The Hindu Business Line : Petroleum, Shipping Ministries in row over Transchart

THE Ministries of Petroleum and Shipping appear to have once again locked horns over the issue of Indian oil companies trying to by-pass Transchart, the chartering wing of the Shipping Ministry.

This comes in the wake of serious attempts being made by the Ministry of Petroleum to allow its flagship company, Indian Oil Corporation (IOC), to make its own shipping arrangements for crude oil imports, circumventing Transchart.

Informed sources told Business Line that the Ministry of Shipping has taken up the issue with the Petroleum Ministry, explaining the need for continuation of Transchart and the role it has been playing in India's crude imports over the years.

The Shipping Ministry is trying to punch holes in the argument being trotted out by the oil industry that by-passing Transchart would bring down crude transportation costs.

However, according to the sources, this does not seem to be cutting ice with the bureaucracy at the highest level in the Petroleum Ministry, which is pushing for a "policy decision" on freeing the oil companies from Transchart's "clutches".

Transchart was formed by the Government in tune with its policy that all Government owned/controlled cargoes should be imported on Freight on Board (FoB) basis and exported on Cost & Freight (C&F) basis, with all centralised shipping arrangements to be made through Transchart. Transchart, which was given the responsibility of ensuring compliance of the Government policy of FOB imports, has been supporting growth of Indian shipping, besides obtaining competitive freight rates for the importers, including the oil PSUs.

In the last policy revision on October 16, 2001, the Government had reiterated its "firm resolve" to continue with the policy of FOB imports and centralised shipping arrangements through Transchart.

Understandably worried over IOC's move to by-pass Transchart, the Indian shipping industry feels that this could lead to all oil companies buying crude on C&F basis by making their own shipping arrangements.

Clearly, what the shipping companies are concerned is that such a situation would deprive them the valuable cargo support that they are getting in the present system, which allows Indian lines to get first right of refusal to carry the cargo.

The Shipping Ministry is pushing for Transchart's case on the ground that it has an experience of more than four decades, with worldwide ship owners being represented through approved ship brokers. Also as tonnage enquiries get circulated worldwide and thereby inviting better competition, Transchart helps avoid competition among users and provides secured freight payments to shipowners.

More importantly, the Shipping Ministry has pointed out that any measure to decanalise import of a particular cargo had the impact of triggering considerable reduction in import of such cargo on FoB basis, with corresponding increase in its imports on C&F basis.