Fuel prices have a profound impact on the logistics and relocation service industry. They are directly related to the operations and growth of the company.
Surging fuel prices will have a detrimental effect on the company as a huge chunk of our budget goes into filling the tanks of our respected vehicles. And the higher the price is, the lower will be the turnout.
Recently the fuel prices have been increasing drastically since December 2020. As of February 2021, the fuel prices retail between Rs.93 to Rs.86 per litre, varying from cities. The reason for this rise stands from the increase in central taxes along with firm crude prices internationally. Adding to the burden is the new agricultural and infrastructure cess levied by The Union Budget 2021-2022. All in all, this led to a drastic rise in fuel prices across the nation.
What does this mean for the logistics industry in India?
Drivers Suffer
Fuel prices are the backbone of logistics services. Almost all our vehicles run through petrol and diesel. What’s more, the long-distance travel demand days worth of fuel. If a driver has to spend a huge chunk of the money on fuel, then he’d have to cut back on other necessities like food and hygiene. This directly affects the quality of service and timely deliveries.
Operations are hampered
High prices lead to allocating a higher budget. This either results in cost-cutting in operations or letting the consumers deal with higher prices for the services. Both options are neither suitable for the sustainability of the business nor feasible for stakeholders.
Gives way for inflation
High consumer good prices lead to high inflation which in turn can affect the interest rates and prices of various goods and services in the nation. This is a vicious cycle that will never stop until there’s a dip in prices.
Conclusion
The logistics industry is the backbone of the economy. Logistics companies ensure that goods are available in the market and that people have access to goods. It keeps the supply chain of the companies running. But if we hamper the chain of logistics with high fuel prices then operations are bound to break down. No company, whether logistics or others, can take losses for the long term and the government needs to realize this before it breaks the economy.
Nitin O Mahipal - MD of Mega group
Nitin O Mahipal, CEO and MD of Mega Group providing Transportation, 3PL and packing and moving services has earned his MBA in Logistics and Finance from the Cardiff University, UK. He expanded MEGA's services to FMCG, Retail, Pharma, Textiles, rubber and tyre MNC’s revolutionizing customer experience with digital initiatives like the Mega App. Under his leadership, MEGA's warehouse foot print grew from 50,000 to over 12 lac square feet space, PAN India Network of branches and Fleet of trucks, with transit times slashed to hours.
