The Hindu Business Line : SCI seeks easing of curbs on tonnage acquisition

"As the firm freight market trends are likely to continue, SCI could partly make up for the lost opportunity, if the Government gives it the go-ahead for its acquisition programme at least now."

Mumbai , Jan. 14

WITH the disinvestment programme of state-owned Shipping Corporation of India (SCI) likely to face a fresh spell of uncertainty and delay in the wake of the announcement of general elections, the corporation has sought a relaxation on the curbs imposed on it by the Government.

The corporation has been barred from making any major investments for tonnage acquisition till the disinvestment process is wrapped up.

SCI is understood to have written to the Ministry of Shipping to take up the issue with the Ministry of Disinvestment as it has already missed out on phenomenal freight market boom.

As SCI has not been able to make optimum use of the unprecedented surge in freight rates due to the fact that it had to put on hold its tonnage expansion programme, the company is keen that it is allowed to go ahead with its acquisition plans, especially now that the disinvestment process is not likely to be revived till the elections.

"As the firm freight market trends are likely to continue for at least another year, SCI could partly make up for the lost opportunity, if the Government gives it the go-ahead for its acquisition programme at least now," a shipping analyst felt.

Indeed, while most shipping companies in the private sector have been extracting mileage out of the phenomenal boom in the global freight market by going in for fresh tonnage, India's shipping giant has had to battle it out with both hands tied due to the uncertainty involved in its disinvestment programme.

The Government did not want SCI to take any strategic decisions involving major capital investments as it may bind on the new owner of the company after the disinvestment.

Indeed, analysts say that it is for the first time that every sector is booming, ranging from the tanker market to the bulk carrier and liner segments. The upturn, which actually started after the US invasion of Iraq, is expected to continue till 2005-06, after which there could be a "market correction" as lot of new ships would enter the market resulting in "over supply of ships".

As a matter of fact, according to an analyst, India's expansion in tonnage has been at a level, which was never before experienced. For example, Great Eastern Shipping, India's largest private fleet owner, had acquired one crude carrier and two products carriers in the first quarter of the current fiscal, while in the second and third quarters it added six more crude carriers, with its tonnage going up from 1,317 million DWT as on March 31 2003 to 2.10 million DWT at present.

In addition, the company has laid out a capital expenditure programme involving an outlay of Rs 1,038 crore for acquiring 10 vessels, including one Aframax, one product carrier and two Suezmax vessels that will be delivered between January 2004 to September 2005.

Sadly, SCI has lagged behind in this regard. It had drawn up an ambitious acquisition programme involving 29 vessels, including 26 tankers, during the Tenth Plan period, with a capital expenditure of over $1 billion (approximately Rs 4,537 crore).

But today it has on order only four vessels, apart from two LNG tankers that are part of a Special Purpose Vehicle formed by SCI and four other foreign lines to move LNG for Petronet to Dahej.

Moreover, the company has to replace about 25 to 30 per cent of its tanker fleet within the next few years, for which it should have had initiated the acquisition programme by now. But this had to go into a limbo due to the delayed disinvestments procedure.