The Hindu Business Line : Sans vessels, DCI unable to dredge up work

DCI's bucket dredger, Kamal XXVI. With various difficulties in the way of acquiring more dredgers, DCI's growth and competitiveness are being stymied.

GIVEN the opportunities available world-wide, the public sector Dredging Corporation of India (DCI) would like to grow but finds it difficult in the absence of dredgers that are proving elusive to get.

DCI has 12 dredgers, all gainfully employed, some in Indian ports and others in foreign waters. But the company needs more dredgers if it wants to get have a fair share of the market. It faces difficulties in acquisition. For several reasons. As a government company, it has to go through a lengthy procedure which delays the acquisition process. Next, the price. A new dredger is now prohibitively expensive and therefore raises eyebrows in the government.

Finally, the delivery time. All international shipyards are choc-a-bloc with orders. No delivery is possible before end-2007/early-2008 while the government insists on delivery within 18 months.

For some time DCI has been toying with the idea of acquiring two dredgers, one trailer suction with 5000 cbm hopper capacity to be deployed exclusively for the Hooghly dredging which accounts for more than 50 per cent of its revenue earning, and the other a cutter suction type.

The price bids were opened for the trailer suction dredger but there were not many bidders, with a Dutch firm, having monopoly in dredger manufacturing, emerging the most suitable. But the bidder is placing so many conditions that coping with them can be a real problem for a state-owned company.

It is in fact a Hobson's choice for DCI. If it does not place the order, it does not get a dredger and thus limits its own growth. If it places the order, it becomes subject to a plethora of conditionalities as well as a stiff price. If DCI accepts the increased price, it will have to jack up its rates. But such an upward revision is ruled out, at least immediately. The government favours bringing down the market rates through competition and therefore allows private dredging firms, both Indian and foreign, to bid for maintenance dredging so far reserved for DCI.

But this is not the only problem facing DCI. There are many others, the unequal competition from the foreign dredging majors being the main. The Government allows Indian subsidiaries of foreign firms to import 30-year-old dredgers for operation in Indian waters, and these subsidiaries undercut DCI, which finds it hard to match the low rates. In some cases, the conditionalities are so framed as to make DCI ineligible for bidding.

Since DCI cannot grow due to the dearth of dredgers and cannot revise rates either, its turnover remains more or less the same for the second year in succession but the PAT (profit after tax) has taken a hit because of the government's decision to keep the dredging companies out of the purview of the tonnage tax.

The benefits earlier available under Section 33A(C) of the Income-Tax Act have been withdrawn whereas the provisions of the tonnage tax have not been made applicable to the dredging firms. As a result, DCI will most probably end up paying about Rs 50 crore of tax, in addition to the countervailing duty of Rs 6-8 crore for the import of spares.

When all types of vessels have been brought under the purview of the tonnage tax, why were dredgers kept out? Is the Rs 50 crore or so to be collected by way of tonnage tax from the Indian dredging firms so critical to the government? There is no level-playing field in dredging.

DCI is, therefore, examining ways and means to keep its head above water. For example, it has resorted to several cost-cutting measures. The second round of VRS is in the offing. But one has to ensure that only those redundant opt for the scheme.

The first round, introduced a few months ago, evoked little response. Only eight people opted for it. This time, it is hoped, at least 40 will take it. For a PSU employing only 400 shore staff, 10 per cent reduction may not be a small thing.

DCI is also planning to tie up with international dredging firms and has asked PriceWaterhouseCoopers to shortlist the right firm. A few firms are believed to have been shortlisted and a decision may be taken soon. The tie-up, it is hoped, will help DCI bid for capital dredging at home and both maintenance and capital dredging outside.

DCI is indeed looking for opportunities outside the country, not so much by choice as by compulsion. A few years ago, it did some work in Taiwan but did not make any money. Right now two of its dredgers are on charter to a foreign firm active in Bahrain waters. Recently the company bid for a job in Egypt, only to step back in view of the non-availability of right kind of dredgers.

One of its dredgers, Aquarius, has been placed with an international dredging firm on charter. Opportunities are aplenty in West Asia and the Far East, and the tie-up with an international dredging major is expected to help the company bid for overseas contracts. When jobs within the country shrink, one has to look for them outside.

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