Demonetisation hits cargo movers' mood, outlook

SICAL Logistics has taken a 15% revenue hit in the past 50 days

Demonetisation has worsened the business mood for domestic shipping and logistics companies, already struggling with volatile freight rates.

With cargo-owners not ready to commit for the usual quarterly, annual or bi-annual contracts in the year ahead, uncertainty in terms of revenue visibility is setting into domestic logistics companies.

“There is a fear of the unknown among cargo owners. First came demonetisation, then was remonetisation (issue of new currency notes) and we do not know what comes next. Due to this, cargo owners are not ready to commit for longer contracts. They all want vessel-to-vessel basis contracts,” said a top official with SICAL Logistics. “No one wants to commit and this is impacting businesses significantly.”

SICAL has taken a 15 per cent revenue hit in the past 50 days due to demonetisation. This would increase by another five percentage points in the coming days, said the official. 

“The morale is completely down. No one is ready to make long-term commitments. Apart from containers, no one is committing on even break-bulk commodities such as steel goods or bulk commodities like iron ore and fertiliser shipment,” said Kiran Kamat, managing director of Link Shipping and Management System.

“A low freight rate was already hurting business. Cargo owners’ dilemma on committing is making things worse,” said the top official with SICAL.

“Shifting to e-transactions will take time. All are not geared for it,” said an official with Mumbai-based Bhavani Shipping. Some in the secot, however, think the situation will not last. And, that the impact of demonetisation would differ from company to company.

“We did not face any challenges in terms of renewal of contracts. Demonetisation did jolt the market and also caused disruption but the markets are beginning to come back to normal since last week,” said Prakash Tulsiani, executive director (operations), Allcargo Logistics.The integrated logistics company owns five vessels and operates on coastal moving bulk, break-bulk and project cargo. It says 90-95 per cent of its transactions are via cheques.