India
Overseas operations overcome difficult bureaucracy
India’s tanker owners can be proud of their contribution to the nation’s gross domestic product, especially given the government’s apparent unwillingness to help the industry
by Barry Luthwaite I
ndia’s tanker fleet is often overshadowed by what is, for India, the core business of dry and bulk cargo. But in recent months impressive
modernisation plans have moved ahead, taking full advantage of both secondhand and newbuilding acquisitions. Currently, six tankers are on order: four VLCCs, and two MR1 products carriers. The trading tanker fleet numbers 140 units aggregating 11,322,560 dwt. The exodus of operations overseas, and in
particular to Singapore, shows no sign of abating. The last Indian budget ignored proposals to make the industry more competitive and to encourage the growth of the Indian-flagged fleet. No changes were made to onerous taxation on various services including bunkers, and coastal shipping was offered no incentives. Calls for domestic owners to benefit from lower interest rates to support borrowing also fell on deaf ears. High taxation remains in place for seafarers on Indian-flagged tonnage. To promote the coastal industry, preference
must be given to Indian-built and Indian-flagged vessels, but attempts to persuade domestic owners to order at home still fall largely on deaf ears. Tanker production is rare in Indian yards and productivity remains extremely poor. Regulations that insist on foreign-owned vessels on charter employing Indian registry and crews have met with disbelief as they increase costs and are unwelcome in the current tough trading climate. Owners prefer to repair vessels in Singapore, China and Dubai, where they find cheaper quotations and superior productivity. State-owned Shipping Corp of India (SCI)
is by far the largest owner of wet tonnage with a fleet of 52 vessels trading in the MR1, LR1, LR2, Aframax, Suezmax and VLCC sectors. A year ago the company ordered four plus optional two VLCCs from Jiangsu Rongsheng, priced at US$106.7 million each. They are due for delivery in 2012 and 2013. Although the crude market is challenging, the vessels are part of a commendable
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effort by the Indian mercantile marine to serve its own oil import needs more and to reduce dependence on chartered in tonnage. Products tonnage is employed in a big coastal trading fleet as more refining capacity comes on stream. India first imported clean petroleum products
in the 1970s, and became self-sufficient in 2000. SCI is the leading provider of tonnage for coastal movement of clean products throughout the country as well as cross trading. VLCCs are unable to enter many ports fully loaded and lightering operations are common. Over the next decade, SCI is expected to invest US$10 billion in new tonnage, but it is unclear how many vessels will be tankers. The owner has been seeking a 50/50 joint venture with a domestic shipyard. The intention is to build half of its newbuildings at home, but this is unlikely to include tankers. Shipbuilding is in a bad way in India. Yards
have lobbied the government for two years to get a support package with tax exemptions and a 20 per cent subsidy, but so far to no avail. Plans
for vast shipyard expansion to enable building of vessels up to VLCC size have been dormant for the last three years, and will not be revived anytime soon. Shipyards are focussing on the booming offshore industry. Lack of government support has not deterred
owners from raising investment cash by other means, and many are moving operations overseas. Singapore is now a major hub for Indian shipowners, charterers, managers and operators. Singapore’s tax-free regime and low- interest credit enables Indian tanker business to thrive without interference. This is a welcome break from the conditions the business faces at home: Indian Government prevarication, an unstable business climate, frequent tax changes and inconsistent political decisions. Perhaps more by luck than judgement, Indian
owners largely survived the financial crash in terms of newbuilding business, and have been astute players in the secondhand market. Great Eastern Shipping Co (GESCO) currently operates
State-owned Shipping Corp of India is the nation’s largest owner of wet tonnage Tanker Shipping & Trade I October/November 2011 I 27
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