Week ending November 24, 2002

News on Shipping

Government favors tonnage tax for shipping companies The government has once again revived the idea of introducing the tonnage tax regime for the shipping companies. The Cabinet Committee on Security (CCS) headed by the Prime Minister, Mr. Aral Bihari Vajpayee, has reportedly ``favored'' the tonnage tax proposal after detailed discussions during a meeting held recently. The domestic shipping industry is currently subjected to the normal corporate tax, which is as high as 30 per cent. A tonnage tax system would imply that shipping companies would be taxed on the basis of their net registered tonnage (NRT) worked out on the notional profit method with applicable corporate tax rates. With Cabinet committee favoring the proposal, the Finance and Shipping Ministries are now expected to discuss and work out the finer details of the tonnage tax with the aim of announcing it in the next Union Budget.

Government rules out distress sale of SCI The Union Shipping Minister, Mr. Ved Prakash Goyal, has stated that government will not sell its stake in Shipping Corporation of India, on a distress sale basis. He stated: " the Government will not dump SCI at any price. SCI is not a sick company; if there are no takers, the Government would continue to run it''. He emphasized that the objective of disinvestments is to bring in a strategic partner to put more funds and expertise to improve SCI's operations and should not be interpreted to mean that SCI will be sold at any price. Recently, GE Shipping has announced its intention to pull out of the race for SCI stake. Besides Great Eastern Shipping, two other parties - Essar Shipping and the Sterlite group _ have shown interest in SCI.

GE Shipping pulls out of race for SCI stake Great Eastern Shipping Company Ltd, one of the leading bidder for the 51 per cent stake in Shipping Corporation of India, has decided to pull out of the race, "for the time being." The decision was taken at a recent board meeting of the company. In a notice to stock exchanges, the company said "having pursued SCI's sale process well over nine months now, at this point of time, in light of the continued uncertainty on the timing of the sale process, the company has decided not to pursue the acquisition of SCI for the time being." The company, also said, "as and when the financial bids for SCI are invited, it would re-examine the acquisition of SCI as one of the investment opportunities, depending on when the bids are invited, evaluation of specific transactional matters, the business environment at that time and SCI's performance in the interim."

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News on Ports

Major ports cross throughput targets in H1 Major ports have registered 8.51 per cent growth in traffic handled in the first seven months of the 2002-03, compared to their performance in the corresponding period of previous year. Except for the Chennai port, which saw a negative growth of 7.49 per cent, all other major ports registered an increase in throughput over the previous year. The combined throughput of the ports during the April-October period was 176.89 million tonnes against 163.01 million tonnes handled during the first seven months of last fiscal. In terms of the target of 168.81 million tonnes set by the Ministry of Shipping, the port sector surpassed the mark by 4.78 per cent. The highest growth rate of 241 per cent was recorded by the Ennore Port, which handled 4.2 million tonnes against 1.2 million tonnes handled in the first seven months of last financial year. This was followed by New Mangalore port with a 26.6 per cent jump (12.5 million tonnes against 9.8 million tonnes), Cochin port 21.5 per cent (7.9 million tonnes against 6.5 million tonnes), Kolkata Dock System 19.3 per cent (2.8 million tonnes against 2.3 million tonnes) and the JNPT 18.3 per cent (15.5 million tonnes against 13.1 million tonnes). Vizag port, which handled 26.4 million tonnes the last seven months, seems set to once again emerge as India's premier port in this fiscal year as it has established a formidable lead over Kandla port (22.9 million tonnes) and Chennai port (20.1 million tonnes).

Ports have failed to meet plan targets says study A study of the Indian port sector conducted by Commodore MK Banger, a consultant for the International Maritime Organization (IMO) has pointed out the failure of Indian port authorities to stick to the development targets set under the Eighth and Ninth five-year plans. During the period, only a port capacity of 4.8 million tonne was added against a planned 46.5 million tonne. The study was undertaken to assess whether Indian ports are capable of achieving a trade target of $ 180 billion, as envisaged in the Ninth plan.

Government allows port trusts to lease out surplus land The Union Shipping Ministry has decided to allow the port trusts to lease out surplus land for purposes other than port-related activities. The Ministry has also decided to allow ports to enter into 100-year lease agreements. The move follows a clearance the Union Shipping Ministry has obtained recently from the Union Law Ministry to reverse a restriction that had been introduced over two years ago. The Shipping ministry had earlier restricted lease of surplus land of ports

Decline in liquid cargo at Mumbai and Chennai ports Edible oil imports during oil year 2001-02 (November-October) have declined by about 9 per cent, with Mumbai and Chennai ports emerging to be main losers. According to Solvent Extractors' Association of India (SEA), edible oil traffic in 2001-02 aggregated 44.25 lakh tonnes, down from 48.34 lakh tonnes in the previous year. About 14 ports are used for discharge of edible oil. The SEA's port-wise data showed a significant fall of over 40 per cent in vegetable oil arrivals at Mumbai port, from 7.19 lakh tonnes in 2000-01 to 4.14 lakh tonnes in 2001-02. The fall is attributable to high local taxes the importers have had to bear. Chennai is another port, which lost over one-fifth of edible oil traffic during oil year. Imports through the port declined 22 per cent from 5.76 lakh tonnes in 2000-01 to 4.47 lakh tonnes in 2001-02. JNPT (6.67 lakh tonnes.), Kakinada (7.12 lakh tonnes.) and Kandla (11.65 lakh tonnes) managed to increase their traffic volume, albeit marginally, while Mundra handled 3.59 lakh tonnes.

Government open to Mitsui offer on Greenfield The Union Shipping Minister, Mr. Vedprakash Goyal, has reportedly supported the offer made by Japan's Mitsui O.S.K. Lines and the Government of Sultanate of Oman to buy out the 20 per cent equity held by SCI in the troubled Greenfield Shipping Company, which owns the 137,000-cubic-metre LNG tanker Laxmi. The government stance as clear from Shipping minister's statement will clear the way for SCI exit from the LNG venture. The board of SCI had earlier rejected appeals from the consortium partners to contribute $33 million as its share of a bridge loan to retire the original senior loan of $110 million taken from a consortium of banks led by ANZ Investment Bank to fund the construction of LNG Ship Laxmi. The LNG ship is currently deployed on a voyage basis with Oman LNG, a 51 per cent subsidiary of Oman Government, who now owns a 40 per cent stake in Greenfield on par with Mitsui.

Vallarpadam bid deadline extended The Cochin Port Trust on the request of the bidders has extended Vallarpadam bid deadline extended the deadline for the submission of pre-qualification tenders for the proposed Vallarpadam Container Transhipment Terminal to November 26. The original deadline for submission of tenders was November 15 and as many as 12 companies including foreign firms responded. The port had convened a pre-bid meeting on November 6 in which the bidders sought further extension of the deadline. The port started releasing the document from October 15. The foreign companies that had responded to the tender so far include CSX of UK, NYT of Japan, Maersk and PSA of Singapore, while the Indian companies included L&T and ABC. The port had set a target date of March 1, 2003 for issuing firm order to the prospective terminal operator.

Haldia, Paradip compete for thermal coal traffic Haldia and Paradip ports are in the race for larger share of the imported thermal coal likely to materialize shortly from a independent power producer (IPP). The CESC Ltd, the private sector generation and distribution agency in West Bengal, is planning to import large quantities of high quality thermal coal for its generating units. A CESC consignment of 30,000 tonnes of thermal coal from Indonesia was handled at Haldia a few weeks ago. CESC is also scheduled to import more than 40,000 tonnes through Paradip port. Imported thermal coal is a new traffic area for both the ports. Neither Haldia nor Paradip has handled this commodity before and both ports are said to be grab each others share of this traffic by offering competitive rates.

Vizag port likely to hire IDBI Caps The Vizag Port Trust (VPT) and the Vizag Dock Labour Board (VDLB) are planning to hire the services of IDBI Capital Market Services for consultancy on portfolio fund management. Both the port and the DLB together have reserves to the tune of Rs 300 crore, with Rs 30-40 crore being added every year. IDBI Capital Market Services is being asked to suggest a suitable portfolio management package for VPT and VDLB so that they get better returns from their reserves.

Mumbai Port Trust floats global tender for Offshore Container Terminal Mumbai Port Trust (MbPT) has invited tenders for the construction of two offshore container terminals on build-own-operate basis for a period of 30 years. The two berths will be located 800 meters offshore of Indira dock harbor wall. The berths will be connected to the shore by a single 1270 meter long approach trestle, which will start from the junction of Victoria and Prince's Docks.

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News on Logistics

The Railways enter into agreement with Adani's Mundra Port The Railways have entered into an agreement with the Adani group for revenue sharing arrangement for the 57 kilometer rail line from Adipur to Mundra. The rail line has been constructed by Mundra port at a cost of 160 crore. The agreement envisages a new model of the railway link, where the Mundra port would own land, tracks and other civil structures and maintain them as per standards laid by the Railways. The Railways would operate the rail link by providing locomotives, wagons and technical staff. The Railways and Gujarat Adani Port Ltd would share the revenues.

NMPT box operator's plea for leased containers The Kanara Chamber of Commerce and Industry (KCCI) has called for a `national policy' on leased containers to overcome a series of "logistical bottlenecks" faced by the industry. In a letter to the Union Ministry of Shipping, the KCCI has sought to focus attention on `complexities involved in the owning, operating and leasing of containers'. According to KCCI, the Indian user is at a `considerable disadvantage' due to temporary shortage of containers, costs imposed by mainline operators for placing containers into India, which gets added to the freight, and non-availability of containers to certain `sub-locations' like Russia. The Chamber has opined that problem could be overcome, if government sets itself a target of being a `major container lessor' with an operational base of not less than one million containers. It has also sought that attention be paid to the domestic use of containers to bring them on par with international logistic operations.