The Hindu Business Line : Delay in ship berthing at Vadinar costs IOC dear

STAE-OWNED Indian Oil Corporation (IOC), the country's largest crude oil importer, has to pay hefty demurrage costs to ship owners as very large crude carriers (VLCC's) carrying five parcels of crude in September had to wait for berthing in Vadinar within Kandla port limits for even up to ten days.

In today's booming freight market, VLCC owners are charging anywhere between US $ 60,000 to 75,000 per day as demurrage costs for delay in berthing due to non evacuation of cargo on the buyer's account. Shipping industry sources said that the situation could have been avoided if IOC had scheduled the shipments properly in view of the planned shut down of the Mathura refinery. "IOC should have anticipated this and planned accordingly," the sources said.

Normally, VLCC's carrying crude cargo arrive and berth immediately before sailing off. But, due to lack of tanking capacity, these VLCCs are forced to wait for evacuating the cargo at Vadinar, the sources pointed out.

But, IOC says that the entire demurrage has not been on account of the planned shut down of Mathura refinery. "We need oil at a time when the oil prices are zooming up. As a result, there will be a few tankers that get bunched up. And, sometimes it is better to pay demurrage costs and get the oil when you know that the prices are going up," an official said. Though, the shut down of Mathura refinery was planned, it went beyond the expected period. "Just because IOC was incurring demurrage, we could not take the risk of running the refinery unsafe. Oil is of prime importance to us. So is safety of our plants," he explained.

IOC's demurrage costs this fiscal are expected to be higher than last year due to a 10-15 per cent rise in demurrage since August this year. IOC's demurrage costs from April to August this fiscal was Rs 55 crore while this was Rs 70 crore for the whole of 2003-04.