Week ending March 12, 2003

News on Shipping

FIPB clears P&O's Rs 290-crore deal for Mundra box terminal : P&O Ports is poised to acquiring 100 per cent stake in Adani Container (Mundra) Terminal Ltd (ACTL) from the Adani Group in a deal reportedly worth Rs 292 crore ($60 million). The Foreign Investment Promotion Board (FIPB) has approved the long pending sale of stake. With the acquisition, ACTL will become a 100 per cent subsidiary of P&O Ports. The FIPB approval is, however, subject to certain specific conditions recommended by the Shipping Ministry for operating the port. The ministry has suggested that the acquisition deal be suitably modified keeping in view national defence and security considerations. Besides, P&O Ports will not be allowed to sell or otherwise transfer their equity holdings in ACTL without prior written consent of the government. The involvement of P&O Ports in ACTL should also be consistent with the terms and conditions of the concession agreement signed between the GMB and Gujarat Adani Port Ltd. for the development of the Mundra port. The FIPB has also directed P&O Ports to seek specific approvals from the Gujarat government on the concession and sub-lease agreement and all other approvals related to port operations in Mundra.

PIB clears SCI VLCC purchase plan : Public Investment Board (PIB) has finally cleared the Shipping Corporation of India (SCI) plan to buy two new very large crude carriers (VLCCs) estimated to cost about Rs 650 crore. The PIB recommendation will now be placed before the Cabinet Committee on Economic Affairs (CCEA) for a final ratification. The price of $65.2 million per vessel quoted by Hyundai is quite competitive in a market that has started firming up lately. Besides, the charter market for VLCCs is on the upswing due to fears of military attack on Iraq by the US and the need for oil importing countries to build up oil inventories. The finance and disinvestment ministries earlier resisted the SCI's VLCC acquisition plan, as the shipping PSU was in the process of being privatized. But, with the disinvestment process getting delayed, it was decided to pursue both the plans simultaneously.

Government may reconsider 25% cap in SCI disinvestment: The government is reportedly reconsidering 25 per cent cap imposed on foreign equity participation to encourage more bidders for the SCI disinvestment process. The core group of secretaries on disinvestment, which met on March 7, has taken up the issue of cap on investment, while scrutinizing the final draft of the transaction documents for the sale of SCI. The recommendations of the group will be put before the Cabinet Committee on Disinvestment (CCD), which will take a final view on the matter. The CCD earlier had fixed the existing cap of 25 per cent on foreign equity participation and any change will also have to be therefore decided by the CCD. The government policy currently allows 100 per cent foreign direct investment in the shipping sector; following which the core group has raised question about restricting the foreign equity holding in case of SCI privatization to 25 %. The cap on foreign investment has already deterred many foreign shipping lines including MISC, , Mitsui-OSK.Lines, OOCL and Qatar Shipping, which were interested in the SCI disinvestment. The core group has reportedly recommended to the government that it needs to review the foreign equity cap to attract more bidders and make the bidding process more competitive.

Bunker adjustment factor price to go up from April 1: Following steep rise the crude oil prices, the bunker adjustment factor price for a 20-ft container is being raised to $95 effective from April 2003. The last increase in the BAF was effected on March 1 2003, wherein the surcharge was increased to $ 90 from $ 70 per 20 ft. container. The BAF surcharge during the same period last year was as low as $ 35 per 20 ft. container. The India-Pakistan-Bangladesh-Ceylon conference (IPBCC) had reduced the BAF surcharge to $ 70 from January 1, 2003 but with continuing trend of escalation in crude oil prices, it was forced to reverse the decision. The BAF surcharge, which stood at $ 40 in April 2002, has been since increasing by $5-10 every month till date.

Shipping lines summoned for security meet: The Director General of Shipping called a meeting of domestic shipping lines to brief the Indian-flagged ship owners about government's national security concerns relating to shipping in the wake of threat of war in Iraq. At the meeting, the ship owners were asked to submit the sailing plans of their ships for the next three months in the Persian Gulf region. The DG Shipping at the meeting told the ship owners that Indian Navy is planning to offer escort to Indian ships sailing to and from the Persian Gulf in view of the "threat of war looming large.'' The move is apparently aimed at safeguarding the Indian vessels from getting hit by forces operating in the area in the event of war. The Indian Navy has a separate - Naval Control of Shipping Office - to monitor the movement of merchant vessels during wartime. This office guides and advises shipping lines on routes to be followed, while transiting war-prone regions.

G S Sahni takes over as new DG Shipping: Mr. G.S. Sahni has taken over as the new director-general of shipping with effect from March 10. Mr Sahni, was earlier the principal secretary in Madhya Pradesh and takes over from Mr D.T. Thomas, who has now been posted to the Cabinet Secretariat in New Delhi.

News on Ports

Krishnapatinam Port Company Ltd. invites bids : The Krishnapatinam Port Company Limited, the Hyderabad-based private sector port developer has invited pre-qualification-cum-tender notice from experienced contractors for an EPC contract for construction of deep water port at Krishnapatinam in Nellore district of Andhra Pradesh. According to a announcement from the company, the Krishnapatinam port is to be built for Super Cape Size specifications with alternate drafts up to (-) 23 metres and providing high throughput of ores and minerals. Tender documents will be issued to the short-listed pre-qualified bidders around April 20 2003, which are to be submitted complete with pricing and technical details by June 30 2003. Requests for pre-qualification documents can be sent to KPCL, Natco House, Road No. 2, Banjara Hills, Hyderabad 500 033 (India).

Kolkata Dock Labour Board seeks Central aid :The Kolkata Dock Labour Board (KDLB) has sought Central financial assistance to fund voluntary retirement scheme to reduce its workforce to 800. Currently, the KDLB has a workforce of 1600. It is estimated that a workforce of 500 is adequate to handle the present volume of cargo traffic. About 300 workers are however expected to go by way of normal superannuating process. The KDLB is seeking financial assistance of Rs. 52 crore from the Central government to fund the proposed VRS and plans to merge itself with KoPT, once its strength is brought down to about 500.

TAMP nod sought for Vizag port's transshipment package: The Visakhapatnam Port Trust (VPT) has forwarded its tariff package aimed at attracting transhipment crude traffic to the Tariff Authority for Major Ports (TAMP) for approval. Details of the package have not been disclosed but are likely to feature rates lower than those currently being charged by the Kakinada port. Reports indicate that Kakinada port charges three cents (a little more than Rs 1.40) per GRT for the mother vessel, one cent (roughly 47/48 paise) per GRT for daughter vessel and $0.52 (approximately Rs 25) per tonne for ship-to-ship discharge of crude in its handling transhipment crude. The Visakhapatnam port has suffered a drop in crude transhipment throughput to the extent of 1.2 million tonnes till February 2003 over the same period of the last year attributed to shift of its traffic to the Kakinada port. Between July and September 2002, the Kakinada port has handled more than two million tonnes of transhipment crude.

News on Logistics

Mumbai Customs get net savvy:In an effort to fulfill the demand from trade to make available the status of the bills of entry, shipping bills and drawback claims, the Mumbai Customs House has further improved its website - www.mubaicustoms.gov.in. With its newly incorporated features, the trade fraternity can now access status information on bills of entry, shipping bills and duty drawback by giving their number. The details of the bill of entry or shipping bill will also be available through e-mail, if the address is indicated in the concerned text box. The Mumbai Customs have also provided a facility of "touch screen", using which importers/CHAs can ascertain the status of bills of entry and shipping bills. The site is also linked to the MbPT (Mumbai Port Trust) site to facilitate cargo tracking and other related websites for notifications and other relevant information.

ONGC likely to form a JV for marine logistics services: Oil Natural Gas Corporation Ltd. (ONGC) is reportedly considering formation of a non-public sector undertaking (non-PSU) joint venture company for undertaking offshore services in the marine logistics. The proposed joint venture will have a paid up capital of around Rs. 100 crore. The JV will provide end-to-end solutions by acquiring, owning, maintaining, operating, chartering wide range of offshore floating units to service the oil and gas industry's exploration and production (E&P) requirements, but not exclusively for ONGC.The JV will also develop capabilities for acquisition, repair and ,maintenance of offshore floating units, undertake dry docking and new building maintenance of a long-term arrangement with yard facilities on a competitive basis. Shipping Corporation of India (SCI) and Mazgaon Dock Limited (MDL) have already shown their interest in participating in the joint venture. The JV will also comprise of participation from shipping repair companies and financial institutions. ONGC has already started negotiating with Infrastructure Development Finance Company and few other FIs.