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Every downside brings opportunities: SCI chief

Starting out as a marginal liner shipping company, the Shipping Corporation of India today has metamorphosed into a giant conglomerate. Its chairman and managing director S Hajara spoke to Gaurav Choudhury on a range of issues.

business Updated: Apr 27, 2009 00:06 IST
Gaurav Choudhury

The Shipping Corporation of India (SCI) was established on 2nd October 1961 by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. Starting out as a marginal liner shipping company, the SCI today has metamorphosed into a giant conglomerate. Its chairman and managing director S Hajara spoke to Gaurav Choudhury on a range of issues. Excerpts:

Please elaborate on the activities of the SCI?

SCI has a significant presence on the global maritime map and is the country’s premier Shipping Line. Presently, the SCI owns a fleet of 80 ships of 5.125 million deadweight tonnage, with a share of nearly 33 per cent of the total Indian tonnage. Our fleet comprises cellular container vessels, crude oil tankers, product tankers, bulk carriers, LPG/ Ammonia carriers, acid carriers, passenger-cum-cargo vessels and offshore supply vessels.

What are your future fleet acquisition plans?

SCI’s tonnage acquisition plan in the Eleventh Five Year Plan period i.e. during 2007-08 to 2011-12, is to order or acquire total 62 ships, 20 of which have been ordered till now.

In the present phase of global financial crisis, how do you see the shipping sector performing and in particular how it has affected the performance of SCI?

The tsunami of global financial crisis appears to have affected the Shipping Industry the most. Out of the three major elements of the shipping Industry ie Dry Bulk , Liquid Bulk and Containers, the Dry Bulk segment has suffered the worst and registered a dip of around 90 to 95 per cent in a period of just eight months. In the Container segment, the freight rates drifted by almost 40 to 50 percent. In comparison, the drift in tanker rates has been moderate, to the extent of about 20 to 30 percent.

As far as SCI’s performance goes, fortunately, the tanker segment, which consists almost 80 percent of our tonnage, has not been affected to the extent other segments.

Do you see any opportunities in the present down market?

Every downside brings opportunities. Many shipping companies, which are cash rich, can go for second-hand vessels at reduced prices. However, in order to take advantage of the situation for purchasing the second hand vessel or resale vessel, one has to secure entire funds. Normally, a shipping company invests about 20-25 per cent of its own funds, the balance have to come from the financial markets. However, unfortunately, today the normal route of financing i.e. through external commercial borrowing from the commercial banks abroad, has almost dried up. For this reason we have requested the government to either incentivise Indian banks to lend Indian Shipping or create a fund of Rs 10,000 crore to acquire ships. We have also requested the Govt. to facilitate lending from multilateral agencies like World bank /ADB etc.

What policy changes would best enable the Indian Shipping industry to grow in the future?

The Indian Shipping industry basically requires an equitable fiscal regime to compete with the foreign shipping companies in the global market. In order to make India amongst the top 10 maritime nations in the world, the cost for operating Indian flagged vessels, needs to be brought down to internationally comparable level. There should be other facilitative measures for growth of Indian tonnage like long term chartering of tonnage and some kind of reservation for Indian flag for Indian cargo.