Fuel Price Rise is GOOD for Logistics Industry- Version 2

 

Consider this-

2008: Crude- USD 148, Diesel at Delhi- Rs. 35

2013: Crude- USD 99, Diesel at Delhi- Rs. 52

 

Imagine the reduced burden of subsidy on Indian Government. This also means that irrespective of how low the crude price goes- high Diesel prices are here to stay.

 

Back in 2008- I argued that this is in a way for good. This makes people think more about cost of logistics and thus helps to drive efficiency. In many ways this has happened- average size of truck capacity has gone up from standard 9 ton to 16 ton and we often see 40 ton plus vehicles.

 

This automatically means more consolidation of cargo is required to fill a truck.

 

Also, the paucity of long haul drivers will mean that it is better to pay him more, give him better comfort and thus make him driver longer. This will of course mean that he should drive larger vehicle- even a 50 tonner !!

 

These dynamics will play out over next 5 years and we will see a great impact on the way supply chains are organized.