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Amit Mitra

AS PART of its efforts to broaden its services and open new avenues of income, Vizag port has taken the lead in the to foray into bunkering business. As the first step, the port has commissioned the Indian Ports Association (IPA) to prepare a feasibility report. The VPT initiative sets a new trend, with a few other ports also planning to enter bunkering.

There are interesting commercial possibilities in the bunkering sector for the Vizag port, as even the IPA interim report confirms. It is estimated that the port could well get a bunkering opportunity of over three lakh tonnes in the next four years, which could make a significant contribution to the port's income.

The global bunkering industry is growing at a fast clip, especially as bunkering takes up to 40-50 per cent of the total operating costs, and the choice of the right fuel is crucial to the safety of the ship. The cost of bunkers, according to the IPA interim report, is highly responsive to the changes in the bulk spot market, with Singapore, Rotterdam and ports in the US playing a vital role in setting the prices.

The IPA, after studying the bunkering activities of three major ports of Singapore, Fujairah and Colombo, has noted that not only is the price of bunkers supplied at the Vizag comparatively higher, the port also does not offer credit facility or supplies at outer anchorages.

Singapore, with its locational advantage, is the leading bunker port in the world, with bunker deliveries averaging 20 million tonnes out of its throughput of 340 million tonnes. The port, which handled 313.49 million tonnes of traffic in 2001, with 1.46 lakh ships calling at the port, supplied 20.35 million tonnes of bunker during the year. And with a cluster of refineries, including those of Shell, Mobil and Singapore Refining Co, located there having capacities of almost 1.5 million barrels per day, the port is able to supply the cheapest bunker in South-East Asia.

According to the IPA study, over 100 bunker suppliers/traders operate in Singapore, with Chi Feng Petroleum Pte Ltd, an associate COSCO Holdings, being the leading supplier, with marine bunker supplies of the company touching 80,000 tonnes each month.

The area known as `Fujairah bunker market' encompasses the three ports of Khor Fakkan, Kalba and Fujairah, all located on the east coast of the UAE. Located on the gateway to the Gulf, Fujairah also enjoys significant locational advantages, having open anchorages with ample vessel space. The present annual demand in that area is around 9 million tonnes, with Fujairah, having a share of 6-8 lakh tonnes per month.

In Sri Lanka, the Lanka Marine Services Ltd (LMSL), a wholly owned subsidiary of Ceylon Petroleum Corporation (CPC), is the monopoly supplier of bunkers, with more than 1,600 ships taking bunkers last year.

Against this background, the IPA points out that though the Vizag port does not enjoy the locational advantage, it has its own ship calls, whose bunker needs could be met by the port. Now, bunker is mainly supplied by HPCL (60 per cent) and IOC. And since the marketing terminals of both the companies are near the port area, there are no separate storage terminals in the port. For supplies to ships elsewhere within the port, two private barges are used. The IPA report says that the bunker supplies at the port fluctuated between 91,000 tonnes to 97,000 tonnes during the last five years, the highest being in 1999-2000, when 1,681 vessels took 97,194 tonnes of bunkers and the lowest last fiscal, when 1674 vessels took 85,636 tonnes. Discussions between the IPA study team and the trade at the port have thrown up several reasons why Vizag is not preferred for bunkering. One, the price of bunkers supplied at the port is higher than those of Singapore, Fujairah or Colombo. Two, there is no credit facility at Vizag as offered at Singapore or Colombo, where at least 60 days credit is available.

Three, the most sought-after IFO 380 bunker is not available at the port. And, four, there is no provision for bunker supply at outer anchorages and if the ships take bunker at the anchorages, they are expected to pay 50 per cent of the port dues and 25 per cent of berth hire charges for the first seven days. "In Singapore, Colombo or Fujairah, bunkering is done in the open sea roadstead and therefore no port charges are involved," the report says.

The price structure for bunker supplies by HPCL and IOC is as follows: FO is supplied by HPCL to foreign ships at Rs 9,031 per tonne (including sales tax and delivery charges), and IOC at Rs 8,974. In the category of duty paid bunker for coastal ships, HPCL delivers FO at Rs 10,683 per tonne and IOC at Rs 11,097. In dollar terms, the base price and delivered cost of FO at anchorage is $157 and $186 per tonne respectively for HPCL supplies and $157 and $185 for IOC supplies. This is significantly higher than the delivered cost at Singapore ($151 per tonne) and Fujairah ($148).

One factor that has to be taken into account is that the base price of bunkers at the Vizag port is quite comparable to the prices at Singapore or Fujairah, but the taxes and duties render the delivered price quite high and un-remunerative for the trade. Obviously, this calls for certain measures, including grant of fiscal incentives, to make the delivered price of bunker internationally competitive if bunkering is to be made attractive at Vizag.

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