The fortunes of road transporters with less than five trucks apiece, termed small fleet operators (SFOs) in industry parlance, appear to have nosed downhill for good since the changeover to the Goods and Services Tax (GST) last fiscal.

Added to the pain from the regime change, enforcement of the new axle-load norms and northward run-up in fuel prices are set to deal them a huge blow where it hurts the most – their margins.

Large fleet operators (LFOs) are much less impacted, as the changes in norms and customer preference have swerved the advantage sharply their way.

For perspective, SFOs comprise ~67% of the road transport operators in India, though they own less than 25% of the trucks (>12T GVW). Medium fleet operators (6-20 trucks) and LFOs (>20 trucks) account for the rest. Indeed, barring the top 10-15 players (by turnover), most road transport operators in the country have turnover less than Rs 250 crore.

The importance of the segment can be gauged from the fact that road freight transportation constitutes ~75% of the ~Rs 6,800 crore logistics industry, which has logged a compound annual growth rate (CAGR) of 9% over the past five fiscals. Robust growth in industry, agriculture and imports, improving road connectivity and persisting capacity constraints in railways have fuelled growth of road transportation in recent years and is expected to continue, given the economy’s prospects.

In the context, a closer look at the pain points of SFOs first.