Sea, road transport recovering; aviation sector still under pressure: India Ratings

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 Diesel consumption witnessed an increase too with a gradual pick-up in the business activities across the country post-lockdown

Giving indications of positive signs in the country’s logistics sector, the sea and road transportation segment witnessed a continued recovery on a month-on-month (m-o-m) basis in August 2020, though it remains lower year-on-year (y-o-y), said India Ratings report.

India’s ports volumes continued the recovery trend displayed in June-July, by improving to 85-90 percent of the pre-COVID-19 levels. In August this year, the e-way bill collections rose 2 percent m-o-m (though down 14 percent vs February 2020; down 3 percent y-o-y) while railway volumes were up 4 percent y-o-y, they were down 13 percent on year-to-date basis.

With airlines re-starting operations from June this year, air transport activity, too, is normalising with plant load factor at around 65 percent for flights, though substantial fleet remains grounded and passenger numbers in July were significantly below normal levels. 

In the sea transport segment, the overall major port volumes witnessed a monthly improvement in August this year, though the volume trade remains lower y-o-y.

The overall major port volumes recovered in August 2020, reporting a decline of 10 percent y-o-y, (July: down 13 percent y-o-y; June: down 15 percent y-o-y).

“During April-August period this year, the overall volumes fell 17 percent. The recovery in the monthly volumes has been led by a 38 percent and 29 percent increase in the imports of iron ore and fertilisers, respectively” India Ratings said.

Dwell time for import containers at JNPT Port witnessed a monthly improvement to 22 hours in July 2020 (June: 38 hours, May: 65 hours) with gradual resumption of business activities. The port dwell time for export containers increased marginally to 75 hours in July 2020 (June: 69 hours, May: 60 hours).

The surface transport sector witnessed traction with a gradual increase in the availability of trucks and an increase in the supply of labourers, leading to a decline railway market share, which had increased in April 2020, the rating agency said.

The market share of road stood at 80 percent during August this year.

“E-way bill collection at 49 million in August this year, is gradually returning to normalcy. It stood at 86 percent of the pre-COVID-19 levels (February 2020) and remains 3 percent y-o-y lower,” India Ratings said.

Diesel consumption witnessed an increase too with a gradual pick-up in the business activities post lockdown.

However, diesel consumption witnessed a mom decline of 15 percent and 12 percent during July and August this year, as compared to the mom decline of 11 percent in July and August 2019.

While average freight rates have witnessed a negligible increase, the impact of higher diesel prices is likely weigh on profitability. Diesel prices though have declined by about 10 percent mom in August 2020.

The air transport is the most affected sector post-coronavirus outbreak and subsequent lockdowns in the country.

With India GDP forecasts being revised further downwards, the recovery in corporate travel could be slower than India Rating’s initial expectations and could remain under pressure even in 1HFY22. 

Passenger traffic nearly remained nil in April-June 2020 due to the nation-wide lockdown and travel restrictions. Few domestic carriers started operations in May-June 2020. However, the current passenger load factor at 59-76 percent may not be truly representative of the actual recovery, as a large number of aircraft are still grounded.

Freight traffic in July 2020 stood at around 65 percent of normal air freight volumes, impacted by overall weakness in economic activity, lack of manpower, and significant erosion in overall available belly-load freight capacity with many passenger aircraft grounded.

Image credit: Tech Mahindra

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