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'Supply side will be affected by new building deliveries
Madhu Chittora
Prime Minister Manmohan Singh wants a change in the LNG shipping policy. Currently, the LNG import policy restricts LNG imports to only Indian flag vessels. If this policy is changed, what impact will it have on your company?
LNG has been identified as the future fuel for the country. The shipping leg forms an important part in the entire LNG supply chain due to the high level of technology sophistication and also due to high capital cost of the shipping venture. It must be appreciated that this is a new area as far as Indian energy sector is concerned and is still in its developmental stage. At this juncture, therefore, it is quite desirable to have a comprehensive, clear-cut and long-term policy for the sector. A supportive policy will go a long way in development of the Indian asset base and expertise in LNG transportation.
SCI is already operating two joint venture companies for transportation of LNG and will progressively take over the entire technical management and manning of the LNG carriers. Thus, we have strong credentials in this sector, which will be further strengthened in due course.
Which factors will govern fright rates in the coming years - and why?
For the past two years, all the sectors showed rising trends concurrently. At present, the freight markets in different sectors have declined from their peak levels. Despite this the prevailing rates are still quite healthy compared to the historical levels. In the coming months, the demand side will depend on the state of the world economic conditions, particularly the Chinese economy, OPEC policies, price of crude etc., while the supply side will be affected by new building deliveries that are in pipeline as well as scrapping.
How far has tonnage tax met your expectations? How much will the shipping industry save as a result of the tonnage taxation system?
The shipping industry is grateful to the government for introduction of the tonnage tax system that more or less meets the industry's expectation. The savings accruing to Indian shipping companies would be substantial due to reduced tax outgo. It is now expected that the Indian shipowners will invest more in tonnage acquisition and also contribute to the development of the country's maritime expertise through training.
What are the future prospects of the Indian shipping industry? Which segment has better scope for growth: bulk, crude, container or coastal shipping?
With the growth in Indian economy, there will be increased movement of raw material as well as finished and semi-finished products. In terms of growth rate, traditionally growth in containers has been comparatively high, which will continue in the near future. In view of the country's increasing energy needs, the energy sector offers immense potential. Further, as is happening now in China, with the increase in economic activities, dry bulk trade would also get a fillip. Coastal shipping offers a very viable alternative for bulk transportation of goods, this sector has a substantial growth prospects. With a conducive environment created by facilitative government policies such as tonnage tax as well as emphasis on improvement in the port infrastructure, the prospects of the industry are definitely very bright.
The government is implementing road and rail corridor projects. What impact will this have on coastal shipping?
The connectivity between ports and the hinterland is of vital importance for development of an integrated logistics system benefiting both the shipping industry and trade. The implementation of road and rail corridors will greatly improve connectivity of the interiors to the gateway ports leading to faster transit times and better utilisation of land-based infrastructure. Although such corridors are meant to service mainly the gateway ports catering primarily to the exim trade, they can also be utilised for the advantage of coastal trade. It may also be kept in mind that apart from the major ports, a considerable amount of coastal traffic is moved through minor and intermediate ports.
How many Panamax and Suezmax ships does SCI have? What is your fleet size in terms of number of ships and DWT? Do you plan to increase the fleet size in the near future?
Over the years, SCI's fleet has been developed with the main focus on the country's overseas trade taking into account trade requirement and the infrastructure at the ports. SCI's fleet is, therefore, well diversified both in terms of the ship types and size. SCI's current fleet consists of 83 vessels aggregating to about 4.62 million deadweight tonnages.
Additionally, SCI manages 54 vessels of various other government organisations. The majority of the crude carriers are in the Aframax and Suezmax size range, whereas the bulk carriers are mainly in the Handymax range. There is a perceptible change in the Indian port infrastructure and parcel sizes of the Indian cargoes are also increasing. All recent acquisitions of SCI have been made with this foresight as well as keeping global employability of the ships in mind. Thus, recently, SCI has acquired Aframaxes, Suezmaxes and VLCCs. SCI has an ambitious plan for acquisition of ships, which will be funded through a combination of internal resource and commercial loan.
What will be the impact of Sethusamudrum and Vallarpadam projects on shipping industry?
Both these projects have great significance to the Indian maritime sector. The Sethusamudram project envisages cutting of a ship canal to connect Gulf of Mannar to Palk Bay. This will create a continuous navigable sea-route around the Indian peninsula within her own territorial waters. This will lead to substantial growth in the coastal traffic. On the other hand, the proposed the container transshipment terminal at Vallarpadam will attract mainline traffic. With the increase in the port traffic due to implementation of these projects, the associated infrastructure will have to be suitably updated to avoid any bottlenecks in the system. Thus, enhancement of port capacity and establishment of better rail or road connectivity should also happen concurrently.
What are SCI's future plans?
The SCI's future tonnage acquisitions would be made with the focus mainly on energy transportation. At the same time, the disposal plans of the existing tonnage and need for suitable replacement would also be considered. In container segment we would attempt to be a niche player in the specific sectors and with a specific USP. Diversification and growth in LNG transportation, mainly through the joint venture route, would continue.
[1 August 2005]
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