T E RAJA SIMHAN, THE HINDU BUSINESS LINE
CHENNAI, NOV. 7:
Shipping Corporation of India (SCI) has come in for strong criticism from the Shipping Ministry’s internal audit on the slow vessel acquisition.
The national carrier did not pursue an ambitious vessel acquisition policy to modernise its fleet. It did not adhere to its annual fleet acquisition targets and there were significant slippages resulting in cost overruns, which also affected the operational efficiency, says the audit report published in the Shipping Ministry’s 2011-12 annual report.
A senior official of SCI attributed the slow vessel acquisition to the three years of continuous subdued activity in the global shipping market. This forced the SCI management to go slow on vessel acquisitions, as the company’s revenue generation was adversely affected, and further acquisitions could have led to depletion of its reserves.
The SCI’s vessel acquisition programme during 2007-08 to 2011-12 envisaged acquisition of 62 vessels at an investment of Rs 13,135 crore. The acquisition progressed smoothly during the first year of the 11th plan (2007-08) with SCI placing orders for 16 vessels.
GLOBAL FINANCIAL MELTDOWN
However, during 2008-09 and 2009-10, the global financial meltdown affected credit availability and resultant liquidity in the market. The depressed freight market led to anticipation of softening of asset values, both new and second-hand, and accordingly, most of the ship acquisition proposals were deferred by SCI, said Anup Kumar Gupta, Director (T&OS), SCI. Due to the slow pace of acquisitions during 2008-09 and 2009-10, acquisition of 26 vessels was proposed in the last year of the 11th Plan to meet the overall 11th Plan target to acquire 62 vessels, he said.
However, in 2011, with further deepening of the European crisis, shipping markets once again reversed their upward trend, and it was felt prudent to go slow on vessel acquisitions on account of the prevailing uncertainties. Hence, SCI has placed orders only of seven vessels and acquired two resale vessels — a total of nine vessels during the year 2011-12 against the target of 26 vessels.
SCI has already made provisions for the replacement of its aging assets and SCI would resume acquisition of vessels to augment its fleet when the shipping markets improve, said Gupta.
The auditors recommended linkages between the development of the economy and growth of shipping and said the Government should address the concerns faced by the industry to facilitate a strong national core fleet.
SCI needs to frame and implement a time-bound acquisition policy for fleet growth and modernisation to face global competition.
It should also ensure that vessel are employed gainfully and avoid idling of vessels. Also, SCI needs to be aggressive in getting business from its major customers, particularly the oil majors.
The Shipping Ministry said it is taking action on the recommendations, says the annual report.
For the year 2011-12, SCI posted a loss of Rs 428.21 crore compared to a profit of Rs 567.35 crore the previous year.
During the last financial year end, it owned 75 ships of 5.52 million dead weight tonnes and was present in most segments of shipping including container, bulk carrier, tanker and the off-shore segment.
Despite the loss, SCI had a net worth of Rs 6,734 crore and strong cash balances.
CHENNAI, NOV. 7:
Shipping Corporation of India (SCI) has come in for strong criticism from the Shipping Ministry’s internal audit on the slow vessel acquisition.
The national carrier did not pursue an ambitious vessel acquisition policy to modernise its fleet. It did not adhere to its annual fleet acquisition targets and there were significant slippages resulting in cost overruns, which also affected the operational efficiency, says the audit report published in the Shipping Ministry’s 2011-12 annual report.
A senior official of SCI attributed the slow vessel acquisition to the three years of continuous subdued activity in the global shipping market. This forced the SCI management to go slow on vessel acquisitions, as the company’s revenue generation was adversely affected, and further acquisitions could have led to depletion of its reserves.
The SCI’s vessel acquisition programme during 2007-08 to 2011-12 envisaged acquisition of 62 vessels at an investment of Rs 13,135 crore. The acquisition progressed smoothly during the first year of the 11th plan (2007-08) with SCI placing orders for 16 vessels.
GLOBAL FINANCIAL MELTDOWN
However, during 2008-09 and 2009-10, the global financial meltdown affected credit availability and resultant liquidity in the market. The depressed freight market led to anticipation of softening of asset values, both new and second-hand, and accordingly, most of the ship acquisition proposals were deferred by SCI, said Anup Kumar Gupta, Director (T&OS), SCI. Due to the slow pace of acquisitions during 2008-09 and 2009-10, acquisition of 26 vessels was proposed in the last year of the 11th Plan to meet the overall 11th Plan target to acquire 62 vessels, he said.
However, in 2011, with further deepening of the European crisis, shipping markets once again reversed their upward trend, and it was felt prudent to go slow on vessel acquisitions on account of the prevailing uncertainties. Hence, SCI has placed orders only of seven vessels and acquired two resale vessels — a total of nine vessels during the year 2011-12 against the target of 26 vessels.
SCI has already made provisions for the replacement of its aging assets and SCI would resume acquisition of vessels to augment its fleet when the shipping markets improve, said Gupta.
The auditors recommended linkages between the development of the economy and growth of shipping and said the Government should address the concerns faced by the industry to facilitate a strong national core fleet.
SCI needs to frame and implement a time-bound acquisition policy for fleet growth and modernisation to face global competition.
It should also ensure that vessel are employed gainfully and avoid idling of vessels. Also, SCI needs to be aggressive in getting business from its major customers, particularly the oil majors.
The Shipping Ministry said it is taking action on the recommendations, says the annual report.
For the year 2011-12, SCI posted a loss of Rs 428.21 crore compared to a profit of Rs 567.35 crore the previous year.
During the last financial year end, it owned 75 ships of 5.52 million dead weight tonnes and was present in most segments of shipping including container, bulk carrier, tanker and the off-shore segment.
Despite the loss, SCI had a net worth of Rs 6,734 crore and strong cash balances.
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