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Credit rating agency Crisil in its latest report has said that freight rates have come down in May 2022 as transporters passed on the benefit of the lower diesel prices due to a cut in excise duty. It noted that cement and mining applications saw a flattish trajectory in freight rates in May owing to the high base of April, while for the auto-carriers, agri-products, container, FMCG/FMCD, petroleum tankers, textile and steel, these rates saw a lower single-digit drop.

The report said CRISFrex indicates that freight rates have dropped month-on-month with free cash flow (pre-equated monthly instalment) decreasing 100 basis points. It said CRISFrex captures the changes in freight rates on a sequential basis. Besides, it also tracks the free cash flows (FCF; pre-EMI) of transporters on an ongoing basis. Higher FCF would typically support demand for commercial vehicles. However, fleet utilisation was flat month-on-month and while for the market load, it was higher, which was offset by slightly lower utilisation for parcel/loose goods, mining (largely coal and iron ore), and agri-products, the remaining commodities, including auto-carriers, container applications, fast-moving consumer goods and durables, steel, textile, and petroleum tankers, saw flattish trajectory in utilization.

According to the report, freight rates, too, declined for most commodities but were stable for mining and cement. Freight rates declined month-on-month for consumer essentials, such as agri-products, FMCG/FMCD, loose goods and discretionary goods. The complete effect of this duty cut would be visible in the index from next month. This is because the central government set an extrinsic decline in excise duty at the end of the month, whereas CRISFrex represents freight rates and fuel prices for the entire month.