3.1 General
3.1.1 Barring some captive freight movement operations of the government and some public sector enterprises, the entire goods transportation by road is in private sector. An important aspect of the trucking industry is the existence of a chain of intermediary transport entities. Between the actual consignor, the original sender, and the consignee, the ultimate receiver of goods, there exists a series of links in the form of transport booking agents, transport operators, brokers and the vehicle owners. When the consignor feels the need to move his goods from one location to another, he contacts a transport operator either directly or through a transport agent. The transport operator may or may not have his own vehicles. Quite often, he does. In case he does not have his own fleet or his fleet is inadequate or otherwise occupied he will contact other transport operators (including vehicle owners) directly or through a broker. It is ultimately the vehicle owners who actually transport the goods from the consignor to the consignee.
3.1.2 Thus, between the actual users of goods transportation services, viz., the consignor and the consignee on the one hand and the actual provider of transportation, viz., the vehicle owner, there are a number of intermediaries who facilitate the entire process. The basic model of transportation of goods by road may thus be depicted as in the following diagram.
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Consignors are individuals or organizations who give orders to transport operators for transporting goods by road to desired destinations, where the goods are received by individuals or organizations known as consignees. Transport operators are the entities, again individuals or registered or un-registered organizations, who generally operate through regular or ad hoc arrangements with the consignors and book orders for transportation of goods. They may or may not own their own vehicles and operate through brokers and small truck owners. Some of them are large with their own truck fleets and other infrastructure like warehouses and offices at a large number of locations all over the country.
Transport Corporation of India, for instance, has a fleet of about 7,000 trucks and 3,000 offices. Truck (or vehicle) owners are the individual owners of a small number of trucks, quite often one and owner-driven. They contact or are contacted by transport operators, usually through brokers, and actually carry out the transportation of goods from one location to another. Some of them, particularly those catering to transportation of household goods, are also directly contacted by the customers. Brokers have relations, usually informal, with the truck owners and transport operators and act as intermediate agents between the two, introducing truckers to the transporters operators or even consignors directly and work on a commission basis charged from either the transport operator or the vehicle owner. They also ensure to some extent, in an informal way, reliability and promptness of the transport services to the transport operator and business to the truck owners. Agents (also called transport suppliers or transport contractors) are also intermediaries, but their job varies from that of a broker. The agents, who usually operate from major project sites or in ports, collect, forward or distribute the goods
Consignor Transport Agent Transport Operator
Vehicle Owner Broker Consignee
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carried by trucks, and are the link between the transport operators and the consignors.
Some of them may also provide finance and go-down facilities. The survey conducted by CIRT in 1998 revealed that around 44 % of small operators themselves take up the multiple role of a transporters, broker and booking agent.
3.1.3 The basic model illustrated above with all the major players in the goods transportation by road sharing the operations has a number of variations in practice. In the extreme case, the consignor himself may own trucks and may directly undertake the transportation himself, dispensing with all intermediaries. More often, the consignor may engage a transport operator directly who in turn may contact vehicle owners through a broker.
Further, the above division of various transport entities into the categories shown in the above model is not watertight and the roles of various entities often overlap. A transport operator or a broker may himself be a vehicle owner, or a vehicle owner may himself be a driver of the vehicle. Thus, the industry is marked by considerable degree of organizational variation, flexibility, informality and dependence on intermediaries.
3.1.4 Size and reach of operations is an important source of variation among the transport operators. As mentioned in the previous chapter, the ownership pattern of trucking fleet is highly skewed in favour of small operators but the range of variation is sizeable. Also the truck operators can be classified on the basis of spread and extent of operations into local, regional and national carriers. Thus, while at one extreme of the spectrum are truck owners with a single truck each catering to haul of goods confined to a small local area, at the other are giants like Transport Corporation of India with around 7000 vehicles and over 3000 offices spread all over the country claiming a substantial share of the market.
In between the large and small operators are the medium-sized operators with 10 to 100 vehicles engaged in regional or even national operations. The CIRT survey revealed that medium and large sized operators charter trucks to the extent of 10 to 12 times their own fleets. They get these either through lorry suppliers or directly from single truck owners.
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Some fleet operators encourage their own employees to become owners of trucks by providing financial assistance, subject to the condition that vehicles should be permanently attached to companies.
3.2 Distribution of Goods Transporting Units by Activity
3.2.1 The proportions of different types of units, viz., agents, transport operators, brokers and vehicle owners, in different States covered in the present survey are given in Table 3.1. It may be mentioned in this connection that the classification of the goods transporting units into these four categories was based on the units’ own perceptions as their main activity and several times they may be engaged in multiple activities.
Table 3.1: Distribution of Goods Transport Operating Units by Type of Units in Different Regions
Percentage of units which are State
reporting 51854 514576 62793 343449 972673
It may be seen that out of the total, about 5 percent are Agents and another 6% are brokers. The bulk of the units comprise of either the transport operators (53%) or the vehicle owners (35%). Moreover, the categorization was primarily based on the perceptions of the reporting units as to their dominant activity. Many of them may be
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performing more than one role in the transportation of goods, as would be seen in the next paragraph.
It may also be seen that as per the abovementioned estimates, there are a total of around 9.7 lakh units engaged in transport trade.
If we were to analyze the same information by class of cities, i.e. the pattern of distribution of different type of units in bigger or smaller cities, we would get an idea of the type of concentration of activities in different class of cities (Table 3.2 below).
Table 3.2: Distribution of Goods Transport Operating Units by Type of Units in Different Classes of Cities
Percentage of units which are State
reporting 51854 514576 62793 343449
From the above table it is apparent that the agents are much more located in Capital Cities (19%) and lesser numbers in smaller cities of below 1 lac population (4%).
Similarly, maximum number of units in rural areas comprise of Vehicle Owners (76%) 3.2.2 While the above classification depicts the situation based on the units’ own perceptions
about their main activity, the units do engage themselves in multiple activities. For instance, a transport operator or even an agent or a broker may also own vehicles and may be called an owner, and a vehicle owner may also perform the role of a transport
Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India
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operator or a broker. The units were asked about their multiple roles during the survey and the results are shown in Table 3.3.
Table 3.3: Multiple Activities of the Goods Transporting Units (All Regions) Percentage of units also performing the role of Type of unit
Agent Transport Operator
Broker Vehicle Owner
Agent 100 0 1 0
Transport Operator 0 86 0 88
Broker 0 0 100 0
Owner 0 41 0 100
All India 5.33 52.90 6.46 35.31 100.0
The sum of percentages in the rows exceeds 100 because of multiple responses
A majority of the classified as transport operators (86%) are also vehicle owners, while 41% of vehicle owners also operate as Transport Operator. Thus, the classification into the four categories is extremely fluid.
3.3 Legal Status of the Units
3.3.1 The units were classified as Public and Private Limited companies, individual proprietorships or partnerships on the basis of information collected during the survey.
Overall, about 60 percent of all units were individual proprietorships and most of the rest were limited companies. It was found that the pattern differed from one unit type to another (Table 3.4).
Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India
37 Table 3.4: Distribution of Goods Transporting Units by Class of Cities
and Legal Status
Percentage distribution of units by legal status Unit
13478 324693 584821 26595 23085 13478 972672
3.3.2 In overall terms about 63% of the units were either proprietorship or partnerships, the other 34% were limited companies out of which only 1% being Public Limited Companies while others were Private Limited Companies. Most agents were individual proprietorships (76%) as was the cases with owners since most of the truck owners have 1-2 trucks. However, in the case of transport operators, about 44% had limited companies while the other 54% were individual proprietorships (Table 3.5).
Table 3.5: Distribution of Goods Transporting Units by Type of Transport Unit and Legal Status
Percentage distribution of units by legal status Unit
Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India
38 Percentage distribution of units by legal status Unit
3.3.3 The data collected also indicate differences between different Regions, as brought out by the chart below (Table 3.6). In particular, the patterns shown by units in North, North East and Hills shows a preponderance of individual proprietorship whereas units in western region had 58% limited companies, East had 48% and south at 36%.
Table 3.6: Distribution of Goods Transporting Units by Regions and their Legal Status
Percentage distribution of units by legal status Unit type
13478 324693 584821 26595 23085 13478 972672
Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India
39 3.4 Membership of Trade Associations
3.4.1 Not all of the goods transporting units reported themselves as members of the local, State or national level trade associations. Usually, it is to be expected that units above a certain size (in terms of turn-over or fleet strength) would become members of such associations to enjoy the benefits of collective clout. The proportion of units who were members varied from Region to Region and with unit type (Table 3.7).
Table 3.7: Association Membership Status of Goods Transporting Units Number of units classified by
Membership of associations
Registration Status Legal Status Type of
3.5 Source of Business and Service Providers
3.5.1 In order to explore the relative preponderance of various types of business models operating in the goods transportation industry as indicated in paragraph 3.1, each of the units surveyed was asked as to from whom they derived business and through whom they in turn operated their business. The results on the source of business are shown in Table 3.8 and those on the channel of operation in Table 3.9.
Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India
40 Table 3.8 Distribution of Goods transporting Units by Source of Business
(All States)
Percentage of units by source of business Type of Unit
Consignor Agent Transport Operator
Broker Vehicle Owner
Agent 21.73 19.93 14.94 18.30 25.11
Transport Operator 18.09 16.04 22.89 22.27 20.71
Broker 13.25 19.13 26.89 33.07 7.67
Vehicle Owner 9.32 18.94 32.71 5.10 33.93
Table 3.9: Distribution of Goods Transport Operating Units by Operational Channels (All States)
Percentage of units carrying business through Type of Unit
Agent Transport Operator
Broker Vehicle Owner
Others
Agent 227665 34.28 19.71 6.80 30.44
Transport Operator 1731482 6.06 32.21 31.23 30.21
Broker 101942 18.8 27.1 35.4 16.8
Vehicle Owner 456101 23.6 30.6 4.6 40.4
3.5.2 These data indicate that the industry is not governed by any rigid system and is generally operated through a large measure of informal interdependence, even though formal relationships do exist.
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41 3.6 Spread of Operations
3.6.1 The responses of the units to the question on their usual area of operation are summarised in the following Table (Table 3.10).
Table 3.10: Distribution of Goods Transporting Units by Their Usual Area of Operation
Percentage of units with usual area of operation Type of unit Total
No. of vehicles 126754 55001 34699 756219 972673 3.6.2 As may be expected, there is an increasing tendency for all goods transport units to also
undertake All India Operations. Thus we find that 78% of the units report that they undertake All India operations. Most transport operators claim that they operate All India (90%). Of course this does not mean that 90% of their business comprises of All India business, but only that they also operate on All India basis.
3.7 Employment
3.7.1 Employment in a unit is a good measure of the unit’s size. Table 3.11 gives the distribution of various types of goods transport operating units by total regular employment (on payroll) in them and also the average employment per unit. Taking all the goods unit operators together, about 63% of the units employed 1 to 15 employees and another 37% employed 15or more workers. This means that most of the transports operating units are small entities, not having economies of scale compared to bigger units.
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42 Table 3.11: Distribution of Goods Transporting Units by Employment Levels
Distribution of employment (%) Type of units
Total (Nos.) 0 1247351 4703420 947150 2422539 9320460
3.7.2 The employment pattern can also be analyzed by class of cities (Table 3.12). It can be seen that maximum number of employees are in the smaller cities of below 1 lac population. However, the percentage of units with 25 or more workers is the highest in the large towns of above 1 lac population.
Table 3.12: Distribution of Transport operating units by type of unit and regular employment The table 3.13 below shows the composition of the work force in the transport industry. It can be seen that the drivers and cleaners form the biggest segment of the industry and account for three-fourths of the work force. Office staff and working proprietors/partners account for another 10%
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or so. They are mostly engaged in office work and organization. Of course many single truck owners also drive their own vehicles.
Table 3.13: Distribution of Employees in Urban Areas by Goods Transport Operating units and Type of Workers
No. of workers by type (%) Type of
units Office staff
Drivers Cleaners Laborers Working prop / Partner
Unpaid family member
Other
ALL
Agent 16 34 26 5 15 4 0 264066
Transport
Operator 5 44 33 6 5 6 0 4600191
Broker 8 41 33 6 8 2 0 592725
Owner 5 47 34 6 4 5 0 3863478
Total 6 45 33 6 5 5 0 9320459
Total
(Nos.) 528432 4163377 3105802 529912 466817 505856 10133 9320460
Final Report: Study on Economics of Trucking Industry for Department of Road Transport and Highways, Ministry of Shipping, Road Transport and Highways, Government of India