Shipping :
Shipping is a global industry and its prospects are associated with the level of global economic activity. Greater the industrial activity leads to greater movement of raw material and finished goods... more
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Shipping
India Scenario
India holds 17th rank among the world maritime nations in terms of GRT and 15th position in terms of DWT. The total Indian fleet, which was hovering around 7.0 million GT for a long time, registered a sudden surge over the last two years and reached a historic high when it crossed the 8.0 million GT mark. This corresponds, for the last two years, to nearly 14 % growth for the last two years. Today Indian shipping companies collectively owns about 704 vessels with 8.3 million gross tonnage (GT) or around 13.75 million deadweight tonnages. This recent surge is attributable to the remarkable upswing in the shipping markets globally, coupled with the supportive measures initiated by the Indian Government such as the introduction of tonnage tax and easing of procedures for acquiring second-hand vessels. Indian shipping industry contributes approximately 0.3% to the country’s GDP.
The industry is governed by 3 separate Acts viz. The Merchant Shipping Act, 1958, The Inland Vessels Act, 1917 and The Coasting Vessels Act, 1838. While most of the vessels are registered under Merchant Shipping Act and dealt within the sector, smaller barges and coastal vessels are governed by the latter two Acts, and lighterage or barging industry comes under port sector. The industry has historically catered to only domestic shipping requirements, although the private sector companies like Great Eastern Shipping Company and Essar Shipping are increasingly getting involved in international cross trade. Notwithstanding this focus on Indian trade, Indian shipowners' share in the country's overseas trade is hardly 30 per cent in volume terms. In value terms, it is much lower to a meager 12 per cent of India's total overseas shipping bill of USD 5.0 billion due to negligible share of Indian shipowners in the trade of high value goods like general cargo and containers.
Shipping is not just about vessels and tonnage. Shipping capabilities of a nation are not solely measured in terms of the quantum of tonnage under control. In knowledge based economy, soft intangible parameters like human capital, information technology and expertise are becoming increasingly important giving rise to innumerable opportunities. India has already become the source of quality seafarers to global ship owners. Indian shipping firms can capitalise on the inherent IT skills of Indians to play a pivotal role in IT activity involved in international shipping and the country may come up as a business center for information processing requirements of the international ship owners.
Management
Ship management is the business of manning, equipping, provisioning and maintaining a ship.
It broadly includes technical, commercial, and crew management of ships. Maintenance, dry-docking and technical upgradation of ship is the responsibility of technical management. Commercial management involves decisions regarding vessel deployment and sale and purchase while, crew management takes care of recruitment and selection of technical, deck side officers and ratings people.
Ship management industry has evolved in India to cater to the manning requirements of various foreign shipowners operating in open registries. Presently, around 200 ship management firms are operating in India, of which majority are of foreign origin. Traditionally, Indian seafarers, specially the officers, are in great demand in the global seafaring market due to their high technical qualification, English speaking ability and low cost. This has attracted a large number of foreign ship management firms to take the advantage of recruiting Indian seafarers and resulted into opening up of branch offices of major foreign firms like, Barbar Ship management and Univan Ship management in India. Major shipping lines like Mitsui OSK have also opened their liaisoning offices, while many shipping lines have appointed their agents for the ship management in India.
On the contrary, most of the Indian shipowners usually do not outsource the manning function to ship management agencies and have strong inhouse team to carry out those functions. Major Indian shipowners like Shipping Corporation of India, Great Eastern Shipping Company and Varun Shipping have their own training institutes to train their personnel.
Looking at the prospects of ship management firms in India, it has been observed that high wage level of Indian seafarers vis-a-vis Chinese, Ukrainian, Russian, East European countries and others is forcing the ship owners to search for easily available alternatives, in their cost reduction strategy.
Classification and Survey
Ship survey concentrates on ship classification societies that register the ships under a particular class and flag.
The technical rules, regulations, standards, guidelines and associated surveys and inspections covering the design, construction and through-life compliance of a ship's structure and essential engineering and electrical system are the main concerns of the classification societies. International Maritime Organization (IMO), through their various conventions requires certification that the above mentioned elements are satisfactory for the service for which the ship is intended. To attain the highest structural and engineering standards in the merchant ships, classification societies form the basis on which the statutory certification is issued. It also provides the technical support, compliance verification and research and development. Classification of ships includes three stages of verification:
During construction, to ensure that the approved plans are followed, approved material and components are properly installed, good workmanship practised and applied, and the rules adhered to.
Periodic surveys are carried out to ensure the continued compliance of rules after the construction of the ship. These include various surveys of hull and machinery on a continuing basis.
Existing ships can be classified, which are not built under the supervision of the particular classification societies only after ensuring their quality standards according to the standards of that classification society.
In India, Indian Register of Shipping (IRS) has the authority to carry out surveys for the Assignment of International Load Lines, issue of Cargo Ship Safety Construction and the International Oil Prevention certificate. Indian Government had made it mandatory for the Indian flag vessels from the mid 1990s to get the International Load Line certification only from IRS.
Dual classification has become a common aspect for Indian vessels. In fact, Indian shipowners prefer to classify their vessels under the foreign classification society because IRS may not be able to provide international service as several of these ships are operating on international routes. Further international acceptability of IRS classification is a major issue since IRS is not a fulltime member of International Association of Classification Societies and acts as an associate. To overcome this, IRS now has entered into agreements of mutual cooperation with all major International Classification Societies with arrangement of survey across the world
Offshore
The offshore industry comprises of support services to the exploration and production (E&P) activity of oil and gas in offshore areas.
The offshore industry comprises of support services to the exploration and production (E&P) activity of oil and gas in offshore areas. The industry includes a wide array of activities ranging from drilling rigs, marine construction, port support / terminal services to development of oil field and production of support facilities.
The history of offshore oil exploration and production, commonly known as E&P activity started long back in 1920 with the introduction of an oil derrick placed on a wooden platform for drilling in Mississippi delta area in the United States. Over the years, the global offshore industry has developed significantly through increasing applications of technology and carries out the explorations in the most adverse conditions.
Contrary to global scenario, offshore industry in India has started of late in the 1970s with the finding of oil in Bombay High region. In the initial years, the offshore industry in India was supported by support vessels owned and operated by foreign offshore service providers. However, from the mid 1980s Indian shipping companies started participating in the industry with long-term chartering of various tugs by Oil and Natural Gas Corporation (ONGC) of India. Presently, a handful number of Indian offshore service providers like the Shipping Corporation of India, Great Eastern Shipping, Essar Shipping, Varun Shipping and others are involved in the offshore business, serving to the domestic industry demand. The sector is dominated by ONGC, which is the largest owner of offshore fleet in India as well as the biggest client to other service providers.
Global and domestic Indian offshore drilling activities are at an all time high. The limited supply of rigs globally has led to increase in the day rates. Recently Transocean, a global rig owner, got its contract for four rigs renewed with ONGC for three years at day rates of US$ 147,500 from earlier day rates of approximately US$ 60,000. With limited supply, the day rates are expected to soar up further. The increasing day rates and expanding oil and gas exploration in domestic Indian offshore sector will increase the revenue of drilling companies. Approximately 60% of the drilling rigs present in India are foreign owned. Currently, the domestic companies like Aban Loyd and Jindal Drilling are aggressively expanding. However, their percentage share in offshore drilling may not go up as demand for drilling rigs is also soaring up and may not be matched by domestic supply.
With the liberalisation policy taken up by the Government of India, entry of major foreign exploration and production majors, namely Enron Oil & Gas, Cairn Energy, Hardy Exploration and Production has increased significantly in recent times resulting into a rise in opportunity for offshore sector.
In regard to the increasing demand for crude oil, Government is giving more emphasis on exploration and production activities in deepwater blocks. The recent awarding of 25 out of 48 oil blocks by the Union Government of India through the New Exploration and Licensing Policy (NELP) has boosted the prospects of the Indian offshore sector and would give rise to significant number of new opportunities in the near future.
Supplier
Operation of the vessel needs various consumables in the form of bunker, lubricants, fresh water, stores and others.
Ship chandeliers provide food and provisions to the ship for the next journey in the sea. It also arranges for the services of the doctor, washerman and others when the ship is at port. The shipping agent of the company or the ship manager normally arranges for the ship chandelier to serve its client. Increasingly these shipping agents and ship managers are entering into the field of supplies.
Ship has to have the adequate supply of fresh water on it, which they purchase on the port they visit. Many of these fresh water suppliers own the barges to supply water for the vessels like tankers, which does not come inside the port for berthing. The vessels at the lighterage port also take services from the fresh water supplying barges.
The industry of ship suppliers is highly fragmented with a significant number of small companies active in this sector. Various other sectoral players like dredging companies, shipping agents, ship managers, stevedores etc. are also entering into the business of ship suppliers to leverage on their experience and good contacts within the shipping industry.
We believe that the large companies with the standardized services can create its own place in the market by applying proper marketing strategy and branding and grading the services to assure high standard. As number of ships visiting at the Indian ports have increased over the years and is likely to be increased in the future, the market for these services is bound to grow giving the scope to new suppliers.
However, bunker and lubricant supply to the ship is dominated by the large sized players like Castrol, Shell, Indian Oil Corporation and other public limited companies. These companies supply bunker or lubricant to the shipowner either directly or through their agents.