Privatisation bound Shipping Corporation of India Ltd (SCI) is assessing offers to buy a second-hand very large gas carrier (VLGC) costing about $45-55 million in the current market as the state-owned firm looks to tap potential in a segment that has been growing on the back of India’s demand for cooking gas.

In December, SCI floated a tender to buy one firm and one optional VLGC, each having a capacity of 82,000 cubic metres in the age range of 10-15 years. If the company exercise the option, the acquisition cost will touch $100 million.

But, the possibility of exercising the option is less due to the high price of VLGC’s in the global market, industry sources said.

Keen to add gas carriers

SCI currently has one VLGC on its fleet. It is keen to add more to cater to the demand from state-run oil firms to ship gas into India, a business in which Indian flagged ships get a so-called right of first refusal (RoFR) to match the lowest rate quoted by a foreign flag vessel in a tender and grab the contract.

That aside, the company is looking to utilise ?133.85 crore left from the funds raised through a follow-on public offer (FPO) in December 2010, the proceeds from which were mainly intended to buy ships.

According to the ministry of ports, shipping and waterways, the government has not placed any restrictions on SCI in terms of functioning and operations despite the privatisation exercise currently underway.

“The government has not given any direction or instruction to SCI not to acquire ships or curtail operations. It’s business as usual,” a government official said.

This is one of the rare instances, particularly in the last five years, where SCI is buying ships from the second-hand market. Historically, the firm has acquired new ships by placing orders at shipyards.

SCI will prefer to lock-in the new VLGC with one of the PSU oil firms on long-term charter of 1-2 years to earn “stable” revenue. VLGC rates are currently hovering in the range of mid-$30,000 a day on a 1-2 year charter.

Amongst other Indian fleet owners, the Great Eastern Shipping Co Ltd and Global United Shipping Company (India) Pvt Ltd also runs gas carriers.

The Department of Investment and Public Asset Management (DIPAM) has initiated the process of privatising Shipping Corporation of India by selling the government’s 63.75 percent stake to a strategic buyer.

Source: The Hindu Business Line

Last Ditch Effort Underway To Salvage DP World-Run Box Transshipment Terminal In Cochin Port

The Centre-owned Cochin Port Trust and DP World Ltd are exploring ways to fund a ?400 crore plan to deepen the channel of India’s only international container transshipment terminal (ICTT) at Vallarpadam run by the Dubai-based operator to 16 metres from 14.5 metres and help dock bigger ships.

The Ministry of Ports, Shipping and Waterways has turned down a request from Cochin Port Trust to fund the dredging cost through a grant from the government, officials said. The Ministry has instead suggested that the port trust can work out a funding arrangement either with the Sagarmala Development Company Ltd, an entity controlled by the government or with DP World to carry out the work.

The Ministry’s suggestions were discussed by the port trust and DP World but couldn’t reach a consensus.

DP World did not agree to a condition put forward by the port trust on handling a minimum guaranteed throughput (MGT) if the dredging work is to be funded by the port authority through Sagarmala Development Company or other means.

Unlike other port contracts at Central government-owned ports, the ICTT deal does not have a MGT clause written into the concession agreement and this has drawn flak from critics.

On the option of DP World funding the dredging work and adjusting the cost against the revenue share it is contractually mandated to pay the port trust annually, the Dubai operator said that it was willing to make such adjustment, but it should cover only the existing revenue share pay outs to the port trust.

The port authority, though, rejected this proposal from D P World arguing that such adjustment of costs should also protect “incremental revenue share” from handling more containers in future and not just the “existing revenue share” at the current level of traffic.

DP World also suggested imposing a transshipment surcharge on Indian cargo containers transshipped via Colombo port to promote transshipment through Vallarpadam in return for funding the dredging work. “The Ministry of Ports, Shipping and Waterways vetoed this proposal saying that no such restrictions can be imposed,” a government source said.

As a result, DP World backed out of funding the dredging work. A three-member panel has been set up with representatives from Cochin Port Trust, Kolkata Port Trust and Dredging Corporation of India to work out proper estimate of the dredging cost and suggest funding models.

“Funding the dredging cost through a grant from the government is the best option as this would ensure that the already high vessel related charges (VRC) at Cochin port does not go up any further and hurt Vallarpadam ICTT’s ability to compete with Colombo port,” said an industry source.

Globally, the port dredging costs are funded by government grants to keep the vessel related charges at competitive levels.

Otherwise, the dredging costs will have to be recovered by pricing it into the vessel related charges collected from ships calling at the port, making the marine charges more expensive.

Cochin Port Trust itself spends about? 90 core every year from internal resources just to maintain the current depth of the channel. This is one of the main reasons why the port trust has not been able to build up cash reserves for expansion.

The channel deepening plan is a last-ditch effort by the port authority and the ICTT operator to facilitate deep draft and also to reduce vessel related charges, two key hurdles that have crimped Vallarpadam’s ability to compete with Colombo port since starting operations in February 2011.

Colombo port is a key regional transshipment hub through which a large portion of India’s export-import cargo containers are transshipped every year.

The channel deepening work at ICTT has also gained urgency in view of a new container transshipment port being built by Adani Ports and Special Economic Zone Ltd (APSEZ) at Vizhinjam also in Kerala and a few nautical miles away from Vallarpadam.

The Vizhinjam project, incidentally, is entitled to receive a viability grant funding or VGF of ?1,635 crore to be shared equally by the Central and the Kerala governments to boost its viability, making it the first port project to be offered such a grant. Of this, ?1,227 crore will be given during the construction phase and the balance during the operation period spanning 40 years extendable by another 20 years.

“The Centre has agreed to give a VGF of about ?817 crore to Vizhinjam which is a non-major port but doesn’t want to give a grant of ?400 crore to its own Cochin Port Trust to deepen the channel to accommodate bigger ships and make ICTT a success,” the industry source said.

APSEZ’s announcement that it will develop the West Container Terminal (WCT) at Colombo port on a government-to-government deal has further accelerated moves to turn around the fortunes of Vallarpadam terminal to compete and help cut India’s dependence on Colombo to send and receive container cargo.

Lack of deep draft and high vessel related charges have been cited for ICTT’s failure to achieve the objective for which it was designed.

The ICTT deal, according to the port unions, has literally broken the back of the state-run port which spent? 938.72 crore (excluding service tax/GST) since FY2011 for maintaining the navigability of the channel.

The other “sacrifices” made by the Port Trust to make the project a success include granting concession in VRC of as much as 86 per cent to help ICTT compete with Colombo port, translating into a revenue loss of ?461.97 crore over a ten-year period.

However, these facilitating measures did not yield any commensurate benefit to the Port Trust and the nation.

In FY20, the 1.2 million twenty-foot equivalent units (TEUs) capacity ICTT handled 6,20,061 TEUs of which a meagre 6 per cent or 36,183 TEUs were transshipment containers.

Source: The Hindu Business Line