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Tuesday, July 19, 2016

NGT's Diesel ban and implications...

Yesterday's blanket ban on Diesel vehicles of over 10 years of age by National Green Tribunal has far-reaching implications and NO, these are not limited to only cars for personal use, which all media reports seem to be suggesting!

Besides the de-registering of these vehicles by Delhi RTO, another major aspect of NGT's order is that no diesel vehicle older than 10 year old will be allowed to enter Delhi. 

The issues are many and have way serious ramifications, and most of them are related to the logistics and transportation sector. Transportation industry today has around 6.6% trucks which are above 13 years of age, as per a FICCI study. It would go up to around 10% or more for trucks above 10 years of age, across India.

In India, 65% of overall freight movement is through roads(trucks). In the segment of over 250 Kms, this becomes more than 80% with only 20% with the Railways. 

In Delhi alone, out of 6 lakh diesel vehicles, over 1.2 lakh are commercial vehicles of 10 years and above of age and these will now be prohibited from plying in Delhi. This constitutes 20% of the total commercial vehicles in Delhi. The numbers that we are talking about are stupendous.

In Delhi/India, most of the products are moved by trucks and with transporters forced to look at ROI in a shorter time-span, the costs are bound to go up. We are already reeling under a high inflation and with higher transportation cost, the products are going to be costlier. Most of the food items / agricultural and animal produce for Delhi's consumption comes from outside of Delhi, so Delhiites need to be prepared to shell out more for groceries and other purchases.

Any movement for industry/businesses/any activity will also be adversely impacted and costs are bound to go up. The cost of transportation will increase substantially leading to an increase in pricing. The B2B businesses will be impacted more, since the B2C businesses may still be able to pass on the increase to the end consumers. There will be pressure on margins in the immediate future.

All in all, we need to be prepared for increased costs, higher inflation and pressure on margins, in the short to mid term, because of the NGT order.

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