The Hindu Business Line : SCI to invest Rs 15,000 cr in new ships in 5 years

Shipping Corporation of India (SCI) has drawn up a five-year fleet expansion programme, involving a capital expenditure of Rs 15,000 crore for acquisition of 70 ships. This will include replacement of some of its older vessels, as well as tonnage accretion.

The company, however, has no plans to raise money from the capital market to fund the acquisition programme. "Right now, we are sitting on a cash reserve of Rs 2,500 crore. For a capital expenditure plan of Rs 15,000 crore, we need equity of Rs 4,000 crore over the next five years. I do not see any financial constraints for funding the acquisition plan," Mr S. Hajara, SCI's Chairman and Managing Director, told Business Line.

The proposed acquisitions include VLCCs (Very Large Crude Carriers) and container vessels. In fact, the company has already placed an order for two VLCCs with a Korean yard for $258, which would be delivered by the third quarter of 2008 and 2009.

In the current fiscal, the company has lined up an acquisition plan for 35 vessels, requiring an investment of about Rs 6,350 crore, in addition to the ships already on order.

Other constraints

Even though funding does not pose a problem, SCI, being a Government-owned company, does face constraints in the form of delayed decision-making process. With asset prices ruling high, including in the second-hand and resale markets, any delay in buying decisions could upset negotiations between the sellers of the ship and SCI.

It is in the light of this that SCI is seeking `navaratna' status, which would give its board complete autonomy to take decisions related to ship acquisition. "We comply with all the criteria required for gaining navaratna status. Right now, we have a mini-navaratna status, which gives autonomy to our board to take decisions that involve an expenditure of less than Rs 500 crore. We cannot even acquire a VLCC with this money," Mr Hajara said.

Status upgradation

The Shipping Ministry has also thrown its weight behind SCI's plea, recommending to the Department of Public Enterprises that the company's status be upgraded.

Faster decision-making has become all the more necessary now for SCI as it has decided to look for resale contracts (in which ship owners resale the contracted ship even before it is constructed) and second-hand vessels. The company has begun to scout the Chinese shipbuilding market for a suitable resale contract, having recently sent a delegation to China to inspect the shipyards there.

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