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Monday, February 6, 2023

Truck unions biggest bottleneck in attracting fresh investment, must be reined in: Adani Group’s blunt message to Himachal Pradesh government 

The Newz Radar

The Adani Group has written a letter to the Himachal Pradesh government to resolve the more-than-a-month-old dispute over the closure of the company’s two cement plants at Darlaghat (Solan) and Barmana (Bilaspur) following a tiff over freight.

The letter has been penned by Ajay Kapur, CEO, Cement Business Adani Cement (ACC & Ambuja Cements), to the Chairman of the Permanent Standing Committee of the Himachal Pradesh government constituted to resolve the dispute. In the letter, the Adani Group has flagged the alleged unwanted interference of the truck unions. The company also alleged that industrialists were wary of investing in Himachal Pradesh due to the fear of truck unions. Following is the transcript of the complete letter:

 

Sub: Proposed Solution on Freight Rate for Goods Carriage in Himachal Pradesh

 

Dear Sir,

At the outset, let me thank you and the members of the Sub-Committee for taking the initiative to resolve the serious issue of transportation in the overall interest of all stakeholders.

The genesis of the problem in the state of Himachal Pradesh is due to historical reasons as the transportation market is completely controlled by the transport unions. These unions not only decide the rates and deployment of trucks but also whose material should be transported and even the destination for each truck.

It is a very alarming situation as unions are effectively controlling and making all transport related operational decisions that belong in the domain of companies. Such unbridled control by the unions without authority or accountability has created not only inefficiencies but also multi-layered complications in the sector with far-reaching consequences for all stakeholders. The recent closure of our operations is an example of that. The exorbitant gatta charges of Rs 35 lakh per transfer of union membership is another example.

Since the freight rate is controlled by the unions, they have artificially kept it at a very high level. The opportunity to make quick profits has led to oversupply of trucks thus creating a huge imbalance between demand and supply. No wonder the truck fleet population in the state is 3 times the demand. Also, due to these excessive numbers, the km-distance travelled by trucks in Himachal Pradesh is just one-fourth of the national average (1 lakh kms) and one of the lowest in the country. The trucks in Ambuja and ACC units elsewhere travel 80,000 to 100,000 km per annum. The reduced km-distance travelling has created distortions, inefficiency adding to the fixed cost and further adversely impacting both freight rates and operations.

It is important to note that the unreasonable, unrealistic and unnecessary interference by the transport unions has created difficulties not only for us but also for all other industries in the state and is the biggest bottleneck in attracting new investment to Himachal Pradesh. Such has been the depth of their interference that the Hon’ble High Court of Himachal Pradesh had to intervene not fewer than 3 times and has passed scathing remarks against the functioning and undue interference of the unions.

In order to arrive at a long-term solution, it is important to address the root cause of the problem by freeing the transportation market from the control of the unions as is the practice in other states. Only a free and fair market will be efficient, sustainable and beneficial to all stakeholders.

The report (Fixation of Freight Rates of Goods Carriages in Himachal Pradesh) prepared on the direction of and submitted to the Hon’ble High Court, provides a very robust, scientific, balanced and implementable framework for resolution of all outstanding issues related to freight rates and can be a good basis for not only resolving the present impasse but also providing a long-term resolution.

We were forced to close our operations after the transport unions adopted an unworkable position on the freight rate and distribution model. The impasse has caused not only significant economic loss to the state but also immense hardship to all stakeholders, particularly small businesses, retailers, dealers, petrol pumps, truck drivers, loaders, small eateries, our employees, and the general public.

In view of the above we propose the following time bound measures for resolution:

1. Considering all the factors, the optimum km per annum would be 50,000 for calculation of the freight. However, in order to make the transition smooth and equitable we propose to achieve this in a timeframe of 3 years as indicated below:

a. Year 1,40,000 km

b. Year 2,45,000 km

c. Year 3,50,000 km

2. As mentioned in our earlier letter dated 12th January 2023, both Ambuja and ACC’s requirement is 550 trucks as against the current deployment of 3,311. Hence, it is proposed to phase out the excess trucks in the timeframe of next three years.

3. Immediate moratorium on adding any new trucks.

4. All operational decisions regarding transportation to be decided by the companies as is the practice in other states.

a. Deployment, route, etc., to be decided by companies based on market principles.

b. Capacity and type of trucks to be decided by companies as per their transportation needs.

c. Swapping of bags between Ambuja/ ACC units and other group companies to be permitted.

Notwithstanding the temporary closure, we have a strong commitment to the growth and prosperity of the state of Himachal Pradesh. Over the past four decades, we have made huge investments in the state and have contributed significantly to its development and welfare. Adani Cement and its two companies – ACC & Ambuja Cements have been working for the upliftment of the entire community, be it in education, livelihood generation, empowerment of women, health, water and infrastructure development.

We thank you and the Sub-Committee for continuing to lend your valuable time to resolve this issue. We request the Sub-Committee to consider our proposal favorably on the basis of mutual discussion.

Thanking you,

Yours Sincerely.

Ajay Kapur

CEO, Cement Business Adani Cement (ACC & Ambuja Cements)

CC: Chief Secretary, Government of Himachal Pradesh (HP)

Principal Secretary (Industries), Govt. of HP Director Food and Supplies, Govt. of HP

Director Industries, Govt. of HP Director Transport, Govt. of HP

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