Oil companies raise margins as consumers suffer fuel price blues
Oil companies raise margins as consumers suffer fuel price blues
Image by Andrzej Rembowski from Pixabay

Waking up early to reach D-Mart, Thane before 7 AM and stand in queue to get a token when it is being distributed is one of the chores of 55 year-old Arvind Ganatra, a senior level management professional. On an average around 800 tokens are given out. A timing to come to the store later based on the number of the token is also told when it is given. For Ganatra, it was 9 AM on a Tuesday. So he went back home, and returned an hour and a half later. “The discounts and the freebies that were usually available here have diminished considerably,” he said to Free Press Journal. “I just pick up the essentials and some snacks for the children and rush out as I have to start work once I go back home,” he said. The women in the family cannot be sent to the shops out of fear of the pandemic and so it is Ganatra who visits the mall every week.

Last year when the pandemic caught people unawares, there were cases of hoarding as they were caught. But in 2021, customers are wiser. Logistics is working, too even though there are lockdowns and restrictions in some parts of the country but by and large there is no difficulty to get essential goods.

However, the situation may change with a rise in fuel prices, the lack of adequate manpower in the logistics sector and manufacturing being impacted by the rising number of COVID-affected. The price of essential products may go up, said an analysts. Though the supplies are enough in the market, these may last till the end of the month if the restrictions and lockdowns continue, said a distributor.

BK Rao, senior category head-marketing, Parle Products, said prices of almost every item has gone up. “Cardboard carton prices have shot up 25-30 percent. Laminates are up 15 to 20 percent. Fuel prices have gone up. All this this will have an overall impact on the prices of goods. We are trying to absorb prices. But in June or July, prices of snacks—namkeens, chips, etc will go up 7-8 percent,” he said.

Some of the suppliers have resorted to buying raw material directly from the source. Angshu Mallick, deputy CEO, Adani Wilmar Limited said though though the company has started procuring materials directly from the mandis, the situation is a bit stressful this month, he said. “April was much better than May. But most of the mandis now operate only on alternate days and often even when open, either the brokers or the labourers are not fit and hence, work is getting slow," he said.

The price of petrol and diesel has been hiked for as many as six times in May making it the highest-ever across the country. This will have an impact on logistics. The Indian road transport sector carries goods worth $150 billion a year, which means about $12 billion of business is done per month. The truck fleet utilisation had peaked to 85 percent in March, which was better than the pre-COVID levels, but has now dropped to 70 percent. Truckers will be hard-pressed to pay back their EMIs, said an analyst.

With lockdowns and restrictions, there is a limitation of working hours. Loading, unloading and despatch have to be done in these limited hours. The issues are many--there is an increase in the number of COVID cases, a large number of labour has shifted back to the villages, and there is a manpower shortage. Localized rules and regulations, unlike last year's national policy for e-commerce deliveries, is also leading to chaos, said logistic firms.

While a few kirana stores went online with the help of hyperlocal delivery partners and some converted entirely to a dark store model, the industry as a whole has been affected a lot. Technical know-how to get online or select the best channel to deliver orders has been one of the most deterring factors that small kirana stores getting back to business as usual, said Rhitiman Majumder- Co-Founder & CEO, Pickrr- an end-to-end Plug-n-Play logistics solution for ecommerce sellers and D2C brands which want to ship anything anywhere in India.

The concerns are not just about supply chain issues alone. The timely procurement of raw materials is an issue at the manufacturing stage and the scarcity thus caused impacts the price of goods. “At any given time, around 30 percent of the pipeline is not really active. Some factory or the other is under stress--either the workers are COVID-positive or the manufacturer or supervisor. Contract manufacturing is also affected. Even if the factories are able to produce, the transfer of goods from factories to depots are posing challenges with labour shortage. Coupled with the rise in fuel prices, prices of essential products are bound to go up,” said Rao of Parle.

in the second COVID wave with increasing number of cases, logistics firms are faced with a shortage/unavailability of manpower. In the second wave, the infection is more widespread and the workforce is either battling with the infection themselves or attending to immediate family members who are COVID-infected, said Vivek Juneja, Founder and Managing Director, Varuna Group. “These issues are further amplified by the inherent fear, especially within the blue-collar workforce due to shortage of vaccine in the country. Even if vaccines are available they are not equipped to use the CoWin portal and hence remain one of the most affected frontline workers,” he said.

The rapid spread of COVID has changed the graph for the logistic industry. The employer is worried about employee safety as the manpower shortage continues. Drivers too hesitate to take long distance trips due to risk of infection as well sudden lockdowns and absence of return load , said Anjani Mandal, CEO, Fortigo Logistics. Consequently, trucks for long-distance route are in short-supply and this is not expected to change soon.

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Free Press Journal