Weak freight rates have pulled down the vessel prices down to historic lows Shipping Corporation of India has shelved its fleet expansion plans, apart from those on order, till economic situation improves, said Mr. S. Hajara, Chairman and Managing Director, on Sept. 24.Mr. Hajara, who will be attaining superannuation in December, while responding to queries raised by shareholders at the 62nd annual general meeting, said: “We will confine only to committed capex as topline and bottomline are both under stress.”
“We have a capex (capital expenditure) plan of Rs. 2,500 crores for our 21 vessels under order and will not be placing any new orders,” Mr. B. K. Mandal, Director – Finance of the public sector maritime major, told the shareholders.
Under the 11th Five Year Plan of 2007-2012, Shipping Corporation of India had proposed to induct 62 vessels of diversified fleet profile but could place orders only for 42 vessels apart from acquiring three second-hand vessels.
Currently, the company has 21 vessels on order and hopes to exceed 6 million dead weight tonnage by March and 7 million dead weight tonnage by the same time next year, Mr. Hajara stated.
As on March 31, 2012, the company had a fleet tonnage of 5.67 million DWT.
Commenting on the outlook ahead, he said: “It would still take a long period for the market to look up and the sluggish phase would continue even in 2012-13.” The weak freight rates have pulled down the vessel prices down to historic lows, he remarked.
Last year, the company registered a loss of Rs. 428.21 crores owing to the severe economic slump in the charter freight market. In April-June, the company widened its net loss at Rs. 54.87 crores, largely due to increased interest payments.
On the future of its joint venture with Iranian shipping company Irano Hind, Mr. Hajara said most probably the Government will dissolve the company as a result of the difficulties SCI is witnessing in its regular operations due to the sanctions against Iranian entities.
“Irano Hind being under the UN, US and EU sanctions is in a difficult stage and even our other dealings with the commercial organizations like European banks, is becoming problematic because of our exposure to Irano Hind. So we have taken up the matter with the Government and we expect the dissolution or whatever is the final decision, to be taken very shortly by the Government,” he pointed out.
To take care of the piracy, SCI is contemplating armed private guards aboard its vessels passing through troubled waters of Middle East and Eastern African coasts and has also requested the Government to train the CISF personnel so that they can be inducted on merchant ships, Mr. Hajara concluded.
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