The Hindu Business Line : Why bunkering services need to be upgraded

Though bunkering services are available at most of the major ports in India, the infrastructure has not been developed in tune with the increasing requirements of the shipping industry.

THE shipping industry is increasingly facing the need for upgrading the bunkering services at Indian ports, as a major slice of the tonnage engaged in overseas trading continues to depend on foreign ports for its requirements.

Industry analysts feel that the upgradation, which is possible through a concerted effort by all the players, including the ports and bunker suppliers, will enable shipping companies to notch up substantial savings.

The analysts also point out that there is considerable scope, given the right policy initiatives, to make bunkering services attractive for both the ports and suppliers.

The bunker fuel represents the most significant component of the operating cost of shipping companies, with the cost of bunkers constituting 25-35 per cent of the direct operating costs, taking into consideration a mix of different vessels in the fleet. Further, with the companies moving towards the zero-inventory concept, the need of the hour is undoubtedly shorter transit times and quicker delivery schedules.

Says Capt. M.C. Patnaik, Director of Shipping Corporation of India (SCI), in a recent presentation on the subject: "The factors that influence bunkering policy plans, include the ability of bunker suppliers to provide bunkers at internationally competitive prices, sound bunkering facilities at load/discharge ports, simultaneous bunkering with cargo operations, avoidance of diversions for bunkering and lower port tariffs for bunkering calls."

India's bunker off-take is poor compared to other ports. The bunker off-take at Indian ports, which is at a level of 0.45 million tonnes, representing a measly 0.23 per cent of the world bunker off-take, will doubtless pale into insignificance.This has to be viewed vis-à-vis the present Indian shipping tonnage, which stands at about 10.5 million DWT, including 0.87 million DWT engaged in coastal trade of dry bulk, general and POL cargoes.

Thus, with the annual bunker off-take at Indian ports being 0.45 million tonnes (1.69 lakh tonnes of HO, 1.59 lakh tonnes of HSD and 64,352 tonnes of diesel oil), a major portion of the tonnage are bunkering at foreign ports, even though they are regularly calling at Indian ports.

Though bunkering services are available at most major ports in India, the infrastructure has not been developed in tune with the increasing requirements of the shipping industry. For the ports to strengthen their bunkering services, it has to be ensured that quality bunkers are supplied at internationally competitive prices with round the clock operations. Further, ports should have designated bunker berths or anchorage with pipeline and barge facilities, backed by a lower port tariff and adequate support services for ship supplies, spares and crew change.

Also, it is felt, facilities for mid-stream delivery should be improvedAnalysts feel that the bunker suppliers and bunker craft operators carrying de-bunkered fuel or those returning from outside port limits should necessarily produce a certificate of quality from the accredited laboratory attesting that the bunker fuel in their tanks meets the minimum requirements of ISO 8217.

In fact, from June this year, a new accredition scheme for bunker suppliers is being introduced, which will make them accountable.Further, the industry feels that bunker pricing on the Indian coast is significantly higher than the international one. Consider this: While the Indian bunker prices are in the region of $247, those at Rotterdam, Fujairah and Singapore ports are $160, $161 and $164, respectively.

It is pertinent to note here that a recent study by the Indian Ports Association at Vizag port had shown that while the base price of bunkers at Vizag are comparable to the rates in Singapore or Fujairah, it is the high taxes and duties that shore up the prices, putting the Indian bunker trade at a disadvantage.

The average tax component has been worked out to be at Rs 1,312 per tonne, which is seen as the major reason for the abysmally low bunker lifting of only 0.45 million tonnes at Indian ports.

Thus, for bunkering activities to pick up, analysts feel that the Government should reduce the tax and duty burden on bunkers. The Government should also come out with a fiscal incentive scheme for making bunkering more attractive and reducing the elaborate procedures involved in Customs documentations.

All these can enable strategic Indian ports to emerge as leading bunker destinations for the international shipping trade passing through the Arabian Sea and the Indian Ocean region, apart from reducing the dependence of Indian ship owners on foreign bunkering services.