The computation methodology behind National Freight Index

This section outlines the methodology adopted to compute the National Freight Index keep in mind the design principles, that would make a comprehensive and trustworthy freight index.

Representation

The National Freight Index is represented in two major forms. Firstly, in INR per ton-km and secondly, as a figure pegged to a base month. April 2018 is considered the base month. This is how most indices are represented: in a purist as well as a pegged form.

The National Freight Index is computed live and is refreshed every hour on Rivigo’s Freight platform. Along with this, average indices for a month are published for the previous 13 months. In order to further analyze index trends, avg. fuel rates for the month are available for overlaying on historical trends. The methodology for computation of each of these are explained in the sections below.

Granularity

Fundamentally, the NFI is a composite of several sub-indices. In some places, few cohorts of lanes or truck types have been combined to aggregate more data points for computational reasons. The granularity available on the NFI page is as follows:

  • Truck types (10 options)

    1. All trucks
    2. All Open type
    3. 6 tyre
    4. 10 tyre
    5. 12 tyre
    6. 14, 18 and 22 tyre (combined to represent the large Open truck segment)
    7. All Container type
    8. 32 ft mxl
    9. 32 ft sxl
    10. All Trailer type (combined high and semi bed variants)
  • Zone of origin of lane (5 options)

    Following zonal options are available:

    1. Pan-India
    2. North
    3. South
    4. East
    5. West

    The states considered in each zone are as follows:

    • North: Delhi, Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Uttar Pradesh, Uttarakhand
    • South: Karnataka, Andhra Pradesh, Kerala, Tamil Nadu, Telangana
    • East: Arunachal Pradesh, Assam, Bihar, Jharkhand, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, West Bengal
    • West: Chhattisgarh, Goa, Gujarat, Madhya Pradesh, Maharashtra
  • Haulage distance (3 options)

    1. 250 or more km
    2. 250 to 750 km
    3. 750 or more km

    We have focused on medium and long haul lanes, as short haul lanes have very high price volatility, not because of demand and supply imbalances, but because of transit conditions (city roadblocks, detours, truck free hours, etc.). Further, short haul constitutes only 5-10% of the total billion-ton-km (BTKM) of freight traversed on road in the country.

Hence, a total of 150 different combinations can be selected to view the index at the granularity required. The truck types and the haulage distances available for selection contribute to almost 70% of the total billion ton-km (BTKM) moved in the country and hence are fairly representative of the overall spot market in road freight.

Selection of lanes

An index can be represented at the most granular level as truck type, zone of origin and haulage distance. For example: Container 32 ft mxl, from North, for 750+ km. There can be 56 combinations possible at this basic level (choice of 7 truck types, 4 zones, 2 haulage distances). We have carefully sifted almost 950 ODVts (lanes (OD) + specific vehicle type (Vt)), across these 56 combinations, which will be used to compute and aggregate the indices periodically.

Following checks have been applied for selection of the lanes:

  • The origins and destinations of lanes must be in the list of locations with high road freight traffic thoroughfare in the country. For fetching the same, 120 locations were selected, 30 in each zone, which contributed to 65-70% of the traffic in the country. The traffic information was fetched using Rivigo’s internal traffic volume information based on trips, load posts and load requests and toll-booth transactions at 300+ booths across the country during the period July to Dec 2018.
  • The lanes must cover all 4 travel directions in each zone i.e. towards North, South, East and West from any zone. This was done through visual inspection.
  • There must at least 10-20 lanes for each of the 56 combinations
  • The lanes must have a decent trip or load post history on Rivigo’s Freight platform, enough to give at least 3 data points in each month per lane.
  • If the lane does not have a data point for a month, the algorithmically imputed lane prices available on Rivigo Rate Exchange will be used.

Computing the base level index rates

Historical monthly averages As stated earlier, users of the National Freight Index can view the same at the most basic level of truck type, zone of origin and haulage distance. Let this level be called the 'base level' or 'BL'. The objective is to compute the monthly average INR per ton-km at this level. This is done by rolling up indices up from two more granular levels. Let us take an example.

  • For a particular vehicle type (Vt), the base level (BL) could be represented as: Container 32 ft mxl, from North, for 750+ km.
  • Each BL is composed of 2-4 District Pairs or DPs: DP1, DP2, DP3, DP4, and so on.
  • Each DP is composed of 4-10 Lanes: say DP1 is composed of Lane1, Lane2, Lane3, Lane4 and so on.

For month M, historical monthly average for DP1 is computed as,

Screen Shot 2019-06-17 at 9.38.32 PM

Where n is the number of lanes within DP1.

For month M, historical monthly average for BL is computed as,

Screen Shot 2019-06-17 at 9.38.51 PM

Where p is the number of DPs within BL and weightage is the weight attributed (explained later).

Live rates The real time rates or indices are computed with a method similar to the one stated earlier. Again, let us take an example.

  • For truck type, Vt, base level is BL: e.g. Container 32ft mxl, from North, 750+ km.
  • Each BL is composed of 2-4 District Pairs or DPs: DP1, DP2, DP3, DP4, and so on.
  • Each DP is composed of 4-10 Lanes: say DP1 is composed of Lane1, Lane2, Lane3, Lane4 and so on.

At any given time, live rate for DP1 is computed as,

Screen Shot 2019-06-17 at 9.39.42 PM

Where n is the number of lanes within DP1.

For month M, live rate for BL is computed as,

Screen Shot 2019-06-17 at 9.39.56 PM

Where p is the number of DPs within BL and weightage is the weight attributed (explained later).

Computing the aggregated index rates At any level, weightages have been assigned to the summed total of the ton-km moved across all lanes under that level. The loads posted from Apr to Dec 2018 on the Rivigo freight platform and the total toll-both exits by trucks using FastTag payments information on key lanes have been used to determine these weights. The bare minimum level at which weightages have been defined is district pairs or DPs.

For any DP, weightage is defined as

Screen Shot 2019-06-17 at 9.40.07 PM Where t is the number of lanes covered under the level.

Suppose, for a truck type, Vt, the base level is BL. Against let us take the example of Container 32 ft mxl, from North, for 750+ km. Total weight assigned to this BL is represented by

Screen Shot 2019-06-17 at 9.40.16 PM

Where p is the number of lanes covered under the level.

For any rolling up, to compute an aggregate index, the following logic is used:

Screen Shot 2019-06-17 at 9.40.24 PM


For example, to arrive at index for Container 32 ft mxl, from North, the following logic will be used:

[(Index value* Container 32 ft mxl, from North, for >750 km X weightage Container 32 ft mxl, from North, for >750 km) + (Index value Container 32 ft mxl, from North, for 250-750 km X weightage Container 32 ft mxl, from North, for 250-750 km)] ÷ (weightage Container 32 ft mxl, from North, for >750 km + weightage Container 32 ft mxl, from North, for 250-750 km)*


These weightages are planned to be kept unchanged with time and if changed will be communicated to all concerned users. NFI team can be contacted here get more information on the weightages.

Pegging index rates to base month As stated earlier, all composite values on NFI are represented in two major forms. Firstly, in INR per ton-km and secondly, as a figure pegged to a base month. For simplicity, the term ‘rates’ is used for the former and ‘index’ for the latter. A pegged index is represented as:


INR per ton-km for the current time period under consideration ÷ Average INR per ton-km for the month of April 2018


Diesel prices for each month The fuel rates shown on the NFI page are available at All-India and zonal levels. Daily prices across all states in India are sourced. A monthly average price for diesel for a zone is simply the arithmetic mean of the daily prices across all days of the month across all states within the zone. States have been categorized into zones as per the aforementioned list.

Write to us at nfi@rivigo.com