For close to 10 months, state-run Shipping Corporation of India Ltd (SCI) has been looking to buy two very large gas carriers (VLGC) to tap potential in a segment that has been growing on the back of India’s growing demand for cooking gas.

While SCI, despite having a ‘navratna’ tag that allows greater financial freedom to state-run firms from government control in taking decisions, faltered, privately owned Seven Islands Shipping Ltd bought two gas carriers in September and chartered them to state-owned oil firms for two years, netting stable revenue in the process.

After scrapping the tender issued in December last year, SCI floated a fresh tender in September to buy two VLGCs (one firm and one optional) that are 12-16 years old of 79,000-84,000 cubic metre capacity from the second- hand market. The first tender for 10-15 years old VLGC’s was discharged because those who had submitted the offers sold the ships to others as SCI delayed a final call on the purchase.

“In SCI, the systems and processes are slow,” said a shipping industry executive. “It was bound to happen. There was assured business from state-run oil firms, but SCI could not finalise the purchase of VLGC’s on time and lost the contract,” he said. “There is no guarantee that the purchase will go through in the re-tendering,” he added.

“The key in shipping is you have to be very swift,” said a second industry official. “If you wait for 1-2 years, the ship price will shoot up by 20-30 per cent. Then, it makes no sense in buying,” he added.

SCI currently has one VLGC on its fleet. It is keen to add more to cater to the demand from state-run oil firms to ship liquefied petroleum gas (LPG) into India, a business in which Indian flagged ships get a so-called right of first refusal (RoFR) to match the lowest rate quoted by a foreign flag vessel in a tender and grab the contract.

In July, the Union Cabinet approved a subsidy scheme for Indian fleet owners for transporting crude oil, LPG, coal and fertiliser cargo for state-run firms.

Local ship owners will get a 10-15 per cent extra on charter rates, depending on age slabs, on ships registered in India after February 1.

For ships registered in India prior to February 1, the subsidy quantum ranges from 5-10 per cent, depending on the ship’s age. The subsidy quantum will be reduced by 1 per cent every year during the five-year tenure of the scheme.

That aside, SCI is looking to utilise ₹133.85 crore left from the funds raised through a follow-on public offer (FPO) in December 2010, the proceeds from which were mainly intended to buy ships.

Rates for shipping LPG has been performing well despite the overall slump in the tanker market.

Currently, a very large gas carrier fetches $33,000-34,000 a day for its owner on a charter period ranging from 1-3 years, while a medium gas carrier earns $22,000-23,000 a day for the same tenure.

India has overtaken Japan to become the second largest importer of LNG in the world. At any given time, Indian oil marketing firms require 20-22 very large gas carriers (VLGC) and 10-12 medium gas carriers (MGC) to haul LPG into the country.

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