The truckers’ strike is finally off and the nation heaves a sigh of relief. But one wishes the real issues faced by the industry had been brought up on the table and resolved once and for all, even if it had meant a prolonged strike. Unfortunately, the truckers were not correctly represented: the leadership could not see beyond their noses and a patch-up deal that seemingly clarified the service tax as not being applicable to truckers is all they could take back.
We blame truckers for many things — high road accident rates, bulldozing their way on highways, overloading, road damage due to the same, road blocking and parking at wrong places, AIDS, impossibility of driving cars at night, delays in cargo movement and what have you. We must also recognise the policy, administrative and legal deficiencies that have made the business what it is. And truckers have been implicitly raising these issues, but they have not articulated the same well enough.
It is a patent absurdity to push service taxes without a clear value-added framework. A service tax of 10 per cent, when applied on the revenue on such operations as trucking, is a huge tax on value-added, especially on an industry whose principal input diesel and oil is most highly taxed in the country, and is not vattable!
P Chidambaram got what he deserved from the brokers when he forgot that even a 0.15 per cent tax on a service industry can be very large on value-added. The hurry to raise more service taxes is understandable. But their revenue potential is much exaggerated. Much of the services arise in small and minuscule enterprises. Taxing them is not worth anybody’s time and effort. The government had to finally clarify that the tax was on the commission of the commission agents. If true, this is better, but is likely to set in motion interesting movements like direct booking.
If the intention was to tax the trucking business, then an 8 per cent tax should have been on value-added. Since this is not easily determined, anything more than 1 per cent would be onerous, and destroy the industry. Let us remember that truckers have saved the Indian economy from the absurdities of the railways — their punitive (far above even revenue maximisation) tariffs for freight, and the horrendous quality of service, which threw freight onto the roads, when the roads were pitted, narrow and dangerous. Just the thought that a truck driver has to change gears more than ten times a km on most roads should sober our attitude to trucks.
Today truckers (I do not include commission agents and freight forwarders who exploit the small truck operator) pay tolls that are too high on a tonne-km basis than anywhere else, taxes on inputs especially fuel take away as much as half or more of the cost of inputs, besides high registration fees. The octroi (now even goons on behalf of private octroi contract agents) entry tax and excise administration, and the eternally ready police for checking and rechecking, suck out the last bit of surplus from truck operators. Lending rates to buy trucks are way above the PLR (prime lending rate). And commission agents and freight aggregators would ensure that not a rupee above survival is left for the operator.
What is it that makes these brave souls still hang on? The fact that they like peasants (the one- and two-truck operators), are not enterprises which maximise profits as much as value-added, which means that they self-exploit (put in unpaid family and self-labour), and use only cheap unorganised labour for long hours to keep costs low.
Now take the case of overloading. Few policymakers realise why truckers overload, and why manufacturers (rightly so) support them with chassis and axles that can stand systematic overloading. Imagine a highway built to specs but with a little, say, 10 per cent cheating on tar or compacting. Deterioration is fast. Vehicles are overloaded since in any case top gear operation is impossible on most stretches. (Leave aside the recent upgradation of the Golden Quadrilateral). Overloading accelerates pothole formation. So there is more overloading. The other theoretical equilibrium of higher truck speeds with improved truck turnover is impossible. The ‘vehicle damage factor scale’ of road designers gives up on many stretches of the national highways!
In other words, state failure has set in motion a negative sum game. Compounding and giving further sustenance to overloading are the huge fixed costs on account of the innumerable rent-seekers of the state on the way. The same story can be said about accidents; with highways designed without worrying about local and bullock cart traffic — no underpasses, no service lanes, no road shoulders! When parking spaces as an aspect of road design is only a late 90s’ discovery in India and that too in conferences, where do you expect the trucker to park? Which city has thought of freight stations integrated with vehicle service shops in an organised way?
To get back to basics: The trucking industry is most competitive, barriers to entry are zero, and would inevitably continue to be exploited by commission agents and other rent-seekers. A highly competitive industry has its own problems, and state failure to manage the regulation and the infrastructure to move this industry into a higher equilibrium is the core problem. Better roads and more contextual design of infrastructure and policy would bring in some changes. Today multi-axles (with far lower damage potential) have come on the highways of the west and south as road conditions have improved, the axle taxes got rationalised, and somewhat higher speeds are possible.
With the correct policy, this industry should continue to yield very low cost services, cover up the deficiencies of the railways, and much taxes, not to speak of rents, but without the other irritants that are rife today.
http://www.financialexpress.com/fe_full_story.php?content_id=67609