Small transporters hit by compliance burden

Why in the News

The road transport industry, which carries nearly 70 per cent of India’s domestic freight, has been described as facing one of the most difficult periods in its history. Operating costs for commercial vehicles have risen sharply over the last few years. Freight rates have stayed largely stagnant over the same period. Vehicle location tracking devices, originally conceived for passenger safety and emergency response, have since been mandated for goods vehicles as well. Faults in integrating those devices with the VAHAN portal have left commercial vehicles stranded for weeks and in some cases months. The contest is between technology driven governance, which promises transparency and enforcement quality, and its implementation cost, which falls hardest on the small operators who have no margin left to absorb it.

What is a Vehicle Location Tracking Device (VLTD)?

1. Function: A Vehicle Location Tracking Device (VLTD) is an onboard unit that continuously transmits a vehicle’s position to a State level control centre over a mobile network. It carries emergency buttons that raise an alert to that centre.
2. Original purpose: The device was conceived for passenger safety and emergency response, so that a distress signal from a bus or a cab could be located and acted on.
3. Registration linkage: A fitted device must be registered against the vehicle on the VAHAN portal, the Ministry of Road Transport and Highways database that holds every vehicle’s registration record. A vehicle whose device does not map correctly to that record cannot complete its compliance formalities.

Why has the road freight business turned financially unsustainable?

1. Costs and earnings have moved apart: The gap between operational expenses and earnings has widened steadily. Freight rates have not tracked the rise in the cost of running a truck.
2. Fuel dominates the cost sheet: Diesel alone accounts for nearly 60 per cent of a truck’s operating cost. Every rise in the pump price passes almost directly into the operator’s monthly outgo.
3. Emission compliance added a new input: Operators have had to absorb the cost of AdBlue, the urea solution injected into the exhaust of Bharat Stage VI (BS-VI) vehicles to cut nitrogen oxide emissions. This is a recurring consumable that did not exist in the earlier cost structure.
4. Every other input has escalated: Tyre prices, insurance premiums, spare parts, engine oil, lubricants, maintenance expenses, finance costs and statutory compliance charges have all risen together. Toll charges continue to rise alongside them.
5. Margins have gone below cost for some: Many transporters operate on wafer thin margins simply to retain business. Some are running below their actual cost of operations.

What has the compliance and enforcement layer added?

1. Documentation load has grown: The burden of documentation, permits, fitness requirements and other regulatory compliances has increased substantially. Each of these carries its own fee, its own renewal cycle and its own downtime.
2. Electronic challans have drawn allegations of misuse: The electronic challan was introduced to minimise human intervention and improve road safety. A growing number of transporters allege misuse of the system, producing avoidable penalties and harassment.
3. Tracking devices were extended without a stated case: The VLTD mandate was extended to goods vehicles in the absence of clear operational necessity. A device designed around passenger distress response was applied to freight movement, adding a financial burden with no matching benefit to the operator.
4. Integration failure converts compliance into downtime: Technical problems in integrating VLTD units with the VAHAN portal have left many commercial vehicles off the road for weeks and in some cases months.
5. Downtime compounds financially: Each day a truck stays off the road means lost income, continuing loan repayment pressure and severe financial distress for the operator. The loan instalment does not pause because the portal did not accept the device.

Does technology driven governance deliver transparency or only new hardship?

1. The intent is not in dispute: Technology driven governance is welcome where it promotes transparency and efficiency. Both the electronic challan and the tracking mandate were framed in exactly those terms.
2. Implementation is where the cost lands: A mandate is issued centrally and instantly, while its back end integration is completed unevenly across States and vendors. The operator carries the difference as idle capital.
3. Enforcement quality decides the outcome: Enforcement must remain transparent, accountable and fair, so that genuine operators are not penalised alongside violators. An automated penalty with no accessible appeal converts a safety tool into a revenue tool.
4. The burden is uniform, the capacity to bear it is not: A compliance charge set as a flat per vehicle amount is trivial for a large fleet and material for a single truck owner. The same rule therefore produces very different pressure across the sector.
5. Digital mandates need a working failure route: No route exists for an operator whose device is fitted and paid for but not accepted by the database. The vehicle is treated as non compliant even where the failure is on the system side.

Why are small operators and self-driving truck owners hit hardest?

1. They absorb every shock directly: Small transport operators and self-driving truck owners are affected the most by these developments. They have no fleet across which to spread a stranded vehicle or a disputed penalty.
2. The sector is structurally fragmented: Most road freight capacity sits with small, unorganised firms and single truck owners rather than large corporate fleets. Fragmentation leaves no bargaining power against shippers on freight rates.
3. Finance costs bite first: Vehicle loans are serviced monthly regardless of utilisation. An operator with one or two trucks moves into default faster than a fleet operator with the same days of downtime.
4. Highway amenities have not followed toll payments: Despite paying substantial toll charges, drivers continue to face a shortage of secure truck parking zones, clean toilets, rest areas and other basic highway amenities.
5. Tolls are a rising fixed charge: Toll charges require rationalisation, since they now form a large and rising share of the per trip cost on tolled corridors. A rate that is not linked to service delivered is a pure cost addition.

Challenges to the road freight compliance regime

1. Freight rates are not cost linked: No mechanism ties freight rates to the actual cost of operating a truck, so input inflation is absorbed rather than passed on. Eg. The rise in diesel, tyre and insurance costs over recent years has not produced a matching rise in contracted freight rates. Fix. Base freight rates on scientific cost calculations that reflect actual operating expenses and are revised on a stated cycle.
2. Device mandates run ahead of system readiness: A device is made compulsory before the registration database can reliably record it, so compliant operators are penalised for a back end fault. Eg. VLTD to VAHAN integration failures have kept commercial vehicles off the road for weeks and months. Fix. Tie the commencement of any device mandate to a certified integration test, and grant an automatic provisional clearance where the portal fails to accept a fitted device.
3. Automated enforcement lacks a low cost appeal route: An electronic penalty is issued instantly while contesting it requires time and travel that a single truck owner cannot spare. Eg. Transporters allege misuse of the electronic challan system producing avoidable penalties. Fix. Provide a time bound online adjudication route with photographic evidence disclosure at the point of the challan.
4. Compliance costs are not scaled to fleet size: Fees, permits and fitness requirements are set per vehicle, so the smallest operator carries the highest cost per rupee of turnover. Eg. Statutory compliance charges have escalated alongside tyre, insurance and finance costs for operators running one or two trucks. Fix. Introduce a graded fee structure and a single consolidated annual compliance filing for operators below a stated fleet threshold.
5. Toll collection is not linked to service: Toll rates rise on schedule while wayside amenities on the same corridors remain absent. Eg. Drivers on tolled highways face a shortage of secure parking zones, clean toilets and rest areas. Fix. Make a stated wayside amenity standard a condition of toll revision on each stretch, audited before the next revision is notified.
6. Overloading and safety enforcement fall on the driver, not the shipper: Penalties for overloading attach to the vehicle and the driver, leaving the consignor who loaded it untouched. Eg. Overloaded highways suffer rapid wear and tear while enforcement action is recorded against the transporter. Fix. Extend statutory liability for overloading to the consignor and the loading point operator.

Conclusion

The compliance burden on road freight has grown faster than the sector’s ability to pay for it, and the cost has settled on small operators and self-driving truck owners rather than on large fleets. The immediate cause is not the principle of technology driven governance but its implementation, where a mandate takes effect before the system that records it works. A comprehensive review of the road transport ecosystem is the stated demand, resting on three things: freight rates built on scientific cost calculations, rationalised tolls, and a relook at the compliance load. None of the three has been taken up.

Road Freight Transport in India

1. Scale: India has the world’s second largest road network. Roads carry the overwhelming majority of the country’s freight tonnage and about 90 per cent of its passenger traffic.
2. Economic weight: The roads sector contributes about 6 per cent of Gross Domestic Product (GDP) and provides direct and indirect work to over 40 million people.
3. Modal imbalance: About 60 per cent of freight moves by road against roughly 32 per cent by rail, which raises the cost of moving goods because rail is the cheaper mode for long haul bulk.
4. Cost benchmark: The National Council of Applied Economic Research and Department for Promotion of Industry and Internal Trade assessment placed India’s logistics cost at 7.97 per cent of GDP for 2023-24, correcting the long cited 13 to 14 per cent figure.

Laws and Rules Governing Road Freight Transport

1. Motor Vehicles Act, 1988: The parent statute for registration, licensing, permits, fitness certification, insurance and penalties for road transport vehicles.
2. Motor Vehicles (Amendment) Act, 2019: Raised penalties sharply, created the National Road Safety Board and introduced a scheme for good samaritan protection.
3. Central Motor Vehicles Rules, 1989: The subordinate rules prescribing vehicle construction standards, fitness testing procedure and the specifications for onboard devices.
4. Carriage by Road Act, 2007: Regulates common carriers, requires their registration and fixes their liability for goods carried.
5. National Highways Fee (Determination of Rates and Collection) Rules, 2008: The basis on which user fees are fixed and revised on national highway stretches.
6. Central Goods and Services Tax Act, 2017: Provides for the electronic way bill, the digital document that must accompany an inter State consignment above a threshold value.

Government Initiatives for Road Freight Transport

1. Bharatmala Pariyojana: Builds economic corridors and greenfield expressways under the Ministry of Road Transport and Highways, with over 21,597 km of phase one completed.
2. PM GatiShakti National Master Plan: A multimodal planning platform whose Network Planning Group has appraised over 350 projects for connectivity efficiency.
3. National Logistics Policy: Targets logistics costs below 8 per cent of GDP and a place among the top 25 on the Logistics Performance Index by 2030.
4. Unified Logistics Interface Platform (ULIP): A data exchange that lets carriers and shippers track cargo in real time across transport modes on a confidential basis.
5. Dedicated Freight Corridors: Electrified rail corridors that separate freight from passenger traffic, intended to raise the rail share of freight from about 27 per cent toward 45 per cent by 2030.

Challenges in Road Freight Transport

1. Fragmented ownership limits investment: Most operators are small, unorganised firms with no balance sheet capacity to modernise fleets or adopt telematics. Eg. Small transport operators and self-driving truck owners form the bulk of the goods vehicle fleet. Fix. Extend priority sector lending and interest subvention for fleet replacement to operators below a stated fleet size.
2. Poor road maintenance raises vehicle operating cost: A large share of the network is in poor condition because upkeep budgets lag construction budgets, which increases fuel burn and repair frequency. Eg. Weak maintenance budgets leave a large share of State highways in poor condition. Fix. Adopt a Maintenance Management System with a ring fenced maintenance share of every project’s lifecycle cost.
3. Weak multimodal links strand cargo between modes: Poor last mile connectivity between highways, rail terminals and ports forces additional handling and idle time. Eg. Port and cargo turnaround times still lag hubs such as Singapore. Fix. Fast track multimodal logistics parks with warehousing, cold storage and container handling at corridor junctions.
4. Overloading destroys pavement faster than it is rebuilt: Overloaded vehicles cause pavement damage out of proportion to their number, shortening the design life of new stretches. Eg. An axle carrying twice its legal load inflicts roughly sixteen times the pavement damage of a legally loaded axle. Fix. Install weigh in motion systems at corridor entry points with automatic penalty capture at the loading point.
5. Private investment in roads remains weak: Delays in returns, regulatory risk and toll uncertainty keep private capital below what the sector needs. Eg. Weak Public Private Partnership uptake persists despite risk sharing models such as the Hybrid Annuity Model. Fix. Expand road Infrastructure Investment Trusts to recycle capital from operational assets into new construction.

Matching Previous Year Question

“[2014, GS3, 12 marks] National Urban Transport Policy emphasises on ‘moving people’ instead of ‘moving vehicles. Discuss critically the success of the various strategies of the Government in this regard.”