Indian Truckers End Strike

Indian Truckers End Strike
Indian truckers have called off their strike after eight days as the government agreed to consider their demands to cut levies on diesel fuel. The strike had disrupted production, supply and commodity prices across the nation. Oil prices have been one of the most watched trends in economics during the 21st century. Globally, petrol ...

Indian truckers have called off their strike after eight days as the government agreed to consider their demands to cut levies on diesel fuel. The strike had disrupted production, supply and commodity prices across the nation.

Background

Oil prices have been one of the most watched trends in economics during the 21st century. Globally, petrol and diesel prices vary in accordance of crude oil prices, processing and distribution costs. It also depends on availability, local demand, the strength of the currency and taxes.

In India, there is no single tax on petrol and diesel under the Goods and Services Tax (GST) that was implemented from 1 July 2017. This is why prices are high despite the lowering of crude oil prices in the international market. Currently, the Centre levies a total of Rs. 15.33 per liter of excise duty on diesel and Rs. 19.48 per litre of excise duty on petrol. On top of this, states levy Value Added tax (VAT) the lowest being in Andaman and Nicobar Islands where a 6 per cent sales tax is charged on both the fuel. Telangana levies highest VAT of 26 per cent on diesel, while Karnataka has a VAT of 19 percent on the fuel.

India spends almost 14 percent of its GDP on transportation and logistics, whereas in developed countries the national expenditure is around 6-8 percent. The contribution of the transport sector to India’s GDP has increased from 6% in 2001-02 to 6.7% in 2012-13. Within this, road transport has increased from 3.9% to 4.9%. The truck population in India has grown at a rate of 7% per annum between 2011 and 2013.

Analysis

The All India Motor Transport Congress (AIMTC) had demanded a cut in central and state levies on diesel by bringing the fuel under the scope of the nationwide Goods and Services Tax (GST). They had also pressed for low third-party insurance premiums and a favorable toll collection system. According to their claims, time and fuel loss amounts to up to Rs 1.5 lakh crore annually on account of a flawed toll collection system. AIMTC’s Secretary General Naveen Gupta has confirmed that the strike has ended, with the organization hoping that the government will address the issue urgently. It had begun 20 July with the support of nearly 93 lakh truckers across the country.

Earlier this year thousands of farmers in Punjab had handed over the keys of their tractors as part of their unique protest against rising diesel prices, which were adding to their debt woes.

Road Transport, Highways and Shipping Minister Nitin Gadkari said, "The AIMTC has called off its strike on the appeal of the government. The government is sensitive towards the demands of the transporters. It has agreed to their many demands already and to consider the rest it has constituted a high-level committee." The committee to look into their demands will be set up under the Road Transport, Highways secretary, and will submit its report within three months. It will also consider extending the coverage of Pradhan Mantri Jeevan Jyoti Bima Yojna and Pradhan Mantri Suraksha Beema Yojna to drivers and co-workers of commercial vehicles.

The government has also stated that it will consider demands like increasing the validity of fitness certificates for vehicles to two years, simplification of national permit rules, regularization of higher axle loads for existing vehicles, strict enforcement against overloading and uniform height for transport vehicles.

The strike has caused an estimated loss of more than Rs. 50,000 crore to the economy, with micro, small and medium enterprises (MSMEs) being the worst affected. It also resulted in a revenue loss of about 40 billion rupees per day for the participating truckers. Automobile companies had to adjust production as the strike had disrupted the distribution and sales of vehicles in the country. It also had an impact on deliveries for e-commerce firms like Amazon, and the supply of farm commodities like cotton, grains and spices. However, essential commodities were kept out of the strike.

Counterpoint

An important reason for states not opting to operate under GST in case of petroleum products is that the taxes on both petrol and diesel are collected by the public sector oil companies and passed on directly to the state governments. This is a significant revenue for states which they do not have to share with the Centre.

Assessment

Our assessment is that the suspension of the strike will bring relief mainly to FMCG, ecommerce and auto industries who were hit by the disruption in supplies. We feel that the government’s decision to redress the grievances of the truckers will appease the community who have already suffered heavy losses. We believe that the prices of affected commodities will also fall in the subsequent days.

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