A

PROJECT REPORT
ON
COMMERCIAL OPERATIONS, ACCOUNTING &
RECONCILIATION PROCEDURES ADOPTED FOR DRY BULK
VESSELS IN BULK COMMERCIAL DEPARTMENT
OF
THE SHIPPING CORPORATION OF INDIA

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF

POST GRADUATE DIPLOMA IN BUSINESS MANAGEMENT
CONDUCTED BY

RIZVI ACADEMY OF MANAGEMENT

UNDER THE GUIDANCE OF
PROF. BHASKAR SINHA

SUBMITTED BY
MR. MOHD SAFWAN. A. BHIKHA
BATCH: 2015 2017
1

CERTIFICATE
This is to certify that Mr. Mohd Safwan Bhikha, a student of Rizvi Academy of
Management, of PGDBM III bearing Roll No. 12 and specializing in Finance has
successfully completed the project titled on
Commercial Operations, Accounting & Reconciliation Procedures Adopted for Dry
Bulk Vessels in Bulk Commercial Department in The Shipping Corporation of
India

Under the guidance of Prof. Bhaskar Sinha in partial fulfillment of the requirement of
Post Graduate Diploma in Business Management by Rizvi Academy of Management for
the academic year 2015 2017.

_______________
Prof. Bhaskar Sinha
Project Guide

_______________
Prof. Umar Farooq
Academic Coordinator

_______________
Dr. Kalim Khan
Director

ACKNOWLEDGEMENT

As I submit my project on, Commercial Operations, Accounting & Reconciliation

Procedures Adopted for Dry Bulk Vessels in Bulk Commercial Department in The
Shipping Corporation of India
I would like to give my sincere thanks to my mentor Prof. Bhaskar Sinha for providing
me with the wonderful opportunity to expand my horizon of knowledge in this interesting
field.
I cannot just condone the valuable opportunity given to me by the RIZVI ACADEMY OF
MANAGEMENT for compiling and submitting the project, which I feel is an opportunity
to express my views about this project
I acknowledge my indebtedness to the various inputs and study materials provided for the
contents of the project.
It is my proud privilege to express my deep sense of appreciation and gratitude to my
parents and friends for their support and co-operation in the course of the project either
directly or indirectly involved in time with their valuable contribution.

EXECUTIVE SUMMARY
The Summer Project for two months includes study on The Shipping Corporation of
India Ltd, What is the companys organization structure, what are the various
Commercial Operations, Accounting & Reconciliation Procedures Adopted in Bulk
Carriers Department.
The study emphasizes on series of operations of a dry bulk vessel, how the vessel is fixed
with the parties, the duties performed off-shore and on the vessel when it sails to the said
port, the documents required throughout the voyage, the permissions required at the port.
The reports sent by the master of the vessel detailing the daily position of the vessel.
The study also throws light on the accounting system of the company, the preparation of
invoice. Usually the invoice is prepared several times and sent to the charterers when
they receive payments. The first invoice is sent post fifteen days from the commencement
of the voyage and the next invoice after the next fifteen days and so on which gives the
balance amount to be recovered from the charterers. When disputes arise in some
voyages how they settle them through mutual understanding or legally.
The reconciliation procedures consist of the approvals from various heads of departments
of the company who sign the final report indicating that invoice is correct and all
deductions claimed by the charterer are genuine and finally the report is closed.
Exploratory Research method was used for study of the project, which included
interviews with various officials from various departments regarding their work and other
information which could be helpful for me.
The major part of the project will include the study on the processes in operations,
settlement of accounts and reconciliation of vessels.

Table of Contents
Sr No

Particulars

Page
no.

Objective of the study

Introduction to the Shipping Industry

Challenges faced by the Shipping Industry

Research Methodology

Introduction to The Shipping Corporation of India (SCI)

10

Types of Bulk Carriers

12

Services offered by Bulk Carriers & Tankers

18

Composition of fleet

24

Types of charterers

25

10

Operations in Dry Bulk Vessels

26

11

Accounting procedure in Dry Bulk Vessels

41

12

Reconciliation of Accounts and File Closure of Dry Bulk

57

Vessels
13

Significance and Limitations of the study

59

14

Findings

60

15

Recommendations

61

16

Bibliography

62

OBJECTIVE OF THE STUDY

Primary Objective:
5

To study the Commercial Operations that is necessary for the functioning of Dry Bulk

Vessel in The Shipping Corporation of India.

To study the method and process of accounting and reconciliation of voyages done for
Dry Bulk Vessels in The Shipping Corporation of India.

INTRODUCTION SHIPPING INDUSTRY

Almost all international trade in goods is transported by sea. Thus, ocean shipping plays a
central and essential role in the world economy and in world trade. Maritime trade
generally is divided into three broad categories: liquid-bulk, dry-bulk, and general cargo.
6

Petroleum alone accounts for nearly all of the liquid-bulk trade and for almost half of the
total world tonnage shipped. About one-fourth of world tonnage consists of dry-bulk
commoditiesprincipally mineral ores, coal, and grain. The remaining one-fourth
consists of the variety of manufactured goods and consumer products called general
cargo, the two principal modes of ship operation are the liner mode, which serves the
general cargo trade, and the bulk mode, which serves both the dry- and the liquid-bulk
trades. The liner industry carries general cargo from port to port at fixed rates and on
regular schedules. Modern container ships are typical of the vessels used in liner trade.
The liner industry commonly operates within conferencesinternational groups of
private liner companies that collectively agree on routes, schedules, rates, and other
aspects of liner service. The bulk industry normally does not form conferences. It
employs a variety of ships, usually on a time- or voyage-charter (rental) basis, to carry
single, large-volume commodities (e. g., iron ore, grain, coal, crude oil) over fixed and
sometimes long periods of time. The liner industry thus tends to manage competition
among major companies, while the bulk industry operates under much more open
competition. The liner trades involve by far the largest portion of world trade when
measured by dollar value, while the bulk trades account for the largest portion by volume
or tonnage.

CHALLENGES FACED BY THE SHIPPING INDUSTRY

The dry bulk shipping market, which primarily is the market for the shipping of such
unpackaged bulk cargo as grains, coal, iron ore and cement, has been relatively soft since
7

the start of the global recession. The Baltic Dry Index (BDI) -- a measure of the price of
shipping major raw materials such as iron ore, grains and fossil fuels by sea-- is down
approximately 86 percent from its November 2009 high. This increasingly challenging
environment has been forcing some bulk carriers to take various corporate actions to stay
afloat, while some have had to shut down.
The soft bulk shipping market that is the cause of these challenges can be attributed to
both a slowdown in the Chinese economy and an increase in the supply of new bulk
carrier ships on the market. The slowdown in the Chinese economy, specifically, resulted
in a slowdown in its real estate sector and consequently the demand for iron ore.
Additionally, China, which has been a large consumer of coal, has been shifting away
from coal to natural gas as a source of energy. The result has been a reduction in the
demand for coal and the demand for ships to transport coal, which, along with iron ore,
accounts for a significant portion of the annual volume of cargo transported by bulk
carriers.
The dry bulk shipping industry is affected by numerous factors like the growth of world
economies and commodity supply and demand. In light of the various world economies,
Chinas economy growth rate and it being an important commodity market affects the dry
bulk shippers movement significantly. Meanwhile, other economies like Australia and
Brazil are major iron ore and coal exporters. They also impact dry bulk shipping industry.

RESEARCH METHODOLOGY

Type of Research
According to project Study on Finance and Account Division of Shipping Corporation
of India Ltd, Research Methodology applicable would be Exploratory Research.

Exploratory Research
The main purpose of exploratory research is the description of functionalities of different
Departments and task performed by each department. This type of research methodology
relies on the Experiences and Observations. The research is carried out to know the
operations, accounting procedures and reconciliation of dry bulk vessels with respect to
the Bulk Divisions of The Shipping Corporation of India Ltd.

INTRODUCTION THE SHIPPING CORPORATION OF INDIA

The Shipping Corporation of India was established on October 2nd, 1961, by the
amalgamation of Eastern Shipping Corporation and Western Shipping Corporation.
Starting out as a marginal Liner shipping Company with just 19 vessels, the SCI has
today evolved into the largest Indian shipping Company. The SCI also has substantial
interests in various segments of the shipping trade. SCIs owned fleet includes Bulk
carriers, Crude oil tankers, Product tankers, Container vessels, and Passenger-cum-Cargo
vessels, Phosphoric Acid / Chemical carriers, LPG / Ammonia carriers and Offshore
Supply Vessels. Sailing through for nearly five decades, the SCI today has a significant
presence on the global maritime map.
As the countrys premier shipping line, the SCI owns and operates around one-third of
the Indian tonnage, and has operating interests in practically all areas of the shipping
business; servicing both national and international trades.
The SCI has immensely contributed to the growth of Indias EXIM trade and the national
exchequer, by being a net earner/saver of valuable foreign exchange.
Over the years, SCI has been a lifeline for the country in times of emergency and distress,
by ensuring continued and uninterrupted supply of crude oil, which drives the countrys
economy.
The SCI has heralded Indias entry into the specialized field of LNG transportation, by
acquiring a stake in the two Indian LNG transportation agreements contracted till date,
after a global bidding process. SCI is the only Indian shipping company engaged in
transportation of LNG, a vital fuel for Indias power plant and chemical / petrochemical
industry. For the same purpose, SCI has formed three Joint Ventures with one vessel each.
On two of these LNG vessels, SCI is managing onboard operation and technical
management and the remaining vessels is fully manned by SCI.
The SCI possesses all the ingredients essential for emerging as a truly world class
international shipping Company. The Endeavour of the management is to facilitate the
release of boundless energy and initiative streams, which will be channeled for the
growth and prosperity of the Company and the nation.
10

TYPES OF BULK CARRIERS

11

Cargo ships or vessels come in different types and sizes to meet the various demands of
marine cargo transportation. Cargo ships are categorized partly by capacity and partly by
dimensions (often related to the different canals and canal locks they are traveling
through). Sizes of cargo vessels range from a modest handysize carrier (10,000 - 30,000
DWT) to mammoth VLCC and ULCC super tankers with a capacity to carry cargoes of
more than 200,000 DWT. Panamax is a mid-sized cargo vessels.

Size categories

Major bulk carrier size categories

Name

Handysize

Size in
DWT

10,000 to 35,000

Ships

New

Used

price

price

18%

$25M

$20M

Traffic

34%

Handymax

35,000 to 59,000

37%

Panamax

60,000 to 80,000

19%

20%

$35M

$25M

Capesize

80,000 and over

10%

62%

$58M

$54M

Capesize
12

They are very large and ultra large cargo vessels with a capacity over 150,000 DWT.
They are categorized under VLCC, ULCC, VLOC and ULOC and can be as large as
400,000 DWT or even more. They serve regions with largest deep water terminals in the
world and are primarily used for transporting coal and iron ore. Because of their giant
size, they are suitable to serve only a small number of ports with deep water terminals.

Very Large Ore Carrier

Handymax/ Supramax
Handymax are

small-sized

cargo

ships

with

size

less

than

60,000

DWT. Supramax vessels have capacity between 50,000 to 60,000DWT, due to their small
size, they are capable of operating in regions with small ports with length and draught
restrictions. They form the majority of ocean going cargo vessels in the world.

13

Handymax

Handysize
Handysize are small-sized ships with a capacity ranging between 15,000 and 35,000
DWT. These vessels are ideal for small as well as large ports, and so make up the
majority of ocean cargo vessels in the world. They are mainly used in transporting
finished petroleum products and for bulk cargo.

14

Handysize

Panamax and New Panamax

As the name suggests, Panamax and New Panamax ships are travelling through
the Panama Canal. They strictly follow the size regulations set by the Panama Canal
Authority, as the entry and exit points of the Canal are narrow. A Panamax vessel can't be
longer than 29,413 m (965 ft.), wider than 3,231 m (106 ft.) and her draught can't be
more than 1,204 m (39.5 ft.). These vessels have an average capacity of 65,000 DWT,
and are primarily used in transporting coal, crude oil and petroleum products. They
operate in the Caribbean and Latin American regions.
The New Panamax has been created as a result of the expanding plans for Panama Canal
locks. Expanded locks will be around 427 m (1400 ft.) long, 55 m (180 ft.) wide and
18,30 m (60 ft) deep so Panama Canal will be able to handle larger vessels .

15

Ships in Panama Canal

VLCC and ULCC

VLCC stands for Very Large Crude Carriers. They have a size ranging between 180,000
to 320,000 DWT. They are very flexible in using terminals and can also operate in ports
with depth limitations. VLCCs are used extensively around the North Sea, Mediterranean
and West Africa.
ULCC or Ultra Large Crude Carriers are the largest shipping vessels in the world with a
size more than 320,000 DWT. Called Super Tankers, ULCCs are used for long-haul oil
crude transportation from Middle East to Europe, Asia, and North America.

16

Ultra Large Crude Carriers

17

SERVICES OF BULK CARRIERS & TANKERS

The Bulk Carriers & Tankers offers the following services:
1.
2.
3.
4.

Tankers
Bulk Carriers
Chartering
Lighterage

TANKERS
The SCI is the largest Tanker owner in India, with a well-diversified fleet of crude
Tankers consisting of all sizes. The SCI's Tanker tonnage paralleled the growth of Indian
oil industry since the mid-1970s. Till late 1990s the tonnage predominantly catered to
Indian crude and product transportation. The SCI's Tanker Commercial Department
looks after scheduling and deployment of Tankers for feeding crude to various Indian oil
refineries. Lighterage operations on the east and west coasts are also undertaken, to
facilitate quick turnaround of Tankers, which otherwise cannot call on ports due to port
restrictions/limitations.

BULK CARRIERS
The SCI is presently the major Bulk Carrier operator in India, with an assortment of 17
Bulk Carriers, spanning the Handymax, Supramax, Panamax and Kamsarmax sizes of
vessels. The average fleet age of the Bulk Carriers is about 3 years, but individual vessels
range from 0 years to 15 years in age.
At the time of acquisition, the vessels had been ordered after carefully considering the
need and utility of these vessels for India-centric trade. However, there is no physical
constraint for these vessels cross-trading worldwide. They carry a variety of cargo like
iron ore, coal, coke, grain, fertilizer, steel products, plywood, bauxite, etc.
18

CHARTERING
The function of Chartering Department is of a corporate nature. The Chartering
Department is responsible for meeting all the requirements of the SCI related to in/out
chartering of all kinds of ships. In/out chartering requirements are communicated to the
Chartering Department by the concerned departments. Accordingly, the department enters
the requirement in the market through weekly broker meetings or any other day during
the week (depending upon urgency), as per the chartering procedures laid down.
Negotiating officers then negotiate and finalize the business.
The businesses or vessels are normally fixed through broking channels or sometimes
directly with owners or charterers. Once the business or vessel is fully fixed, all the
necessary documentation is done as per the chartering procedures laid down. The Charter
Party is drawn and passed on to concerned department for necessary action.
The Chartering department is also involved in:
1. Providing market information to the management through daily/monthly reports.
2. Preparing monthly reports on in/out chartering fixtures concluded by the
department.
3. Forwarding brokerage commission Debit Notes to concerned commercial
department for payment of brokerage commission after C/P is signed.
4. Conducting weekly meeting with empanelled brokers.
5. Reviewing performance of the brokers on a periodic basis.
Clients expect smooth operation and optimum utilization of vessels in accordance with
Charter Party provisions. In order to give clients the best services, the concerned
operation departments (Technical and Commercial) are in constant contact with the
vessels/various agencies/clients so that the operations are executed as per the clients
expectations and C/P provisions.

19

In case of disputes, the endeavor is always to sort them out amicably. However, disputes
where an amicable solution is not possible are referred to an Arbitrator, as per the Charter
Party provisions regarding arbitration.

LIGHTERAGE
The SCI has been conducting open sea STS Lighterage operations on the east and west
coasts of India, for Ship-to-Ship transfer of crude oil/petroleum products for the Indian
oil industry, since 1975. These operations are conducted by a team of experienced STS
Superintendents in accordance with recommendations prescribed in the ICS/OCIMF
Ship-to-Ship Transfer Guide (Petroleum).
Since January 2006, the SCI has also been involved in STS Trans-shipper operations off
Goa, for Ship-to-Ship transfer of iron ore for export to the Far East.

OTHER SERVICES
BREAK BULK
The SCI is the only Indian shipping company providing overseas Liner Break-bulk
services to the Indian trade. The SCI arranges carriage of Break-bulk cargoes on a space
charter basis from various regions across the globe including USA and Far East. This is
offered for imports and exports in & out of India, which include shipments of OverDimensional Cargoes (ODC)/ Project cargoes/Heavy Lift cargoes/IMO Class I Cargoes
and containers.
The SCI continues to operate its India-UK Continent Break-bulk service regularly from
European ports to India on a space sharing basis.

OFFSHORE
20

Offshore Services Department provides following services to offshore industry:

1) The SCI has diversified into the Indian Offshore marine business and provides
vital offshore marine logistics support to the Indian oil industry in its indigenous
oil exploration activities.
2) SCI owns 7 Anchor Handling Tug-cum-Supply Vessels (AHTS) and 2 Platform
Support Vessels (PSVs), which are on charter to ONGC. Offshore Department
also undertakes manning, management, maintenance and operations of various
specialized vessels viz. Multi Support Vessels, Well Stimulation Vessel, Seismic
Survey Vessel, Geotechnical Vessel, Offshore Supply Vessels, of our client M/s.
ONGC.
These vessels offer following services:
Towing & Anchor handling operations in Offshore.
Carriage of men and materials (fuel oil, bulk cement and byrite, deck
cargo, refer cargo, pot water, drill water etc.) between base and offshore

installations as well as between Offshore installations.

Carry out standby and rescue operations in offshore, if required.
Carry out routine surveillance in offshore for safety and security reasons.
Standby at SBM Tankers in Offshore.
Carry out Fire Fighting duties by FIFI vessels.

3) SCI also offers Operations, manning, maintenance and Management (O&M)

services of following vessels owned by Indian E&P Company, Oil & Natural Gas
Corporation Ltd. (ONGC):

Seismic Survey Vessel.

Well Stimulation Vessel.
Multi Support Vessel.
Diving Support Vessel.
Geotechnical Vessel.
Offshore Supply Vessels.

4) SCI has ambitious plan for expansion of offshore fleet with versatile vessels and
planning to acquire 2 nos. Platform Supply Vessels and 3 nos. Anchor Handling,
Towing & Offshore Supply vessels.

21

SPECIALIZED VESSEL CELL

The Specialized Vessels Cell (SVC) is part of the Bulk Carrier & Tanker Division, and
deals with the operations and management of two Liquefied Petroleum Gas (LPG)
Carriers, which are wholly owned by the SCI.
In addition, the SVC also deals with the operation and management of three Liquefied
Natural Gas (LNG) Tankers, which are owned by joint venture companies, in which the
SCI has a sizeable share.
The LPG carriers in the recent past are chartered with Indian Oil Corporation Ltd. The
LNG Tankers are on long-term time charter to Petronet LNG Ltd.
The SVC looks after the technical and commercial management of the LPG tankers as
per the time charter. Technical management activity involves regular planned
maintenance of ships in line with international statutory regulations, periodic dry-docking
and running repairs of the Tankers. Commercial activity includes coordination with
charterers / agents for smooth transit of ships to various ports of call, cargo operations,
payment of port and other dues, arranging for ships bunker (fuel), timely raising of debit
notes and following up with customers for prompt payment.

PASSENGER SERVICES
DOMESTIC PASSENGER-CUM-CARGO SERVICES
In addition to international operations, the SCI, with its one owned Passenger-cum-Cargo
vessels and 10 managed vessels, operates domestic passenger and cargo transportation
services between the mainland, Andaman & Nicobar group of islands, on behalf of the
Government of India.
22

COMPOSITION OF FLEET

23

The Bulk Carrier Department has 17 vessels:

Gearless 7 vessels.
With Gear 10 vessels (includes cranes).

TYPES OF CHARTERS
24

1. Time charter.
2. Voyage charter.
3. Bare boat charter.

Time Charter
A time charter is the hiring of a vessel for a specific period of time; the owner still
manages the vessel but the charterer selects the ports and directs the vessel where to
go. In a time charter, the revenue generated is based on the number of days for which the
vessel is being used (hired) by the charterer. The expenses related to bunker (fuelling),
port dues and other miscellaneous expense incurred in the voyage on Time charter is
borne by the charterer.

Voyage Charterer
A voyage charter is the hiring of a vessel and crew for a voyage between a load port and
a discharge port for a certain cargo. In a voyage charter the revenue generated is based on
the freight i.e. the quantity of cargo loaded and not on time duration. The vessel is fixed
basis a rate per MT cargo loaded. Here all the expenses is borne by the owners of the
vessel (includes bunkering, port dues and other miscellaneous expenses).

Bare Boat Charter

A bareboat charter or demise charter is an arrangement for the chartering or hiring of a
ship or boat, whereby no crew or provisions are included as part of the agreement;
instead, the people who rent the vessel from the owner are responsible for taking care of
such things.

OPERATIONS IN DRY BULK VESSELS

25

The following section describes the requirements and standards operating practices and
terminologies used in a voyage.

REQUIREMENTS OF A VESSEL
When the vessel is employed for its next voyage it needs to have a few necessary items
on board without which it is difficult for a vessel to sail further and function. These are
the following:
1. Bunkers: Depending upon the employment/voyage fixed, the master will have to
check if the vessel has sufficient bunkers to reach the load port (in case of APS
Delivery)/delivery port (in case of DLOSP delivery). If not, then the master has to
co-ordinate with the commercial department to raise the request for supply of
bunkers at a port that will command minimum cost when bunkers cost of bunkers
(which varies at different ports) and the cost of duel and time due to deviation is
taken into account.
2. Hold Cleaning (Move this point as the last point): Also before moving on the
next voyage the hatches and holds of the vessel need cleaning. The vessel may
either have a dry cleaning or a wet cleaning depending on the cargo it will be
carrying. For example if the vessel had carried coal in its previous vessel and its
next cargo is wheat grains then it needs a wet cleaning, but if it was to carry coal
again it need not have wet cleaning instead and can have a dry cleaning.
3. Fresh Water: The vessel also needs fresh water on board for domestic and
technical purpose. The vessel has a fresh water generator on board which converts
sea water into potable water and the vessel need not be supplied with fresh water
if the sailing duration is long. However, for shorter distances the master of the
vessel may have to request the owners for supply of fresh water in port as vessel
can generate FW only while sailing and not when stationary.
4. Provisions: Food supplies and other provisions are also to be checked before
commencing a voyage the master of the vessel informs the owners to supply the
provisions. In case the voyage takes more days and the stock of provision is less,

26

the master may call for CTM (cash to master). The CTM is then used to procure
provisions like Food, Water etc.
5. Spares and Lube Oil: Spares lube oil and other necessary parts are also checked
whether if the vessel requires any repairs or spares. These are provided by the
technical team. In case the vessel face any problem mid way, the technical team
guides the master of the vessel to carry out necessary repairs or they may ask the
vessel to move to a particular port where the repairs can be done.

CHARTERING
The chartering department is the backbone of the company. This department is mainly
responsible for generating business for the company.
Once a vessel is on the verge of re-delivery or being free from employment, the
concerned vessel is floated in the market by the chartering department seeking its next
employment either through a broker or directly. Depending on the cargo requirement the
charterers will look into the vessels specifications, it current position etc., if the vessel
meets their preliminary requirement they go ahead with further negotiations i.e. price,
and other details of the voyage etc. and once all details are finalized the vessel is said to
be clean fixed.
The charter hire rate in the market is largely dominated by the demand-supply gap in the
vessel.

RECAP
27

Recap is a condensed version of charter party. It is a document between the charterer and
the owners of the vessel which states the main terms and conditions of the voyage which
binds the owners and the charterers. This includes:
1. Details of the vessel i.e.
a) The year it was built.
b) Where it was built.
c) Port of registration.
d) Carrying capacity of the vessel.
e) Dimensions of the vessel.
f) Type and number of holds and hatches.
g) The speed of the vessel, both when laden (with cargo) and ballast (without
cargo).
h) Consumption of fuel both laden and ballast, when working and when idle.
i) Grade of fuel used in the vessel
2. Details of the owners of the vessel(address and bank account details)
3. Where the vessel will be delivered (at which port) and also the port of redelivery.
It has to reach a particular port within specified period (LAYCAN).
4. Nature of cargo to be shipped.
5. Hire charges per day (in case of time charter) and it may or may not have a ballast
bonus (lump sum amount paid by the charterer to the owners of the vessel). This
scenario of Ballast bonus arises when the voyage is long and the charterer takes
ASP delivery. For example if the vessel is at Mumbai Port and the charterers want
the delivery at Richards bay in South Africa from where the cargo is to be
collected and this cargo is to be discharged again at Mumbai port, then the vessel
would be travelling to South Africa on its own expenses and to reduce the burden
of this cost the charterer pays a lump sum amount called as Ballast bonus.
6. Cost/price of bunkers per MT to be used for the entire voyages accounting
7. Clause pertaining to fuel i.e. the fuel supplied at the time of delivery of the vessel
should be equal at the time of redelivery. However, the charterer may deduct the
cost of fuel if the number exceeds when it is redelivered.
8. ILOHC: The amount to be paid by the charterer to owners for re-delivery the
9.

vessel with unclean holds.

C.V.E: The amount charterers

pay

to

owners

to

cover

for

the

cable/Victualing /entertainment cost incurred during the voyage. This cost is

determined for a 30day/month basis.
10. Address commission percentage to the charterers and percentage of commission
to be given to the broker (if applicable).
28

The below diagram represents the typical set of activities that follow in case of a
voyage:

29

The details of the events/activities represented in the flow diagram are described in
details as follows:

30

VESSEL SAILS TOWARDS LOAD PORT/BUNKERING PORT

Basis the nature of the delivery (Arrival Pilot Station i.e. APS or Dropping Last Outward
Sea Pilot i.e. DLOSP), the distance to delivery port and the quantity of bunkers on board,
Owners would instruct the master of the vessel to proceed either to the load port or
bunkering port.
While sailing, in addition to the recap the master of the vessel also receives voyage
instructions from the charterers. Voyage instructions is a set of instructions and details
that highlights details like agents at Load port, time to tender NOR, format of reporting,
contact details of all concerned parties etc.
Also while the vessel is sailing towards the Load port another critical activity is the
preparation of the Stowage Plan by the master as per charterers requirement (within the
designed limits of the vessels of course) and getting it confirmed by the
charterers/shipper.

BUNKERING
Bunkering means supply of fuel (known as bunkers) in shipping industry. The vessel
requires fuel to run the engines. The vessel needs:
a) Intermediate Fuel Oil (IFO)
b) Marine Diesel Oil (MDO)
IFO is used for running the main engine while MDO is used for running the Auxiliary
Engines/ generators which is needed for electricity onboard and other operational
purposes of various machineries. MDO consumption per day of a vessel is very little as
compared to IFO consumption; however MDO is almost twice as costly as IFO.

BUNKERING DELIVERY NOTE

31

This is a receipt that the bunker supplier provides to the vessel/charterer/owner of the
ship after supply of the bunkers
This BDN includes the following details:
1.
2.
3.
4.
5.

Port of bunkering.
Bunker tanker name.
Start and end time of pumping.
Quantity supplied, viscosity, grade of vessel etc.
Date and sign of the master/chief engineer of the vessel.

ARRIVAL REPORT
Arrival report is sent by the master of the vessel to the charterers and all other concerned
parties. This report is sent when the vessel reaches load port, bunkering port or discharge
port. It is when the vessel reaches the port limit and anchors and awaits for the
permission to enter the port. This report includes:
1.
2.
3.
4.
5.
6.
7.
8.

Port at which it has arrived.

Time zone.
Reason for being at the port.
Fuel remaining on board.
Date and time of tendering notice of readiness.
Anchor time and position.
Total distance covered and its duration.
Draft of the vessel i.e. how deep the vessel is in water

NOTICE OF READINESS (NOR)

This notice is sent by the master of the vessel. The master mentions the date, time, and
the location of the vessel as to where it has anchored. This notice is to inform the
charterers that the vessel is ready to load cargo.
32

DELIVERY OF THE VESSEL/DELIVERY NOTICE

Once the vessel is said to be delivered to the charterer the vessel is said to be on hire.
Vessels delivery can be either APS delivery or DLOSP delivery:
DLOSP Delivery: Generally speaking, if the vessel is delivered immediately to the next
charterer after re-delivery from the previous charterer the delivery is considered to be
DLOSP delivery. DLOSP delivery will not have any ballast bonus associated with it as
the vessel does not do a ballast passage before being delivered to the charterer.
APS Delivery: If the vessel is delivered to the charterers at a different port than the last
port it is known as APS delivery. It might or might not have a ballast bonus associated
with it, depending on the distance between the previous port and delivery port.
When the vessel arrives at the said port the master of the vessel sends intimation that the
vessel has arrived at the port and kindly accept the delivery of the vessel along with the
date and time it has been delivered. It is from here that the hire charges starts.
The master of the vessel also sends the details of the balance fuel remaining on board. A
delivery report includes the details as to when was the vessel delivered to the charterers.
It mentions the latitude, longitude, local time and the GMT time then (GMT time is
useful in time charter as the local time differs from port to port, therefore to keep a track
of the actual time taken by a vessel to complete its entire voyage). It also gives the details
of the fuel remaining on board. A certificate of delivery is also issued stating that the
owners have delivered the vessel to the charterers and also the details of the balance fuel
and fresh water and time and location of the delivery of the vessel. This certificate is
signed by the master of the vessel, the attending surveyor and the agent appointed by the
charterer. From this particular date & time (as per GMT) the charterer is liable to pay
hire.

33

BERTHING
After tendering NOR and arrival report the vessel needs to berth at the port. The
designated shore side of the port where the vessel comes alongside to load cargo is
known as a berth and the process of vessel coming in from anchorage to berth is known
as per berthing. A pilot designated by the port is assigned for berthing the vessel. There
are certain ports where loading is at anchorage only and there are not specific berth. At
such places the loading activity takes place at anchorage only and the intended cargo is
made available to the vessel with the help of a barge (small boats).

ON-HIRE BUNKER SURVEY

It is a survey done at the time of delivery of the vessel to check the remaining fuel on
board. The surveyor is appointed by the charterer to be sure about the reading of the
balance fuel on board and the cost for appointing the surveyor is generally split 50/50 %
between Owners and charterers. The survey report also mentions the date and time when
the survey was done. The surveyor gives his remarks on the condition of the vessel
whether any damage was caused during the tenure of the charterer. This report is signed
and verified by the chief engineer of the vessel, master of the vessel and the surveyor.

CARGO LOADING

34

1. DRAFT SURVEY(INITIAL AND FINAL)

Draft survey is carried out on arrival and departure of load port /disport. It determines
the weight of the vessel before and after loading of cargo, thus determining the cargo
loaded by calculating the difference in the ships weight before and after loading.
There are charts which help them determine the amount of cargo loaded as they do
not have any weighing scale on board. Therefore on the judgment of the density and
deductions of fuel and fresh water the actual draft is calculated.
a) INITIAL DRAFT SURVEY: survey done when the vessel arrived at the load
port and depending on how much of the hull of the ship is underwater; the weight
of the ship is calculated.
b) FINAL DRAFT SURVEY: this survey is done after the cargo is loaded in the
vessel and depending on how much of the hull of the ship is underwater; the
weight of the ship after loading of cargo is calculated.

2. MATES RECIEPT
Mates Receipt is a receipt signed and stamped by the master of the vessel after the
cargo has been loaded in the vessel. The MR describes the nature and quantity of
35

cargo i.e. the description of cargo along with its weight and is signed and stamped by
the master of the vessel. The MR also includes the port and date loading the cargo
along with the cargos shippers and receivers details.

3. BILL OF LADING
A bill of lading is a critical document. It is a document issued by a carrier, or
its agent,

to

the shipper as

a receipt for cargo accepted

a contract

of

for transportation,

carriage of goods.
and

must

be

It

is

presented

also
for

taking delivery at the destination

The bill of lading has to be signed and stamped by the master of the vessel and has to
be in strict conformity with the Mates receipt.
Many a times the original Bill of Lading (sometimes abbreviated as B/L or BoL) is
not available at the port before vessel departs and in that case the master issues a
Letter of Authority to the agents to sign the B/L on his behalf provided all details are
in strict conformity with the Mates receipt.

4. CARGO MANIFEST
A cargo manifest is prepared by the charterers agent it usually consists of the
following:
1.
2.
3.
4.
5.
6.
7.
8.

Name of the vessel.

Port of cargo loading.
Port of cargo discharge.
Shippers address.
Consignees name and address.
Number of bill of lading.
Commodity of cargo.
Weight of the cargo.

5. STATEMENT OF FACTS
36

This statement is a detailed statement which is prepared by the agent and upon
verification signed by the master of the vessel at every loading port or discharge port.
It includes the details of the vessel, actions carried out during loading and unloading
of cargo and the reason for the delay of the loading / discharging of cargo. It includes:
1.
2.
3.
4.
5.
6.
7.
8.

Arrival time of the vessel at the port.

Notice of readiness sent.
Anchorage of the vessel.
Pilot boarding and draft survey.
Hold inspection.
Time of berthing
Start time of loading / unloading.
Halts in loading (if any) due to weather condition / cranes malfunctioning / De-

Ballasting.
9. End time of loading / unloading.
10. Nature of cargo loaded.
11. Amount of cargo loaded / discharged.
12. Final draft survey.
13. Remarks of the master stating any queries.
This statement is signed and stamped by the master of the vessel and also the agent
appointed.

DEPARTURE REPORT
Departure report is sent by the master of the vessel. This report is sent when the vessel
leaves load port, bunkering port or discharge port. This report includes:
1.
2.
3.
4.
5.
6.

Next port.
Date and time (both local and UTC).
Position of the vessel
Fuel remaining on board.
Estimated time of arrival at next port.
Whether vessel is carrying any cargo or not (ballast or laden).

37

VESSEL SAILS OUT

After loading the cargo from the said port the vessel sails out to its discharge port. While
in the sea the master of the vessel keeps informed about the status and position of the
vessel this is done through:

DAILY REPORT
Once the vessel is delivered to the charterers at the said port the hire charges start on a
per day basis. The master of the vessel will send daily reports which include the details of
the vessel i.e.
1.
2.
3.
4.
5.
6.
7.

The location of the vessel

The direction in which it is progressing.
The speed of the vessel.
The weather conditions.
Consumption of fuel & freshwater in a particular day.
Balance of freshwater and fuel remaining on board.
On the basis of the speed and the weather conditions the master gives an estimate
as to when the vessel will reach a particular port (may keep changing as and when
weather conditions change).it may reach before time due to favorable weather
conditions or may be delayed due to unfavorable conditions / engine breakdown
or any other reason that the master justifies in the daily report.

This is done on a day to day basis till the voyage is completed this helps to keep a track
of the vessel and also to make arrangements at the port for the vessel if any problem
arises. For example a vessel may consume more fuel and may cover less distance due to
bad weather and therefore, would require fuel at the time of arrival at the port which also
has a protocol to be followed and may take a few days to arrange the same.

DISPORT ARRIVAL / DISCHARGE OF CARGO

38

After the vessel reaches the disport to discharge the cargo it follows several protocols as
in the case of load port. The same procedure is carried out the master sends a NOR (here
for discharging the cargo), berthing, commencement of discharge of cargo. The master of
the vessel keeps on updating the charterers and the owners of the vessel by sending the
daily report stating the amount of cargo discharged and also the consumption of fuel and
fresh water, estimated time to discharge.

OFF-HIRE BUNKER SURVEY

It is a survey done at the time of re-delivery of the vessel to check the remaining fuel on
board. The surveyor is appointed by the charterer to be sure about the reading of the
balance fuel on board and the cost for appointing the surveyor is generally split 50/50.
The survey report also mentions the date and time when the survey was done. This report
is signed and verified by the chief engineer of the vessel, master of the vessel and the
surveyor.

RE-DELIVERY REPORT
A Re-delivery report includes the details as to when was the vessel re-delivered to the
owners. It mentions the latitude, longitude, local time and the GMT time then. It also
gives the details of the fuel remaining on board. A certificate of re-delivery is also issued
stating that the owners have received the vessel from the charterers and details of the
balance fuel and fresh water and time and location of the re-delivery of the vessel. This
certificate is signed by the master of the vessel, the attending surveyor and the agent
appointed by the charterer.

PERFORMANCE EVALUATION / VOYAGE PERFORMANCE

REPORT
39

This report is made by the agency appointed by the charterers to evaluate the
performance of the vessel and to determine if speed and bunker consumption of the
vessel was as declared in the C/P; it is prepared basis the reports sent by the master which
includes:
1.
2.
3.
4.
5.

Voyage summary.
Voyage map.
Analysis of weather.
Time analysis.
Bunker analysis.

Based on the above analysis the off-hire charges are deducted by the charterer in the
statement of accounts. The above analysis consist of various calculation made on the
basis of formulation of reports and other data which considers the averages of the speed
of the vessel, distance covered during good weather, bunker consumed etc. overall the
report highlights the extra time and bunker consumed.

ACCOUNTING PROCEDURE IN DRY BULK VESSELS

STATEMENT OF ACCOUNTS
A statement of accounts is an invoice sent to the charterers at the end of the voyage it
includes:
1.
2.
3.
4.
5.
6.
7.

The hire charges i.e. number of days for which the vessel was hired.
Ballast bonus (if any).
Add Commission i.e. the commission which goes to the charterer.
Bunkers on delivery
Bunkers on Re-delivery
Survey fees (split between the charterers and the owners of the vessel).
CVE cable, victualing & entertainment allowance as agreed in the recap on pro-

rata basis.
8. ILOHC (In lieu of Hold Cleaning) Cleaning charges as agreed in the recap.
40

9. Off-hires i.e. breakdown of vessel and the delay due to the vessel which is
excluded and considered as extra days taken by the vessel due to problems like
breakdown of engine. This also includes extra fuel consumed within those days /
hrs. This amount is deducted from the actual hire charges and it is a burden for the
charterer and therefore deducted for the actual hire charges.
10. Performance claim (as per performance evaluation report).
11. Claim due to short loading of cargo (may arise due to De-Ballasting or any other
reason whatsoever.)
12. Actual amount received from the charterers till date.
Statement of accounts is an invoice that mentions the amount earned after deducting all
the amounts from the actual hire. The statement of accounts is prepared both by the
charterers as well as the owners and which is verified by facts and figures sent by the
master and on the basis of the performance evaluation report of the charterers and later
the queries are settled and so are the accounts.
The SOA is a statement of accounts it is an invoice that is sent to the charterers it consist
of the details of the number of days the vessel was hired (includes date and time of hire
from the day of delivery to the day of redelivery no of days), it gives the amount the
charterers are liable to pay to the owners after deducting the off hires.
Off-hires are deductions due to time loss and bunker over consumption due to technical
reasons like Crane break down, engine break down or commercial reasons like deviation
from the route for bunkering etc. The deductions are calculated on the basis of the reports
prepared by the agents appointed by the charterers; these reports are based on the inputs
provided by the master in the daily report. The details of the vessel are monitored through
the daily report and also the agents have a system which monitors the vessel, the weather
conditions the vessel faces. Considering all the aspects a performance claim report is
prepared by the charterers, this includes the details of the deductions (delays, off-hires,
engine breakdown, excess fuel consumption, total time loss) from the actual hire.
The statement of facts plays an important role in determining the off-hires. For example if
the vessel has cranes to load/dispatch cargo and any one of the cranes do not function
then the SOF will include the details of such malfunctioning, it will state the date and
41

time from when it was not functioning, which makes it easier to calculate the off-hire. For
example if the vessel has four cranes and one of the crane stops functioning from the
time it was to dispatch cargo then the off hire would be 25% of the time taken to
discharge cargo (say it took 4 days to discharge cargo then the off hire would be 1 day as
per 25%).

OWNERS STATEMENT OF ACCOUNTS

42

CASE FOR TIME CHARTER

43

A vessel travels from India to South Africa to load cargo and for discharge in India. The
details as per the recap are:
1) Speed 13.0 K (B) 31 MT & (L) 32.5 MT IFO & 0.1 MT MDO, Port Idle
3.5IFO, 0.1MDO, Working 4.0IFO, MDO 0.1.
2) Delivery of vessel at South Africa.
3) Delivery of the vessel at 0030 HRS on 10.09.2015.
4) Laycan at 0001 HRS at 05.09.2015 2359 HRS 10.09.2015.
5) Hire charges USD 7750 & Ballast bonus 265000.
6) ILOHC USD 5000 & C.V.E USD 1500 pro rata basis
7) 3.75% Ad commission & 1.25% agent commissions.
8) Bunkers on delivery 275 IFO & 100 MDO.
9) Bunkers on re-delivery 150 IFO & 80 MDO.
10) Survey fees (on hire USD 420, off hire USD 100) split 50:50.
11) Performance claim 61.23 HRS.
12) Re-delivery of vessel at 1315 HRS on 08.10.2015.
13) Bunker over consumed IFO 105MT, MDO 5.5MT.
14) Amounts Received 370000, 30000, 60000 & 500.
A statement of accounts is prepared basis details given.

OWNERS STATEMENT OF ACCOUNTS

44

INTERPRETATION OF THE STATEMENT OF ACCOUNTS

45

1. Gross Hire total hire amount [( hire charge per day) 7750 X (total number of days )
29.53125 = USD 228867.188)]
a. From date and time from when the vessel is hired (10.09.2015 at 0030hrs).
b. To date and time until vessel is hired (08.10.2015 at 1315 hrs).
2. Ballast bonus if the vessel is going empty to a certain port a lump sum amount is
paid by the charterer (USD 265000).
3. Adcomm + brokerage commission paid to the agent is 3.75% (for charterers) &
1.25% (for broker) of hire charges + ballast bonus.
a. Ad comm. - commission paid to the charterers is 3.75% of hire charges + ballast
bonus i.e. ((228867.2+265000) X 3.75%) = USD 18520.0195
b. Brokerage - commission paid to the broker is 1.25% of hire charges + ballast
bonus i.e. ((228867.2+265000) X 1.25%) = USD 6173.34
c. Ad comm. Reverse commission reversed due to off-hire charges 2.55 days X
228867.2 = USD 741.46.
d. Brokerage reversed brokerage reversed due to off-hire charges 2.55 days X
4.
5.
6.

7.
8.

228867.2 = USD 247.15

Cost of Bunkers on delivery
a. IFO at the time of delivery was 275 MT at USD 285 = USD 78375.
b. MDO at the time of delivery was 100 MT at USD 460 = USD 46000.
Cost of Bunkers on re-delivery
a. IFO at the time of re-delivery was 150 MT at USD 285 = USD 42750.
b. MDO at the time of re-delivery was 80 MT at USD 460 = USD 36800.
C.V.E allowance is USD 1500 p.m. on a pro-rata basis.
a. C.V.E was taken as per the duration of the vessel i.e. 29.53 days = USD 1476.56.
b. C.V.E. was reduced due to time loss of 2.55 days = USD 127.56.
c. C.V.E. was reduced due to off hire of 0.49 days = USD 24.5.
ILOHC a lump sum of USD 5000 was paid.
Survey fees:
a. On-hire survey fees were USD 420 which was split between the owners and the
charterers in the ratio of 1:1 = USD 210.
b. Off-hire survey fees were USD 100 which was split between the owners and the

charterers in the ratio of 1:1 = USD 50.

9. Performance Claim They are the loss of the income due to underperformance of the
vessel and are determined by the voyage performance/weather report. They can be
further classified as time loss and bunker over consumption.
a. IFO consumption off-hire the vessel was delayed by 2.55 days, therefore it
consumed 80.36 MT of fuel in those days is treated as off-hire.
b. MDO consumption off-hire - the vessel was delayed by 2.55 days, therefore it
consumed 0.255 MT of fuel in those days is treated as off-hire.

46

c. Time loss time loss is calculated on the basis of hours given in the case i.e.
61.23 hrs equivalent to 2.55 days = 7750 X 2.55 = USD 19772.19.
10. Off Hire:
Bunker over consumption:
a. IFO the vessel consumed more than it should as mention in the recap. It
consumed 20 MT of fuel and is deducted from the hire to be received to the
owners. 20 X 285 = USD 5700.
b. MDO - the vessel consumed more than it should as mention in the recap. It
consumed 1.0 MT of fuel and is deducted from the hire to be received to the
owners 1.0 X 460 = USD 460.
c. Time loss the time loss due to off hires is 0.49 days X 7750 = USD 3797.50
11. Amounts received are the total amount received by the owners from the charterers
(370000+38000+50000+10000 = USD 468000).
12. Balance to owners is the sum total the owners have to receive from the charterer
after deducting the off-hires and performance claim for the hire charges, here the
owners have to receive USD 301.05 from the charterers.
Thus it can be inferred that losses were incurred mainly on account of performance claim
(i.e. speed underperformance/ bunker over consumption) and off-hires.

CASE FOR A VOYAGE CHARTER

A vessel travels to SUR (Oman) on a voyage charter the details of the voyage as per the
recap are given below:
1.
2.
3.
4.
5.

Vessel name SCI

Laycan XX- XX June 20XX
Cargo to load Granular Urea 38807 MT (estimated 38000MT).
Load port SUR (Oman), Disport Kakinada.
Load rate 12000MT PWWD (Per weather working day), Disport rate 5000MT

PWWD.
6. Freight rate USD 17 per ton.
7. Demurrage USD 10000 per day.
8. The vessel also moves to Colombo for bunkering (200 MT IFO @ USD 750 / MT)
9. Estimated cost of bunkering IFO USD 605 & MDO USD 1030.
10. Estimated route Tuticorin Sur (1800) Sur Kakinada (2600).

47

11. Actual route - Tuticorin Sur (1465) Sur Colombo (1523) Colombo Kakinada
(850).
12. Estimated port dues load port 70000, disport 80000, bunkering dues 2500.
13. Actual dues disport (Haldia) 82000, disport (Vizag) 65000, bunkering dues
2000.
Basis above a voyage estimate is prepared and compared with the actual voyage; the
comparison of these two reports is called Variance Analysis Report.

Voyage Estimate Report

The voyage estimate is a report which consists of estimated details of the vessel .i.e.
1.
2.
3.
4.
5.
6.

Name of the vessel.

Charterer.
Laycan period.
Estimated Cargo quantity.
Load port and discharge port.
Estimated Direct Operating Expenses (load port dues, disport dues, bunkering

cost & bunkering dues.

7. Estimated Voyage duration.
8. Freight rate.
9. Demurrage charges.
Based on the above details the gross total income is obtained from which direct operating
expenses is deducted which gives us Net operating expenses. The net operating expenses
id then divided by the estimated voyage duration which in turn will give the net yield per
day.

48

VOYAGE ESTIMATE REPORT

49

Voyage Charter Actual Report

50

The voyage charter actual report is similar to the voyage estimate report; but this includes
the actual details of the vessel i.e.:
1.
2.
3.
4.
5.

Voyage route.
Distance covered.
Fuel consumed.
Load port dues.
Dispatch charges (if the loading / unloading is done faster we pay dispatch

charges else we incur demurrage charges).

6. Bunker dues.
7. Net cargo loaded.
8. Net Income (after deduction of commission).
9. Actual number of days of voyage.
10. Yield per day.
11. Duration of the voyage.
12. Exchange rate.
13. Profit / loss for the total voyage.
Based on the report the actual profit or loss of the vessel is determined.

VOYAGE CHARTER ACTUALS

51

VARIANCE ANALYSIS
52

Variance analysis is the comparison between the estimated voyage report and the actual
voyage report. The variance includes the details of the differences in both the reports. The
variance analysis report throws light on the facts as to what caused differences between
the two reports.

53

54

INTERPRETATION OF THE VARIANCE ANALYSIS REPORT

As seen in the above report the differences are as follows:
1. Weight differences 807MT of more cargo was loaded on charterers request.
2. Port Disbursement expenses are increased by USD 3500 (load port (5000) +
bunker port (500) discharge port (2000)).
3. Total number of days sees a difference of 2.73 days mainly due to faster discharge
at Kakinada port.
4. The cost of the bunker also increased by USD 7885.
5. Higher bunker rate owing to FIFO bunkers supplied earlier.
6. The vessel consumed 101.57 MT of less fuel as the vessel took a shorter route as
compared to the estimated route.
7. Dispatch amount of USD 34475 is to be paid to the charterer due to faster
discharge of cargo at Kakinada.
8. No demurrage charges are paid due to faster discharge of cargo.
9. The dispatch and demurrage cost are determined by 2 reports i.e. the lay time
report during loading and discharging of cargo. The charterer allows certain
period within which the cargo has to be loaded or discharged, if the number of
days exceeds the period sanctioned we would have to pay demurrage cost and in
case if we complete before the given period we have to pay dispatch to the
charterers.
10. After analyzing the report we see that the variation in the variation in the yield
was USD 353, this was because of the additional cost of the increased quantity,
extra fuel cost, and dispatch charges which were not included in the voyage
55

estimate. After having included all these components in the voyage estimate the
yield per day comes approximately to USD 6918.

RECONCILIATION OF DRY BULK VESSELS

Reconciliation involves two major processes i.e.

56

1.
2.
3.
4.

Account settlement.
Audit.
Closure of file
Brokerage Payment (If not direct)

ACCOUNT SETTLEMENT
Account settlement is closing of the accounts i.e. to receive the entire amount due by the
charterers after deducting necessary off-hires and expenses. After the statement of
accounts is prepared it is sent to the charterer, the charterer then verifies it and sends his
own Statement of accounts including off-hire according to his reports. Once the statement
of accounts is received from the charterers end it is checked by the commercial
department for any excess deductions in the off hires. If both the statement of accounts
match the account is settled else the discrepancies and solved and settled mutually.
In case the amount of disputed off hires are high then P&I (Protection and Indemnity)
club may come into picture. The P&I Club on gathering all details leading to the off-hire
will advise the commercial department if there is merit in the owners contention or if it
would be better to settle it amicably. However if the undisputed amount is high and
owners have good merit to contest, the P&I club may advise the owners to appoint a
lawyer and file a suit against the charterers.
Legal proceeding will take place after lawyer is appointed and the award to the arbitration
will bind the owners and charterers

AUDIT & OFF HIRE APPROVAL

Audit in a nutshell included the verification of data in the finalized SOA. In an audit all
the documents that are relevant to the data in the SOA are bunched and sent for
57

verification. These documents include the recap, the daily report, delivery report, arrival
report, berthing report, loading report, off-hire and on hire bunker survey, bunkering, any
issues pertaining to the vessel or the voyage, SOA, voyage estimate, voyage actual, off
hire charges, performance claims, departure report, redelivery report and all other
necessary details are recorded and put forward to an audit team. This team verifies if all
the charges are true and fair, all the figures are based on the information provided and no
faulty errors have occurred, all calculations are correct i.e. the off hires. Once the audit
department confirms that all the expenses mentioned in the file are genuine then the file
is sent for the DOPO approval (Delegation of power) to the DFO (Designated Finance
Officer), he also like others verifies and approves the off-hires and deductions. After it is
approved here it is sent to the vice president for approval, he again checks if all the offhires and deductions are genuine and gives his comments and opinions on the report.
After the approval from the audit department, a separate note is prepared indicating the
off-hires incurred during the voyage and is sent to the DFO (Designated Finance Officer)
for approval of the off hires. Once the approval from DFO is obtained with the
subsequent signature of the vice president of the commercial department the off hires are
entered in the system (Danaos) such that the final SOA in the system shows zero
outstanding to the owners and charterers.

CLOSURE OF FILE
Once the system indicates zero balance between owners and charterers a closure note is
put with the DFO indicating closure of the file.

BROKERAGE PAYMENT
If the voyage is fixed by any broker the brokerage is paid after the closure of file and the
amount of payment is as per the brokerage commission mentioned in the recap.

SIGNIFICANCE OF THE STUDY

It mainly focused on The Shipping Corporation of India under the shipping industry. The
58

survey was conducted in the office of The Shipping Corporation of India. Necessary files
were studied and the procedures were detailed by the employees of the company in the
Bulk Carrier and Tanker Division.

LIMITATIONS OF THE STUDY

The limitations of the research for working of The Shipping Corporation of India with
regards to the Operations, Accounting Procedures and Reconciliation of Dry Bulk Vessel
are as below:

Only the Dry Bulk division under The Shipping Corporation of India considered in the

research.
The present research study is limited to continents that exclude American and European
continents.

FINDINGS

59

Observations and analysis of the various sample voyages carried out by dry bulk vessel
lead to the following findings:
1. The dry bulk vessel of SCI largely carry coal as the major chunk of cargo, with
Iron Ore, Fertilizers, Grain, Manganese Ore, Cement etc. being the other cargo.
The bulk vessel of SCI largely operates between Asian/African continents and
Australia with South Africa, Middle East, China and Australia being the most
frequented routes apart from India.
2. Around 80-90% of the voyages of bulk vessels are Time Charter with the
remaining being voyage charter.
3. Charter hire, and thus the revenue, is largely driven by trade forces and demand
supply gap and ship owners have very little influence over prices.
4. The governing document that binds the Owner and the charterer is called as the
Charter Party. It is the most important document and lays down all clauses by
which the voyage shall be executed.
5. For a successful execution of voyage, all concerned parties like Ship Owners,
Charterers, Agents, Brokers, Port Authorities have to do the needful on a timely
basis and no one party on its own can carry out the voyage.
6. Variance analysis indicated that difference noticed in yield of pre voyage estimate
and post voyage calculation was which largely affected were as a result of speed
claim/performance claim and off-hires.
7. While the difference in yield for a time charter is due to performance claim and
off-hires, in case of a voyage charter it is due to possible change in bunker prices
and demurrage/dispatch.

RECOMMENDATIONS
1. To realize the maximum yield, off hires need to be minimized which means all
equipment and machinery of the vessel especially like cranes, grabs etc need to be
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monitored on and very well maintained. Besides, vessels speed norm to be

maintained vis--vis bunker consumption.
2. Also try and to fix vessel for DLOSP (Dropping of Last Outbound Sea Pilot)
delivery as much as possible instead of APS (Arrival Pilot Station) delivery.
3. Have a check list of all dos and donts for specific ports and cargo based on
previous voyages. For example a well-documented list of bunker prices, bunker
survey cost, FW cost at different ports will enable expedition of decision making.
4. Since timely decision is of utmost importance in shipping industry, structured
cohesive bonding that integrates commercial, technical and chartering teams is
advisable.
5. Also since shipping is a very dynamic and incident filled industry which leads to
lot of legal advice, it would be advisable to have a legal team in house which will
expedite advice and thus avoid time loss in the communication chain with the P&I
club.

BIBLIOGRAPHY

Abbreviations and terms in shipping, http://www.tkmglobal.net/shipping.html as

on 16.07.2016.

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Challenges - https://www.ukessays.com/essays/economics/challenges-faced-bythe-shipping-industry-economics-essay.php as on 16.07.2016

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