Shipping Corporation of India Puts on Hold Capacity Addition Plan

With the cost of money moving up and freight rates diving, Shipping Corporation of India​ (SCI) has put on hold its plans of issuing fresh tenders to acquire new vessels. The 1961-founded company is already taking delivery of about 10 vessels this year, mostly bulk carriers, though there is overcapacity in the market.

The Mumbai-headquartered company has a target of ordering 62 vessels by next year under the national maritime development programme. Of these, SCI has already ordered 39 with $2 billion investment, with fresh acquisitions on hold, the company is expected to fall short of the target by 15 vessels.

Government-controlled SCI currently has 79 vessels with a capacity 5.7 million dead weight tonnage (dwt). Of these, 45 vessels are tankers, 17 bulk carriers, five liners, 10 offshore supply vessels and two passenger-cum-cargo vessels.

India ranks 16th in the world in terms of capacity: the shipping industry’s total fleet size is 10 million gross tonnage annually, though it forms a marginal share of only one per cent of the global fleet. On the other hand, India’s seaborne trade has been growing at 12 per cent in the past 10 years. Consequently, the share of India’s vessels in carrying the country’s cargo has been declining. Currently, it is only eight per cent.

Fitch said charter rates across most segments remained depressed, with a marginal uptick driven largely by industry discipline. “The outlook on the sector continues to remain negative, driven by oversupply,” according to its mid-year ratings review of the shipping sector.

SCI had expressed its interest in participating in ship-building ventures on a public private partnership basis. The state-owned enterprise is in the process of appointing a consultant for a detailed feasibility study.

The National Maritime Agenda mentions that a joint venture is likely to be set up under the PPP model by 2014 at an approximate cost of Rs 3,500 crore.

Though the company is faced with an oversupply problem, it is hoping the demand-supply will balance out by 2013.

(business-standard)