The Hindu Business Line : Varun Shipping moots crude transportation foray

Speaking to newspersons on Monday, Mr Arun Mehta, Vice-Chairman and Managing Director, said that the company was also examining opportunities in the transportation of petroleum products and LNG. "However, the details are yet to be sorted out," he said.

If finalised, the crude transportation would be the company's maiden such venture, according to Mr Yudhisthir Khatau, Managing Director.

"Never before have we engaged in transportation of crude," he said.

"We have to go for either Aframax, or Suezmax or VLCCs (very large crude carriers) and the decision on the type of the vessel to be acquired will be firmed up at the time of acquisition depending on so many factors, such as the market condition, the availability of the vessel, the age and the price of vessel, etc."

In transportation of petroleum products, the choice would have to be between MR and LR types, he added.

For transportation within Asia, MR types (MR I or MR II) might be ideal while for movement beyond Asia, LR types (LR I and LR II), he added.

The proposed acquisition would be funded partly by the current rights issue totalling Rs 65 crore and partly by debts and internal generation.

The company would go for second-hand vessels, which would start earning from the day of the acquisition.

Earlier, speaking to Business Line, Mr Mehta said that the LPG transportation would continue to hold promise for the company as LPG demand in the country, as per the Government's own estimate, is rising at 10-12 per cent annually. Once the oil companies launch rural marketing of LPG in a big way, the growth would be many times more.

The country currently imports about 1.5 million tonnes of LPG annually, more than 80 per cent of which is accounted for by Varun Shipping.

This is because there are not too many players in the field. Shipping Corporation of India has two LPG carriers, of which one is engaged in coastal movement. Great Eastern Shipping has two vessels, but both are engaged in cross-trading.

Mr Mehta discounted the possibility of foreign lines throwing stiff competition in the field because with the cost remaining the same, the Indian bottoms had the preference for Indian cargoes, according to the government's current policy of the right of first refusal being with the Indian flag.

"Some quantities of ammonia are still being imported in foreign flag vessels, but we are not unduly worried about it," he added.