Week ending February 18, 2003

News on Shipping

Great Eastern Shipping exits from SCI race: After months of uncertainty, the largest private sector shipping firm - The Great Eastern Shipping Company has finally decided to pull out of the race for acquiring strategic stake in the Shipping Corporation of India (SCI). A decision to this effect has been conveyed to the Bombay Stock Exchange (BSE). The decision to pull out of the race is expected to dampen the sell-off process at a time when the government has decided to put it back on tracks. In fact, the bidders had asked for another round of due diligence following delay in the disinvestment process as well as SCI announcing its third quarter results. Following GE Shipping's exit, the most serious contender for the controlling stake in SCI, it now leaves in fray other companies - Essar Shipping, Videocon, BPL and Sterlite.

Ministry sets up group to study vessel-related charges: The ministry of shipping has set up a study group to suggest measures to bring down high vessel-related charges at major ports. Mr. M.P. Pinto, shipping secretary, who made the announcement about the formation of the group said that while cargo handling charges at major ports were almost on par with international levels, the vessel-related charges were ruling at a high level. The Chennai Port Trust had recently taken an "in-principle'' approval to reduce the vessel-related charges for mainline vessels calling at the port by about 20 per cent in a bid to attract mainline vessels to the port.

Transworld, CONCOR to tie up for direct coastal shipping: Transworld Group and CONCOR have jointly planned IBM (India, Bangladesh and Myanmar) service, a direct coastal shipping services connecting Chennai with Chittagong and Myanmar. While Transworld would provide the sea services; CONCOR would provide containers for cargo movement from various ICDs to Haldia and Chennai ports. Transworld currently owns and operates 22 vessels with capacities varying between 400 and 1,250 TEUs and is a major feeder operator accounting for nearly 15 per cent of the country's liner business. At present, containers from Chennai to Yangoon and vice versa go via Singapore and involve additional transshipment cost. The new service would eliminate this additional cost. The service is second such direct service to be established on the East coast. The HRC Shipping, Bangladesh had started its coastal service late last year connecting Chennai to Chittagong, Haldia and Colombo.

ONGC plans to lease out OSVs to a JV: Oil and Natural Gas Corporation (ONGC) is reported to be considering a proposal to lease its shipping assets to a joint venture (JV) company consisting of shipyards and service firms, both in the public and private sector. The proposed JV will, in turn, `wet lease' those assets it back to ONGC, i.e. manage assets as well as operate it for the exploration major. The business is currently reckoned to be worth around Rs 500 crore per annum. Under the proposal being considered, ONGC would retain 26 per cent in the venture, while public sector companies like Mazgaon Docks Ltd. (MDL) and Shipping Corporation of India (SCI) would have around 15 per cent each, hence government-owned companies would have around 49 per cent stake in the JV. In the private sector, Pipavav Port Ltd, Kakinanda Deep Water Port and Great Eastern Shipping Company Ltd will have around 13 per cent equity each, while FIs would hold the rest. ONGC has about 32 `offshore supply' vessels as well as multipurpose vessels, which are used to tow rigs to the area of drilling, engage in fire fighting operations, etc. The objective of the JV would be to streamline the management of the shipping business as well as bring in greater efficiencies in the running of the business.

The Indian shipping fleet declines by 11 per cent: The Indian shipping tonnage has declined by about 11 per cent. The shipping tonnage stood at 6.21 million gross registered tonne (grt) as on January 1, 2003, against 6.95 million tonne grt on January 1, 2002. Further, fleet deletion outstripped fleet acquisition. While the tonnage added during the period was 2.12-lakh grt, the tonnage deleted was 9.81 lakh grt. The fleet now comprises 617 ships, including 5.40 million grt deployed in the overseas trade, 0.64 million grt in the coastal trade and 0.17 million grt of offshore supply vessels. The fleet declined in 2002 primarily as acquisitions did not keep pace with scrapings. The scrapings were mainly due to the increased age of the vessels. About 63 per cent of the current Indian fleet is over 15 years old and 34 per cent is over 20 years old. Also most of the additions comprised smaller ships such as tugs, pilot vessels, towing vesseled and survey ships.

CCTL in talks for getting calls from mainline vessels: Chennai Container Terminal Private Limited, the port-based private container terminal operator is reportedly talking to several shipping lines to make Chennai a port of call so as to make it the transshipment hub for the East Coast. The BOT (build-operate-transfer) operator is of the view that volume of shipments currently handled at the Chennai port would meet the minimum threshold volume required for the direct operation of mainline vessels. Besides, the operator is also pinning hopes on consolidation of containerised cargo generated from the hinterlands such as Bangalore, Hyderabad, Coimbatore and Tirupur regions to back up their effort to meet the volumetric business for the direct shipping line from Chennai. CCTL has proposed to invest $150 million on terminal infrastructure in the Chennai port in the next five years has within one year of its operation invested $60 million in the forms of improving port infrastructure, equipment and information technology. The terminal has its current container handling capacity at 8,50,000 TEUs and it has the potential capacity to handle up to 1.7 million TEUs.

News on Ports

Vizag port asks IOC, SCI to undertake lighterage operations: The Visakhapatnam Port Trust (VPT) has appealed to Indian Oil Corporation (IOC) and Shipping Corporation of India (SCI) to undertake crude lighterage operation by way of ship-to-ship discharge in high sea near the port (outside the outer harbour) and has assured that it would be willing to consider charging nominal rates as wharfage. The operation would involve mid-sea anchorage of very large crude carriers (VLCCs) and ultra large crude carriers (ULCCs) - discharging cargo to smaller daughter vessels and further sailing to other ports for second round of discharge. The VPT has during the past one year lost a good volume of its transshipment crude oil cargo to the huge success of similar operation currently in progress at the Sandheads, at the mouth of the Hooghly River. The operation, which started in October 2002, has resulted in an estimated handling of 3.2 million tonnes of crude till mid-March. IOC has also undertaken crude lighterage at Kakinada port where the wharfage is reasonable.

Norms eased for private port investments: The ministry of shipping has announced relaxation of policy on private participation in the major ports sector. As per the new directives, the port trusts would henceforth not insist on stipulations for private entrepreneurs to make investments in equipment within a specific timeframe. Mr. M.P. Pinto, shipping secretary has stated that his ministry has also asked the port trusts to waive the minimum guaranteed throughput (MGT), with the change in the system of awarding contracts from earlier system based on upfront fees and MGT to a revenue sharing format. While upfront fees continues to exist, the shipping ministry has asked the port trusts to recover as such fee an amount "as minimum as possible" from operators. He also stated that government would henceforth insist only few non-negotiable conditions while developing a cargo handling facility at a major port with private participation. Under the new policy guidelines, once the government selects a good, efficient and world class private operator, it would be now up to the operator to decide how much investment it should bring in and what equipment it wants to install and when.

12 entities in the race for JNPT's third box terminal: The Jawaharlal Nehru Port Trust has received request for qualifications (RFQs) from 12 entities including some of the top global box terminal operators to develop a new container handling facility at the port. The interested entities include - Maersk A.S., CSX World Terminals UK, Skanska International Civil Engineers AB consortium, PSA Corporation Ltd., Singapore, West Port Malaysia, Stevedore Services Inc of the US, NYK Line, Tokyo, Marubeni Corporation Tokyo, Hutchinson Port Holdings Hong Kong, Sea King Infrastructure Ltd., Larsen & Toubro, United Liner Agencies India Private Ltd and Terminal Link (part of Container Marine Agencies Private Ltd.) have submitted their RFQs to the JNPT. While 32 parties had purchased the RFQ documents, 12 have submitted the documents. The JNPT will now evaluate the RFQs and short-list the bidders on the basis of the qualification criteria stipulated in the tender documents. The short-listed bidders will then be given the document on request for proposals (RFPs).

News on Logistics

Tata Group to diversify into logistics business:The Tata group is reportedly considering the option of foraying into the logistics business. Tata Industries, the group's holding company for new generation businesses is drawing up the blueprint. If the plan is given a go-ahead, the Tatas would be yet another large corporate jumping into the logistics business. Others, major groups that have announced plans for forays into logistics operations include Reliance, primarily to service their mega oil-retailing plan, and the Mahindras. The Tata gameplan is to form a separate company and bring the entire logistics of group companies under one umbrella, to enable better scale of operations and services, and considerable savings of cost. Tata Strategic Management Group has been advising the group on the new initiative to play a role of a third-party service provider.

Western sealink project gets environmental nod:The Maharashtra government has obtained the environmental clearance for the Rs 1,465-crore Western Freeway Sealink (WFS) project that would connect the eastern and western suburbs of Mumbai like Charkop, Versova, Malad and Gorai to Nariman Point, in South Mumbai. This 17-kilometer long sea link, of which 14.5 km would comprise the main bridge when implemented would result in huge savings in fuel costs and also ease the traffic load on the Mahim Creek flyover that witnesses traffic movement of 1,20,000 vehicles daily.