The Shipping Secretary, Mr K. Mohandas, said on Tuesday that there is no freeze on buying of ships by Shipping Corporation of India.

Denying reports that SCI is heading to a debt trap, he said there is no cause for any concern over the financial position of SCI and that its fundamentals are strong.

“The Government has not directed SCI to stop acquisition of ships. The company is free to buy ships taking into account its requirements, financial position and the market conditions,” said Mr Mohandas at a press conference.

There were reports that an internal document prepared by the financial advisor to the Shipping Ministry had raised doubts over the debt-raising ability of SCI to finance is fleet acquisition plans.

The SCI Chairman and Managing Director, Mr S. Hajara, said the company's debt-equity ratio which is 0.66 as on March 31, 2011, will not exceed 1:1 even after it buying all the 66 vessels planned for the 11th Plan. Generally, shipping companies world over are highly leveraged with debt-equity ratio of 1:2 and above, he said.

SCI has never borrowed for working capital requirement, so there is no question of the company falling into any debt trap. The company has never faced any difficulty in raising funds for fleet acquisition and most of it is raised overseas. Its average cost of overseas borrowing two per cent in last fiscal, he, said. Regarding allegation that SCI's has not yet tied up funds for making payments to shipyards, he said the practice being followed by SCI is to raise funds only after the order is placed and mostly at the time of making the final payment.

The initially payments are made out of the equity portion. “We are absolutely confident that we can raise funds as and when we require it,” he said.

The largest shipping line in the country has on order for 28 vessels, worth around $1.4 billion, due for delivery by 2013-14. Following the economic slowdown and the bearish shipping market, ships prices have come in the recent past.

However, Mr Hajara said out of the 28 vessels on order, the market price of only nine have declined.

After taking a review of the market conditions, the SCI board has decided to go slow on buying ships. But he said in the current year, the company may buy at least 10 vessels.

The current market value of SCI vessels ( Rs 8,400 crore) is higher that their book value (Rs 7,282 crore).

SCI's outstanding debt as on March 2011 was Rs 4,715 crore.

SCI, which has a fleet of 81 vessels with a DWT of 5.82 million, had reported a loss of Rs 5 crore in the first quarter of the current fiscal.

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