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Delay in getting Government approval for acquisition of vessels has been taking the steam out of Shipping Corporation of India’s (SCI) fleet expansion plans, resulting in loss of significant business opportunities.
The Comptroller and Auditor General (CAG) report on SCI, which was tabled in parliament last week, has pointed out that the delay in getting government approval resulted in steep rise in prices of 26 vessels by Rs 2105 crore, when compared to the indicative prices reported by international agencies.
SCI’s falling back on its acquisition targets has kept its fleet more or less static in terms of gross tonnage. The company, for instance, acquired eight vessels, but sent 15 of its existing ships to the scrap yard in the last five years, with the net addition being only 2.5 lakh GT.
The CAG pointed out that in the case of four panamax bulk carriers, the delay was as much as 62 months, including time taken for government approval (30 months), holding PIB meeting (10 months) and re-tendering (12 months). Similarly, it was 63 months in the case of six handymax bulk carriers, 25 days for two very large crude carriers (VLCCs) and 46 months for two container vessels.
The CAG has also pointed out that delay in getting the approvals resulted in a loss of earnings opportunity to the extent of Rs 358 crore, considering the estimated hire rates assumed by SCI for these seven projects, including the two VLCCs and two container vessels.
The company could meet even reach the half way mark in its acquisition targets for the Tenth Plan and Eleventh Plan. As against the target of acquiring 39 vessels (20.8 GT) in the Tenth Plan, it could add 14 ships (10.5 GT) to its fleet. Similarly, in the Eleventh Plan, it could acquire 25 vessels as against the targeted 62 vessels. “Based on past trends, making good the shortfall of 37 vessels, involving 20.15 GT, during the (remaining part of the Plan Period) appears an uphill task,” the CAG report feels.
This trend is also telling upon SCI’s fleet age. With its fleet of 76 vessels having an average age of 18 years as on March 31, 2010, SCI appeared to be at a disadvantage when compared to its nearest domestic competitor, which had an average fleet age of 11 years. During 2010-11, however, SCI brought down the average age to 15.63 years through phasing out of older vessels and acquisitions.
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