Country losing $2.5 billion annually to inefficient road freight industry
KARACHI (February 01 2007): The inefficiencies of country's road freight industry are costing roughly Rs 150 billion, or $2.5 billion, annually to the national exchequer. The present industry structure cannot integrate into international trucking nor can support the country's projected economic growth and, unfortunately, the trade would stay reliant on such industrial infrastructure due to the absence of alternative options.
According to documents available with Business Recorder, there are three major areas identified for such losses of inefficient road freight sector, which are Rs 60 to 90 billion per year spent on extra fuel cost and subsidies on the use of diesel, Rs 30 to 35 billion in additional road user costs and about Rs 25 billion contributed to the infrastructure deficit. A highway constructed for 10-year efficient life for freight traffic has been damaged only in 18 months period.
Low quality of service is impeding the country's trade competitiveness for imports and exports. Freight sector demands are unbalanced, and majority of consumers is not aware of 'externalities' unwilling to pay the right price.
The industry is responding by over-supplying of illegal and unregulated services. Competing in an 'illegal market' is keeping the freight industry from responding appropriately.
Experts believe that as far as structure of road freight industry is concerned, the domestic demand is much higher than the international demand and 90 percent or more of all land freight in the country is 'trucked' and this would double in the next ten years.
They say that segmentalisation of demand is very weak and poor; reliance on 'inter-modalism' as railways is not delivering the adequate service levels for speedy freight movement.
Almost all trade is conducted through two seaports in the south, and one out of every three truck trips is for agricultural sector use. The geographical distribution of demand is uneven due to major share of Punjab in both internal and external trade. The consumer tariffs, which have consistently fallen in real terms over the last 20 years, are among the lowest in the world.
Majority of the consumers, further negotiating down rates with little or no expectation for improvement, is stuck in a rut. The share of manufacturers and general merchandise is rising rapidly and these (and other) high-value exporters and customers are willing to pay higher.
The current available capacity is higher than demand, but this availability is illegal. The trucking equipment is under-developed and outmoded and the same holds true for all not significant road infrastructure, freight stations, terminals, trailers, sales, service, support and driver training.
Another aspect of cargo safety is under-developed cargo insurance practices and absence of mechanisms for access to finance at the right cost. The country's trucking industry is not practically deregulated. In reality, it is poorly regulated as per the market trends for owning the vehicles.
The experts say that the freight sector is superficial and a very fragmented industry, but few informal financiers consolidate it at the back, though. The absence of appropriate standards, registration and fitness certification system has distorted supply side incentives, and ill-informed industry and trade associations do not have the professional service users' control rates.
http://www.brecorder.com/index.php?id=524009&currPageNo=1&query=&search=&term=&supDate=
KARACHI (February 01 2007): The inefficiencies of country's road freight industry are costing roughly Rs 150 billion, or $2.5 billion, annually to the national exchequer. The present industry structure cannot integrate into international trucking nor can support the country's projected economic growth and, unfortunately, the trade would stay reliant on such industrial infrastructure due to the absence of alternative options.
According to documents available with Business Recorder, there are three major areas identified for such losses of inefficient road freight sector, which are Rs 60 to 90 billion per year spent on extra fuel cost and subsidies on the use of diesel, Rs 30 to 35 billion in additional road user costs and about Rs 25 billion contributed to the infrastructure deficit. A highway constructed for 10-year efficient life for freight traffic has been damaged only in 18 months period.
Low quality of service is impeding the country's trade competitiveness for imports and exports. Freight sector demands are unbalanced, and majority of consumers is not aware of 'externalities' unwilling to pay the right price.
The industry is responding by over-supplying of illegal and unregulated services. Competing in an 'illegal market' is keeping the freight industry from responding appropriately.
Experts believe that as far as structure of road freight industry is concerned, the domestic demand is much higher than the international demand and 90 percent or more of all land freight in the country is 'trucked' and this would double in the next ten years.
They say that segmentalisation of demand is very weak and poor; reliance on 'inter-modalism' as railways is not delivering the adequate service levels for speedy freight movement.
Almost all trade is conducted through two seaports in the south, and one out of every three truck trips is for agricultural sector use. The geographical distribution of demand is uneven due to major share of Punjab in both internal and external trade. The consumer tariffs, which have consistently fallen in real terms over the last 20 years, are among the lowest in the world.
Majority of the consumers, further negotiating down rates with little or no expectation for improvement, is stuck in a rut. The share of manufacturers and general merchandise is rising rapidly and these (and other) high-value exporters and customers are willing to pay higher.
The current available capacity is higher than demand, but this availability is illegal. The trucking equipment is under-developed and outmoded and the same holds true for all not significant road infrastructure, freight stations, terminals, trailers, sales, service, support and driver training.
Another aspect of cargo safety is under-developed cargo insurance practices and absence of mechanisms for access to finance at the right cost. The country's trucking industry is not practically deregulated. In reality, it is poorly regulated as per the market trends for owning the vehicles.
The experts say that the freight sector is superficial and a very fragmented industry, but few informal financiers consolidate it at the back, though. The absence of appropriate standards, registration and fitness certification system has distorted supply side incentives, and ill-informed industry and trade associations do not have the professional service users' control rates.
http://www.brecorder.com/index.php?id=524009&currPageNo=1&query=&search=&term=&supDate=
