, and then the estimates of the two location strata in the State are combined to get estimates for the selected State. Derivation of estimates for the region and the country is straightforward extension of this procedure. In all the states the sample estimates for the selected State is divided by the probability with which it is selected to obtain the regional estimate, as the selection of the state is with probability proportional to size. Let X be the population total of the parameter to be estimated. Let x(ijkl) be the total of the sampled values of the parameter for the lth block type, in kth location type (or locality, as only one locality is sampled for each location type), in jth sampled state stratum (or State, as only one state is selected in each state stratum) and ith region.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

24

Estimate of the parameter total for the sampled locality ‘k’ is given by

Est x{L(k)} =

where f(b) is the sampling fraction for the bth type of NSSO’s UFS blocks (b =1 for industry/business blocks, and 2 for Others). In fact, the fractions proposed are f(1) = 20% and f(2) = 2.5%

Estimate for the selected state as a whole is obtained by

Est x{S(j)} = where

p(k) is the sampling fraction for the localities of type ‘k’ ( k=1 for State capitals,

2 for localities with large population (in most States 1 lakh) and 3 for localities with less population). These fractions are in fact the reciprocals of the number of towns of that type in the State as per 2001 census, as only one town of each type at most was chosen (for States in Stratum I, State capital was already covered in the first phase of the survey and hence not chosen in the second phase.)

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

25

The estimate for Region ‘i’ is then given by: Est x{R(i)} = {1/π(i)}* where π(i) is the probability with which the State is selected. (In State stratum I, new localities in the State already covered have been taken and hence π(1) is 1 in all regions. π(2), however, differs from region to region)

Finally, the national estimate is derived as the sum of estimates for all the seven regions as

The multipliers at various levels have been combined in to a single set of overall multipliers which can be applied directly to the sample totals within the sampled locality. These are shown in the table attached in Annexure IV. Estimation for the rural sample followed a similar pattern, from village to block to district, state region and national levels. Explanatory note on methodology used for Calculation of Overall (or composite) Multiplier’ and its use in Estimation

It is clarified that the ‘overall (or composite) multipliers used for estimation is not any new concept, but only a computational convenience.

In the normal procedure, estimates are built up at various levels starting from the ultimate level of sampling upwards using multipliers appropriate to the level of sampling. This is necessary when estimates at various levels are required. However, when intermediate level estimates are not required but only the overall estimate, the use of overall multiplier, Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

26

which is essentially the product of the multipliers at various levels, provides an operationally convenient short-cut, without affecting the results in any manner whatsoever.

An example will make it clearer. Let us, for simplicity, assume that one State is selected in a region with probability ‘p’. Suppose there are 3 locations to be selected in that State – the State capital, one out of the n1 other larger locations and one out of the n2 smaller locations. In each location, 20% (or one in 5) of the business blocks and 2.5% (or one in 40) residential blocks are selected. There is no further sampling involved as the selected blocks are completely surveyed for goods transport units. Let us assume (for simplicity’s sake, and this does not in any way affect the procedure or argument) that the sample consists of 1 Business block and one residential block in each of the three locations. Thus, the sample is made up of

Location 1 – B1 (business) and R1 (residential) Location 2 – B2 and R2 Location 3 – B3 and R3

Let us assume that the variable being estimated is X, and the total of the values of X for all the goods transport units in the sample are x (b1) and x(r1) for the business and residential blocks respectively in Location 1, x (b2) and x(r2) for Location 2, and x (b3) and x(r3) for Location 3.

Normally, estimates are built up as follows.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

27

Since there is no sampling at the block level, the multiplier at that level is 1 and the estimates for various blocks are simply the totals x (b1) and x(r1) for the business and residential blocks respectively in Location 1, x (b2) and x(r2) for Location 2, and x (b3) and x(r3) for Location 3. The multipliers for different types of blocks are 5 for business block and 40 for the residential blocks, being the inverse of sampling fractions. Thus, the total Location-wise estimates are Estimate for Location 1 = 5* x (b1) + 40* x(r1) Estimate for Location 2 = 5* x (b2) + 40* x(r2) Estimate for Location 3 = 5* x (b3) + 40* x(r3)

Now, Location 1 is the State capital, and so its multiplier at location level is 1. For Location 2, the multiplier is n1 as one out of the n1 large locations is selected. Similarly, the multiplier for Location 3 is n2.

Thus, the estimate for the State is 1* {Estimate for Location 1} + n1*{Estimate for Location 2} + n2*{Estimate for Location 3} = 1* {5* x (b1) + 40*x(r1)} + n1*{5* x (b2) + 40* x(r2)} + n2*{5* x (b3) + 40* x(r3)}

Finally, since the State is selected with probability p, the estimate for the Region would be =1/p* (estimate for the State), i.e,

1/p[1* {5* x (b1) + 40* x(r1)} + n1*{5* x (b2) + 40* x(r2)} + n2*{5* x (b3) + 40* x(r3)}}

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

28

This is the same as

(1/p*1*5)*{x

(b1)}+(1/p*1*40)*{x(r1)}+(1/p*n1*5)*{x(b2}+(1/p*n1*40)*{x(r2)}+

(1/p*n2*5){x(b3} + (1/p*n2*40) { x(r3)}

Thus, if intermediate level estimates are not required, the overall estimate may be derived as the weighted sum of all the block level sample totals, the weights (the underlined factors) being simply the products of all the relevant multipliers at various stages, which may be called overall or composite multipliers. The numbers in each of the factors is known in advance, and hence, the overall (or composite multipliers can be determined in advance. National estimates are simply the total of all regional estimates and do not involve any estimation procedures. 2.10

Estimation of Gross Value Added One of the important objectives of the study is to estimate the contribution of the mechanised goods transport sector to the gross domestic product. The study therefore attempted to estimate the Gross Value Added by this sector. The principles laid down in the CSO Manual 2007 on National accounts have been followed while computing Gross Value Added. As a practical guide, the procedures adopted by NSSO in their 63rd Round (Economic characteristics of Enterprises in Service Sector) have been adopted. The NSSO used the following definitions: Operating Expenses: The total value of services purchased and other expenses incurred during the reference period by an enterprise on raw materials, electricity, fuel, lubricants and auxiliary materials consumed; cost of maintenance, etc Receipts: The sale value of services produced together with the value of services rendered to other concerns and other receipts incidental to entrepreneurial activities

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

29

including value of products and by-products manufactured, if any, by an enterprise during the reference period. Gross Value Added: GVA is taken as the additional value created by the process of production of an enterprise to the economy, and is calculated by deducting the total operating expenses from the value of receipts.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

30

Chapter – 3: Organizational Structure of the Trucking Industry

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

CHAPTER – 3 ORGANIZATIONAL STRUCTURE OF THE TRUCKING INDUSTRY

3.1

General

3.1.1

Barring some captive freight movement operations of the government and some public sector enterprises, the entire goods transportation by road is in private sector.

An

important aspect of the trucking industry is the existence of a chain of intermediary transport entities. Between the actual consignor, the original sender, and the consignee, the ultimate receiver of goods, there exists a series of links in the form of transport booking agents, transport operators, brokers and the vehicle owners. When the consignor feels the need to move his goods from one location to another, he contacts a transport operator either directly or through a transport agent. The transport operator may or may not have his own vehicles. Quite often, he does. In case he does not have his own fleet or his fleet is inadequate or otherwise occupied he will contact other transport operators (including vehicle owners) directly or through a broker. It is ultimately the vehicle owners who actually transport the goods from the consignor to the consignee. 3.1.2

Thus, between the actual users of goods transportation services, viz., the consignor and the consignee on the one hand and the actual provider of transportation, viz., the vehicle owner, there are a number of intermediaries who facilitate the entire process. The basic model of transportation of goods by road may thus be depicted as in the following diagram.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

31

Consignor

Transport Agent

Consignee

Vehicle Owner

Transport Operator

Broker

Consignors are individuals or organizations who give orders to transport operators for transporting goods by road to desired destinations, where the goods are received by individuals or organizations known as consignees. Transport operators are the entities, again individuals or registered or un-registered organizations, who generally operate through regular or ad hoc arrangements with the consignors and book orders for transportation of goods. They may or may not own their own vehicles and operate through brokers and small truck owners. Some of them are large with their own truck fleets and other infrastructure like warehouses and offices at a large number of locations all over the country. Transport Corporation of India, for instance, has a fleet of about 7,000 trucks and 3,000 offices. Truck (or vehicle) owners are the individual owners of a small number of trucks, quite often one and owner-driven. They contact or are contacted by transport operators, usually through brokers, and actually carry out the transportation of goods from one location to another.

Some of them, particularly those catering to transportation of

household goods, are also directly contacted by the customers. Brokers have relations, usually informal, with the truck owners and transport operators and act as intermediate agents between the two, introducing truckers to the transporters operators or even consignors directly and work on a commission basis charged from either the transport operator or the vehicle owner. They also ensure to some extent, in an informal way, reliability and promptness of the transport services to the transport operator and business to the truck owners. Agents (also called transport suppliers or transport contractors) are also intermediaries, but their job varies from that of a broker. The agents, who usually operate from major project sites or in ports, collect, forward or distribute the goods Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

32

carried by trucks, and are the link between the transport operators and the consignors. Some of them may also provide finance and go-down facilities. The survey conducted by CIRT in 1998 revealed that around 44 % of small operators themselves take up the multiple role of a transporters, broker and booking agent.

3.1.3

The basic model illustrated above with all the major players in the goods transportation by road sharing the operations has a number of variations in practice. In the extreme case, the consignor himself may own trucks and may directly undertake the transportation himself, dispensing with all intermediaries. More often, the consignor may engage a transport operator directly who in turn may contact vehicle owners through a broker. Further, the above division of various transport entities into the categories shown in the above model is not watertight and the roles of various entities often overlap. A transport operator or a broker may himself be a vehicle owner, or a vehicle owner may himself be a driver of the vehicle. Thus, the industry is marked by considerable degree of organizational variation, flexibility, informality and dependence on intermediaries.

3.1.4

Size and reach of operations is an important source of variation among the transport operators. As mentioned in the previous chapter, the ownership pattern of trucking fleet is highly skewed in favour of small operators but the range of variation is sizeable. Also the truck operators can be classified on the basis of spread and extent of operations into local, regional and national carriers. Thus, while at one extreme of the spectrum are truck owners with a single truck each catering to haul of goods confined to a small local area, at the other are giants like Transport Corporation of India with around 7000 vehicles and over 3000 offices spread all over the country claiming a substantial share of the market. In between the large and small operators are the medium-sized operators with 10 to 100 vehicles engaged in regional or even national operations. The CIRT survey revealed that medium and large sized operators charter trucks to the extent of 10 to 12 times their own fleets. They get these either through lorry suppliers or directly from single truck owners.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

33

Some fleet operators encourage their own employees to become owners of trucks by providing financial assistance, subject to the condition that vehicles should be permanently attached to companies.

3.2

Distribution of Goods Transporting Units by Activity

3.2.1

The proportions of different types of units, viz., agents, transport operators, brokers and vehicle owners, in different States covered in the present survey are given in Table 3.1. It may be mentioned in this connection that the classification of the goods transporting units into these four categories was based on the units’ own perceptions as their main activity and several times they may be engaged in multiple activities.

Table 3.1: Distribution of Goods Transport Operating Units by Type of Units in Different Regions State

Percentage of units which are Transport Brokers Vehicle operators Owners

Agents North (plain) North (Hills) West South East Central North East All India No. of units reporting

7 0 5 5 3 5 6 5

22 0 51 63 37 2 12 53

6 0 19 4 25 4 3 6

65 100 24 27 35 88 78 35

51854

514576

62793

343449

No. of reporting units

All 100 100 100 100 100 100 100 100

92159 15862 83472 682922 47160 41620 9477 972673

972673

It may be seen that out of the total, about 5 percent are Agents and another 6% are brokers. The bulk of the units comprise of either the transport operators (53%) or the vehicle owners (35%). Moreover, the categorization was primarily based on the perceptions of the reporting units as to their dominant activity. Many of them may be Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

34

performing more than one role in the transportation of goods, as would be seen in the next paragraph. It may also be seen that as per the abovementioned estimates, there are a total of around 9.7 lakh units engaged in transport trade. If we were to analyze the same information by class of cities, i.e. the pattern of distribution of different type of units in bigger or smaller cities, we would get an idea of the type of concentration of activities in different class of cities (Table 3.2 below). Table 3.2: Distribution of Goods Transport Operating Units by Type of Units in Different Classes of Cities State

Percentage of units which are Transport Brokers Vehicle operators Owners

Agents Capital Cities Cities >1 Lac Pop Cities1 lac 1 lac

%

0

3

30

14

53

32.5

All India

1 Lac Pop Cities1 lac), where as the smaller cities have a lower percentage of holding. Similarly the percentage of Light Commercial Vehicles is higher in smaller cities.

Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India

50

Table 4.5: Distribution of Goods Transport Vehicles by Type, of vehicles over cities of different size classes State Multi-axle

Capital Cities Pop>1 lac Pop1 lac

27

44

25

4

100

1237359