No truck with the small

There are several advantages with being large. First, taxation becomes easier and there is less evasion and circumvention, even on labour laws. The government has staved off applicability of VAT (value added tax) by arguing that transporters provide services. But when service sector taxation is extended, surely there cannot be an argument that transporters should be exempted. Second, regulatory conditions become easier to enforce and there cannot be an argument that there should be no norms whatsoever. Third, larger operators can have direct interface with users and offer services that are more than hauling freight. You can disintermediate and break the chain of booking agents, brokers and vehicle suppliers. As things stand, large operators do often obtain trucks from single owners. Fourth, there are economies of scale in servicing, repair and maintenance and even in obtaining credit. Ostensibly, truck operators who own fewer than 10 trucks are eligible for priority sector lending. But as every other instance of priority sector lending illustrates, all that happens is that fear of default results in no credit being extended. Instead, small operators have to depend on private financing, with higher costs. Credit is especially important if trucks more than 15 years old are to be phased out.

Fifth, large is good for truck-drivers. Drivers will be trained. They won’t have to double up as brokers. Ostensibly, truck-drivers are not supposed to drive for more than 8 hours at a stretch. The AITD survey tells us 66 per cent of drivers drive continuously for more than 9 hours. 20 per cent drive continuously for more than 12 hours. Do you know trucks account for 5.2 per cent of India’s total number of vehicles, but also account for 30 per cent of deaths from accidents? With large operators, there will be better provisions for night-halts for drivers. There will be alternative drivers who will take the truck on from the night-halt while the first driver rests, and transport times will drop. Truck manufacturers may also begin to pay attention to driver comforts. Liberalisation may have improved passenger cars, but the truck-driver’s cabin has remained untouched. Sixth, there are high transaction costs because of regulations — Motor Vehicles Act, Motor Transport Workers’ Act, environmental laws and rules, other laws and rules and indirect taxes. These hold up trucks at inter-state borders (and elsewhere) and reduced compliance costs was probably the only legitimate demand in the charter of demands transporters produced at the time of the strike. Fair enough. The argument is not for eliminating regulation, but unifying and rationalising it and reducing costs of compliance. For instance, you can devise a smart card every truck should have and send across the information in advance to inter-state borders. However, this will only work if you have large operators.

These arguments in favour of the large aren’t new. Read the report of the Study Group on Transport Planning, 1955. Read the report of the Committee on Transport Policy and Coordination, 1966. Or the report of the Study Group on Viable Units, 1967.

Shake-outs and normal entry and exit should ensure survival of the large and exit of the small. Except that there are policy-induced distortions in favour of the small. I have mentioned priority sector lending. A more serious issue is the Motor Transport Workers Act of 1961. Its provisions become applicable if an establishment employs more than 5 workers. So you fragment to ensure you are outside the purview of legislation. Strangely, there is no system for registering transport operators. The Motor Vehicles Act registers vehicles, not operators. Sometimes, transport operators don’t bother to register themselves at all. In other cases, they register themselves under the Shops and Establishments Act. If you go through the Shops and Establishments Act, you will realise how bizarre that is. It’s only large operators who register themselves under the Partnership Act or the Companies Act. If there is an insistence on registration through the Partnership Act of the Companies Act, small operators will automatically be weeded out and I see nothing wrong with that. Perhaps small operators will change to offering brokerage and booking services to large operators. Brokers and booking agents may or may not be covered under Section 93 of the Motor Vehicles Act. The wording is vague enough for the answer to be unclear. But with larger operators, such services will be integrated into the transport function. Registration under the Partnership Act or the Companies Act will also mean that other legislation to protect workers will apply and the Motor Transport Workers Act will be unnecessary.

During the strike, transporters had a minor demand that the Carriers Act should be changed. Absolutely. That legislation goes back to 1865 and has several dysfunctional elements. But that legislation doesn’t also define carriers. Let’s have modern carriers with a proper definition. And that has to mean the large.