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Freight rates to cool down after cut in diesel prices

Freight rates to cool down after cut in diesel prices

Freight rates to cool down after cut in diesel prices
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By CNBCTV18.com Nov 5, 2021 7:47:34 PM IST (Published)

Truck rentals are expected to fall 10-12 percent in the coming days, bringing relief to consumers as prices of vegetables, fruits and consumer goods should come down.

The cut in diesel and petrol prices will lead to lower road freight rates in the coming days, according to the Indian Foundation of Transport Research and Training (IFTRT), reported Business Standard. The reduced cost of road freight will be passed on to consumers in the form of reduced prices of consumer goods, and food items.

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“Freight rates are expected to come down 10-12 per cent in the next few days,” S.P. Singh, a senior fellow at the IFTRT, told Business Standard.
The cut in fuel prices came as state governments announced cuts in VAT and the Centre lowered excise on fuel. In Delhi, diesel prices are already down by Rs 12. In response, truck rentals for key road freight routes are expected to fall over the next five months. Truck rentals had been steadily climbing since June after being cut by nearly 25 percent in April-May due to the second wave of the pandemic.
Truck rental prices will also be impacted as the festive season impulse in shipping starts to ebb. With the festive season ending, the additional demand of 30-35 percent will taper off.
However, other experts have said the fuel price cuts will not lead to a large decrease in freight rates. Instead, the main impetus would be the supply and demand dynamics. With shipping rates still swinging wildly due to a breakdown of logistics, shipping container shortages and excess traffic in major ports, road freight holds the key.
The elasticity of the demand-supply situation will further define how closely freight prices will follow diesel prices as more states announce cuts in fuel prices.
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