Over 90% of goods movement in India is carried out by the unorganized sector-the much awaited shakeout and consolidation have never materialized. But the latest fuel price raise ( and many more to come with oil likely to remain in $130-160 band) can actually be the proverbial "tipping point".
Transport rates are already up 15% plus and by end of 2008 will end up 25% above December 2007 levels. It is but natural that industry will lean hard on transporters to suppress prices as much as it can.
But that may work only in short term. The need of the hour is to have larger transport companies with all India fleet, modern management, superior use of technology and collaborative approach.
But this means heavy capital infusion into vehicles, talent and technology. This is beyond transporters with less than 20 vehicles, let alone single truck operators.
The higher fuel price will lay a premium on services such as load planning, reverse load management, route optimization, variable capacity in line with demand etc.
As regular transporters will fail to offer above, they will be able to compete only by reducing margins. This will lead to many downing shutters or merging to become larger entities.
Thus, fuel price can actually do some good by placing a premium on value added services that can save even a small percentage of fuel bill.
Get ready for the shakeout- no other way at $140 crude.
