With diesel prices increasing and fuel shortages impacting the free movement of trucks, transporters have decided to increase freight rates with effect from 20th May 2026 to pass on the extra burden to the customers. This is going to fuel inflation. 

To offset the diesel price hike, the transporters have introduced a new calculation method called Fuel Adjustment Factor (FAF), which will regulate the pass-on price of the increase in diesel rates, which accounts for 65% of the operational cost.

They have appealed to customers accept the new mechanism and pay the extra rate so that transporters do not default on their loans. 

Customers have been asked not to impose any penalty for delayed arrival of consignments because trucks are getting struck due to diesel shortages at several pockets.

Since the prices of non-diesel components (toll/tyre/lubricants etc.) have gone up, they have increased by a flat 3% on non-diesel charges. This includes the additional burden of the ₹3 increase in diesel price announced on the first occasion.

In case of the diesel component, for every ₹ 1 increase in diesel price per litre over the base rate prevailing on 15 May 2026, there would be a 0.65% increase in freight rates as per FAF. 

It may be recalled the first increase in diesel price was effected from May 15, 2026 which has become the base date. 

These measures were announced by All India Transporters Welfare Association (AITWA) on Thursday (May 21). 

“We write to you with a sense of urgency, and with the deepest respect for the long-standing and valued partnership between the transport sector and the trade/industry it serves across the length and breadth of our nation,” AITWA wrote to customers. 

“We wish to draw attention to the severe cost pressures currently impacting the road transport industry — pressures arising entirely from global developments beyond the control of domestic stakeholders,” it wrote.

Stating that for several years, diesel prices in India had remained relatively stable, allowing freight rates to be maintained with only periodic revisions, it said the sharp diesel price increase effective 15 May 2026 and subsequent increases are fundamentally different in nature and are directly linked to the global war conditions disrupting international energy markets and trade routes among others.

It said an extraordinary situation has been created due to restrictions around the Strait of Hormuz affecting global crude supplies; pressure on the Indian Rupee, increasing the landed cost of crude imports.

In addition, several related operating costs have also risen sharply, they said. 

“Diesel shortages at pumps are delaying truck operations, increasing manpower/running costs; DEF/AdBlue prices have nearly doubled in the last two months; Tyre prices have increased by nearly 5% in the same period, and till charges across the country were revised upward from 1 April,” they highlighted. 

“These extraordinary global circumstances were beyond the scope of normal freight contracts and annual escalation mechanisms. With further diesel price increases anticipated, it has become essential to establish a structured, transparent, and predictable mechanism to address fuel cost volatility, rather than relying on repeated ad hoc revisions and negotiations,” the AITWA emphasised.

It said the 3% increase in the non-diesel component is to neutralise the additional cost. “This needs to be corrected in existing contract rates immediately,” it stated.

To address the volatility of fuel costs in a transparent, structured, and equitable manner — and to spare both transporters and their clients the uncertainty of repeated unplanned revisions —AITWA said it had initiated the FAF, effective 20th May 2026.

“Thereafter for every ₹ 1 increase in diesel price per litre over the base rate prevailing on 15th May 2026, 0.65% increase in freight rates,” it said. 

“Any further revisions necessitated by subsequent increases in diesel prices shall be applied on the same basis, providing a consistent and predictable framework for all parties,” it added.

“We wish to emphasise that the FAF is purely a fuel cost recovery mechanism arising from the current global situation. It does not provide any additional commercial margin to transporters. The FAF shall remain directly linked to prevailing diesel prices and will be adjusted accordingly if diesel prices moderate,” it said.

“Our Earnest Request to Trade and Industry. AITWA sincerely acknowledges the challenges faced by trade and industry during these difficult times. However, the road transport sector — the backbone of India’s supply chain — is facing unprecedented cost pressures that can no longer be absorbed,” AITWA said. 

“We therefore request all users of transport services to accept the Fuel Adjustment Factor (FAF) effective 20th May 2026; treat this as an extraordinary global cost adjustment, separate from normal annual revisions; engage with transport service providers to implement the same without delay; continue supporting the transport sector during this period of global uncertainty.

“AITWA remains committed to serving Indian trade and commerce with dedication and remains available for any discussions or clarifications required. We thank you for your understanding and cooperation in navigating this challenging period in the interest of the national economy,” it added.