With the economy slowing down, India’s transportation industry is facing a crisis – and small fleet operators, in particular, are fighting for survival. India’s transport industry is primarily unorganised and it is small fleet operators and driver-owners like Mohan Jadhav here who form its backbone.According to a CRISIL research report, small fleet operators form about 67 percent of the road transport operators in India, though they own less than 25 percent of the trucks in the segment over 12-tonne gross vehicle weight (GVW).In recent times, as the economics of the industry begins to sharply favour large fleet operators, small fleet operators (SFOs) and first-time buyers of trucks have been finding themselves in difficulty due to an increased compliance burden, higher cost of operations, and slow economic growth.As the business becomes unsustainable for them, many of them are looking to sell off the trucks they own and exit the business altogether. Unable to pay EMIs, truckers look to exit business.Unable to pay EMIs, truckers look to exit businessMohan Jadhav is a small fleet operator and also drives one of his trucks. He used to own three trucks. But six months ago, he was forced to sell one truck to his driver. He is now looking to sell his second truck as well because he's unable to scrape together the Rs 50,000 each month towards EMI for one of his trucks, which he bought four years ago.“There is no margin in this business. The business itself is so low that the truck stays idle for three days at a stretch. There’s no load available,” Mohan says, adding, “I will watch what happens in the next 6 months - 1 year. I will drive one truck and then sell off the rest to one by one. I will go back to my village.”Mohan's story is similar to that of many small fleet operators, who own one to five trucks. While demonetisation widely hurt the informal economy which employs these trucks, the dual GST system for the industry has raised capital costs for FTUs and SFOs.Since small operators don’t garner enough billings, they choose to opt for the Reverse Charge Mechanism (RCM), in which GST is provided by the load provider, and takes a long number of days to process.On the other hand, large fleet operators are able to avail of the benefit of the forward charge mechanism (FCM) and use the savings in capital costs to pass on a lower freight rate to consumers.Financiers who lend to the segment say this is reflecting in their loan book as well. "The background is that GDP growth, load itself in the economy has come down. Mining, steel, cement, core sector- demand in all sectors has reduced. The cumulative effect of these things is that lending to FTU (first-time users) has come down by half," V Ravi, chief financial officer, Mahindra Finance, told CNBC-TV18."Out of a hundred trucks sold almost three years back, almost 70 trucks would be FTUs. That has now come down to 30-35. We have also come down by 50 percent in our portfolio. Now, we are leaning more towards fleet operators than FTUs," Ravi added.Piling costs, falling demandPaying EMIs is not the only problem either. With NBFCs becoming stricter towards lending, and regulations getting tighter, the cost of owning a truck has also risen significantly.“Capital cost, registration cost, insurance has gone up for FTUs. On the other hand, the loan-to-value ratio (LTV) has gone down after the IL&FS crisis. The money NBFCs are giving has gone down, the result of which is that they (the truckers) have to bring Rs 6-9 lakhs of their own money, which is very high. That's why they’re bringing down their purchase," Ravi said."Moreover, the extra load permitted by the government has resulted in higher capacity vehicles being purchased by the fleet operator. So the capital cost for multi-axle vehicles has gone up, with it, bodybuilding cost goes up too. All these things are affordable to the large fleet operator, not FTU, so their industry is slowly shrinking”, Ravi explained.This trend is also hurting logistics businesses that rely on small fleet operators to keep business competitive. "There will be a lot of defaults happening in the next two months now. Small fleet operators are not able to pay the installments because most of the trucks which we buy are all financed. So those who have bought trucks in the last two-three years will definitely default," Ashok Goel, managing director, BLR Logistiks told CNBC-TV18.Goel’s company outsources about 80 percent of its trips to small fleet operators.Sales in the medium and heavy commercial vehicles segment took the steepest fall this year, and small fleet operators have been the first casualties. There's also concern that the impending BS-VI regime will push capital costs higher, meaning such fleet operators will find the going tougher in 2020. In this scenario, commercial vehicle makers say there is little hope of a quick revival in the absence of a stimulus that will lower costs and spur demand.