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Indian Shipping Industry- An overview of SCI
INDIAN SHIPPING INDUSTRY AN OVERVIEW OF SCI

AHSAN ABDUL RASHID KHAN
(Bachelor of Management Studies) Academic Year 2011-2012
Under the Guidance of
Prof. ARUNA DESHPANDE
UNIVERSITY OF MUMBAIS
ALKESH DINESH MODY INSTITUTE

FOR
FINANCIAL AND MANAGEMENT STUDIES
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University of Mumbais Alkesh Dinesh Mody Institute For Financial and Management Studies
Certificate
I, Professor ARUNA DESHPANDE, hereby certify that Mr. /Ms. AHSAN KHAN, TYBMS Student of Alkesh Dinesh Mody Institute for Financial and Management Studies, has completed a project titled INDIAN SHIPPING INDUSTRY- AN OVERVIEW OF SCI, in the academic year 2010. The work of the student is original and the information included in the project is true to the best of my Knowledge.
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Signature of Guide with Date: -
Signature of Director:-
Declaration
I, Mr. /Ms. AHSAN KHAN, TYBMS Student of Alkesh Dinesh Mody Institute for Financial and Management Studies, hereby declare that I have completed the project titled INDIAN SHIPPING INDUSTRY- AN OVERVIEW OF SCI during the academic year 2011.
The report work is original and the information/data included in the report is true to the best of my Knowledge. Due credit is extended on the work of Literature/Secondary Survey by endorsing it in the Bibliography as per prescribed format.
Signature of the Students with date
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University of Mumbais Alkesh Dinesh Mody Institute For Financial and Management Studies
Name of Student: AHSAN ABDUL RASHID KHAN Roll Number: 43
Title of the Project: INDIAN SHIPPING INDUSTRYAN OVERVIEW OF SCI
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Signature of Student with date:
ACKNOWLEDGEMENT
I would like to express my sincere gratitude to Prof. Aruna Deshpande for his immense help and for the guidance offered by him. A special mention must be made of Director Mr DR CHANDRAHAUNS CHAVAN. for his constant encouragement and support. I also take this opportunity to thank our guidance Prof. Aruna Deshpande without whose guidance and help, this project would out have been possible. Finally I would like to thank all those people who have directly and indirectly helped me during the course of this project.
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INDEX
SR.NO CONTENTS 1 2 3 4 5 6 7 8 9 10 Introduction PESTEL Analysis of Indian Shipping Industry (ISI) 5 Forces Porters Model of ISI Ownership pattern of Indian fleet Regulation of ISI Contribution of shipping to the world economy Overview & Importance of Liner Shipping in India What constitutes of ISI ? Challenges & Opportunities of ISI PG.NO 05 06 19 29 30 33 35 41 42
Shipping Corporation of India (SCI)- About SCI, Mission, Vision, Objectives 44 Of SCI
11 12 13 14 15 16 17 18
Organization structure of SCI Operations of SCI Types of Services provided by SCI List of Customers & important persons to contacts Types of Division & Types of Department Redressal of Public Grievance Conclusion Executive Summary
53 54 57 62 63 76 87 03
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19 20
References Bibliography
88 88
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Executive Summary Shipping Industries have been formed for more than 130 years. Their practices include, price fixing, Loyalty contract system and capacity management. These conferences, nonetheless, were given exemptions or immunity in many jurisdictions on basis of the stability that they are supposed to bring in the market. In fact in many places this sector is taken as the special sector. Shipping Corporation of India (SCI) is a part of this conference. The benefit to India is only to the extent of the recognition that SCI has achieved. The project proceeds in the following manner: It describes the importance of shipping for the world economy in terms of the growth in their size and capacity. A close look has been given to the liner shipping industry as this industry is prone to join conferences, not tramp shipping services. It also explains the importance of shipping in India. There are many factors which directly or indirectly affect the present day businesses like government policies, regulations, laws, human rights, competition, technology, international organizations, world trade bodies, child labour, minimum wage, pollution, accidents, risks, violence, security, labour, supplies etc. Therefore it becomes important for every business to determine these various factors and plan their strategies accordingly to survive against all such odds. But practically it is virtually impossible to consider all such individual factors and therefore specific models exists like PESTEL and Porter five forces which are applied available to determine the external and internal environments factors affecting the shipping industry in India, the same are applied here. Overall shipping industry in India is very large in size and volume, therefore Container Line business group has been taken for discussion under this study. Container line business involves hiring, transportation, repairs and movement of containers by exporters, trader or agents for transportation of goods to any foreign destination against agreed freight rates. The reason for choosing this industry as part of study is due to enormous support being given by government of India to promote foreign trade for the economic development. It explains some very critical concepts and issues covered in this report. As these conferences are, in
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fact, shipping cartels, the concept of cartels is explicitly explained along with the conditions that are making it possible for the liner shipping industry to form these cartels. Furthermore, the level of concentration in the international shipping market is also competition laws governing liner shipping conferences discussed in this section. In, recent developments in different jurisdictions in order to maintain competition and efficiency are discussed. The concluding comments have been given in section 5. explained. Then we come to the all over the world explaining the
exemptions given to them. The rationale behind the exemption provided to this industry is also
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Introduction With the changing economic scenario, factors such as globalization of markets, international economic integration, removal of barriers to business and trade and increased competition have enhanced the need of transportation. It is one of the most important infrastructure requirements which is essential for the expansion of opportunities and plays an important role in making or breaking the competitive positioning. Within transportation, shipping industry is one of the most globalised industries operating in a highly competitive business environment that is far more liberalized than most of the other industries and is, thus, intricately linked to the world economy and trade. Shipping is the lynchpin of the global economy. Over 90% of world trade is carried by the international shipping industry. Without shipping, it would not be possible to conduct intercontinental trade, the bulk transport of raw materials or the import/export of affordable food and manufactured goods. Ships are technically sophisticated, high value assets (the largest hi-tech vessel can cost over US $150 to build) and the operation of merchant ships generates an estimated annual income approaching US $500 billion in freight rates, representing about 5% of the total global economy. There are around 50,000 merchant ships trading internationally, transporting every kind of cargo. The world fleet is registered in over 150 nations, and manned by over a million seafarers of virtually every nationality. World trade continues to grow and the international shipping industry responded to demand for its services. Recently the service has enjoyed what has become the largest sustained period of buoyant markets within living memory. Shipping markets are cyclical and notorious volatile, and todays unprecedented markets are unlikely to continue forever. However, virtually all sectors of the industry have benefited from the recent global shipping boom.
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For delivery of goods, the four basic modes of transport are ocean, air, rail and road. Globally, the railway and road networks are largely used for domestic movement of goods while shipping is primarily used for transporting goods in large quantities between nations. The world sea-borne trade, at around 15.6 billion tonnes in 2010, represents nearly 96% of total merchandise trade and has been growing at more than 8% over the past 2 decades. In terms of value, the global shipping industry is estimated to be more than USD 823 billion and constitutes a significant part of the world GDP. As India makes a transition from an import-substitution closed economy model to an outward-oriented trade regime, the importance of shipping, as an enabler of trade and economic growth cannot be over emphasized. The countrys transport infrastructure is still underdeveloped. Freight costs, measured as a percentage of total value of imports (c.i.f) are around 18.3%, one of the highest in the world. Against this, the global average is around 7.11% and the average for all developing economies is around 13.21%. Massive improvement in transport infrastructure is necessary to enable future trade and economic growth. While, around Rs 700 billion of investments have been made in the last 8 years to augment port facilities in the country, and equally massive investments in road and rail networks, the shipping sector has received least attention from both investors and government bodies. PESTEL Analysis Political Factors: Shipping industry in India is administered by central government through Ministry of Shipping with the sole responsibility to formulate policies, programme and their implementation. Each port is governed under Indian Ports Act 1980 and Major Port Trust Act 1963 and administered individually by board of trustees under direct orders from central government. Political factors are important here due to immense involvement of government in this industry. Appointment of Custom House Agents: Customs House Agent (CHA) is a person who is licensed to act as an agent for transaction of any business relating to the entry or departure of conveyances or the import or export of goods at any Customs station.
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These agents are governed by Customs House Agents Licensing Regulations, 1984 which involve responsibilities like filing bills of entry, shipping bills, submitting documents, helping in examination of goods, payment of duty on behalf of principal, storage and movement of goods. They act as an intermediary between importer, exporter, clearing agent and custom house due to high involvement and technical nature of work involved in connection with clearance of cargo. These agents are appointed after clearing minimum laid criterias like minimum qualification as graduation, practical working experience in customs for 3 years, holder of pass in Form G as employee of company, reliability of applicant, financial soundness and completion of oral and written examination with maximum 3 attempts. This kind of agents positively affects the Indian shipping sector, because it prevents the fraud and illegal entry and controls the activities of shipping business in a particular manner.
Infrastructure Development:
Maritime Transport is a critical infrastructure for the social and economic development of a country. It influences the pace, structure and pattern of development. 90% of India foreign trade is carried out by sea, in contrast its existing port infrastructure is insufficient to handle trade effectively. In recent years, government has started promoting investments into infrastructure projects based on PPP model with allowance of up to 100% FDI and in return provides incentives of up to 100% tax exemption for maximum 10 years. As a result significant investments have been made by foreign players like Maersk, P&O Ports, Dubai Ports International and PSA Singapore in port development and operation activities. This kind of activities encourages new investors to invest in shipping while it also gives the benefit to the existing market players by loans and other facilities, and helps in development of sites, this factor is positively affect the industry.
Anti Sea Piracy:
Government is actively involved in curbing of sea piracy in Gulf of Aden off Somalia coast. Sea piracy has been a big problem in recent time for this industry specially trade and transit between India and counties like Sudan, Saudi Arabia, Djibouti, Egypt and Ethiopia. To protect vessels and crew from such pirate attacks, India has deployed its naval warship in Gulf of Aden since 2008 under informal Contact Group on
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Piracy off the Coast of Somalia (CGPCS), which is a broad based policy oriented group comprising 22 countries for securing Somalia coast from pirates. Around 59 Indian vessels are hijacked since 2009 till date but none of the seafarers or vessels have been held hostage due to proactive and prompt measures by government. This policy negatively affects the industry, because due to policy of government businesses in sea is not safe at Somalia coast, by which the shipping business is suffers a lot, because nobody wants do their business in such a dangerous condition.
Safeguarding Domestic Market:
With an action of anti dumping and anti subsidy measures in line with WTO agreement, government seek to provide necessary relief and protection to domestic companies against dumping of goods and articles at cheaper rates by exporting companies of foreign countries. India has been a victim since long against such unfair practices in items like import of chemicals, petrochemicals, pharmaceuticals, textile, steel and other consumer products which were dumped at cheaper rates than offered by Indian companies. Under these anti dumping measures government charges an additional duty on such cheap imported products making it equivalent to price offered by domestic market. This factor is negatively affects the shipping business, Because the anti dumping and high duty will discourage the foreign player to deal in Indian market and by this the Indian shipping market suffers a lot because of less import and less opportunities of business in such a condition.
Promoting Exports:
To overcome shortcomings on account of multiple controls and clearances; absence of world-class infrastructure, unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000. This policy intends to make SEZs an engine for economic growth, employment opportunities, attract foreign direct investment, infrastructure development with attractive incentives like exemption from central and state taxes, 100% income tax
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exemption for 5 years, duty free imports, exemption from custom and excise duties etc. As a result there are presently 105 SEZ units operational in India with continuous growth rate of more than 50% annually. Even during the period of recession when global markets were struggling Indian SEZs were booming with growth rate of 93% and 50% in fiscal year 2007-2008 and 2008-2009 respectively. This factor is positively affects the Indian Shipping Business, as the tax saving and other benefits in SEZ is more, the foreign players are also interested to invest in Indian Shipping Industry, which will results into the development of Indian shipping industry. Other thing is that 100% tax benefit and other duty free schemes encourage the domestic players to invest more and more and export as much as possible, which will result into high growth of industry and upliftment of sector. Overall, from the above factors, two factors are negatively affects the shipping industry and two are positively. But, overall all the present and upcoming governments are interested in development of shipping industry. So, the political factors are positively affects the shipping industry. Economic Factors: Economic factors are as important as political factors which concern not only this industry but every industry in each and every corner of the world. Change in economic conditions at domestic or at international level largely affects the functioning of every industry; following are some of the economic factors which may affect shipping industry. Exchange Rates are required for determining custom and excise duties, valuation of import and export goods, payment of duties etc. These rates are not uniform and fluctuate daily in line with demand-supply factors prevailing in international markets. With respect to shipping industry, government of India informs public involved in shipping trade about uniform monthly exchange rates, through monthly notification. This ensures that dealing and communication between trade bodies and government agencies, in respect of duties and value of goods is uniformed across all ports and across all custom houses throughout India, instead of different rates and different value each day.
Rationalization Measures:
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Government is promoting trade of medical equipments, construction machineries, renewable sources of energy, bio degradable products, solar energy, export of species, tea/ coffee plantation and agricultural machinery etc with incentives like minimal or zero custom duty. In contrast government demotes import of products like petrol, diesel, precious metals which add no value to the economy as a whole. These rationalization measures are untaken to improve infrastructure, quality of life of people, better facilities and environment friendly products. This factor is positively affects the shipping industries, as encouragement of export, agricultural improvements etc will increase the export and increase the profitability of Indian shipping industry
Push n Pull Factors:
Due to global recession since last couple of years liquidity of countries around the world has affected badly and as a result many governments have increased the rates on fixed and saving deposits to pull out money from its people to fund the deficit. This step was successful to some extent which was further boosted by relaxation in income tax slabs. For i.e. individual in India earning 5 lacs (0.5 million) or more was paying 30% tax under previous rules which is now decreased to 20% under Union Budget 2010-11. This means saving of Rs 50,000 by way of tax annually which has indirectly increased the buying power of that individual. Tax rebates are also introduced if the investment is made in national health care, medical and infrastructure projects. These new procedures and relaxations have provided relief to around 60% of taxpayers by way of savings in taxes. This factor is also positively affects the shipping industry indirectly, as the circulation of money getting high, the demographic pattern of people will also change like income, purchasing power etc. which will increase the business of shipping by more movement of goods and services for meet the high demands. Inflation: Rate of inflation reflects changes in demand and supply conditions in economy. Inflation management therefore involves controlling demand and supply factors by various monetary and fiscal measures
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respectively. Before global recession wholesale price index (WPI) inflation was high due to increase in commodity and fuel prices, with subsequently decreased due to meltdown in global economy which has resulted in sharp decline of commodity prices. During the period 2008-09 inflation rate in India was 10.20% which has reached to 1.63% in 2009-10 due to above factors. As regards food inflation, the continuous increase in inflation rate from start of 2008-09 to 2009-10 was majorly due to unfavorable monsoon in India which was worst since 1972. Food inflation has reached double digits because of shortage in supply of wheat, rice, pulses, sugar, onions and potatoes. Government initiated several anti-inflationary measures like exempting duties on import of rice, wheat, pulses, edible oils to bring more imports to country and also allowing distribution of rice and wheat to consumers through public distribution centers (PDS). Futures trading, exports have also been suspended for rice, wheat and onions to control increasing prices. However inflation volatility in India was much better and stagnant compared to other countries of world. Inflation rate negatively affect the Indian Shipping industry, because high rate of inflation will resulted into high prices and high rate of transfer of goods will decrease the business of shipping. Overall, economic factors are positively affects the shipping industry. Except inflation all factors are positively affects the shipping industry and growth rate is also high. Socio-Cultural Factors: Quick Facts: Indian civilization can be traced back to 3400 BC during the development of Indus Valley Civilization. India lies to the north of the equator between 644' and 3530' north latitude and 687' and 9725' east longitude. India's coast is 7,517 kilometers long which consists of 43% sandy beaches, 11% rocky coast including cliffs, and 46% mudflats or marshy coast India has a GDP of over USD 1.367 trillion, the 11th largest in the world. It is the 4th largest in the world in terms of purchasing power parity. Its per capita income is USD 1124, 139th in the world. Population in India is second highest in the world. As of 2010, Indias population is estimated to be 1.18 billion. India ranks 139th globally, under medium human development category according to Human Development Index (HDI). Due to significant changes in economic reforms undertaken during the industrial revolution in 1991, India has transformed itself to one
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of the fastest growing economies in world. India is also a strong member of Commonwealth of Nations, SAARC, and WTO. Indias strong 55,000 military personnels are serving in 35 UN peacekeeping operations across 4 continents. Demographics: India has more arable land than any other country except United States, and largest water covered area after Canada and United States. Indian life revolves mostly around agriculture and allied activities in small villages, where the overwhelming majority of Indians live. As per the 2001 census, 72.2% of the population lives in about 638,000 villages and the remaining 27.8% lives in more than 5,100 towns and over 380 urban areas. In languages Hindi is used by over 80% of population in India followed by Muslim (13.4%), Christian (2.4%) and Sikhs (1.3%). Muslim population in India is third largest in world after Indonesia and Pakistan. 57% of population in India is between age group 15-59 years while around 35% of population is below 15 years. Literacy rate in India is 64.8% overall distributed between urban (79.9%) and rural areas (58.7%). This factor is positively affects the shipping industry, as difference in location, demand people will demand different things and import of it will increase the shipping business. Cultural Trends: Trends are a manifestation of new enablers unlocking existing human needs which are constantly changing with time. Cultural trend reflects in many tangible aspects ranging from architecture to attire to food to culture which are deeply embedded in the rich historical and geographical elements of the country. In the past two decades, India has seen plethora of change, more so, as an after effect of globalization. A nation of thinkers has become a nation of doers, eco sensitivity is on the rise, and all this has translated into a new language of patriotism, and speaks of a redened culture. This cultural shift has denite impacts on the Indian work scenario. Start-ups today have fresh innovative concepts and exciting working models which highlights the key socio-cultural trends in India. Businesses are increasingly catering to rational, practical and current cultural needs and are not based only on traditional models and offerings. Indian society is defined by relatively strict social hierarchy because of high degree of syncretism and cultural pluralism. Marriage is considered to be a thought for life and therefore divorce rate is extremely low in India.
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Recent Trends in 2010: Government has started its long awaited prosperous plan to provide unique identification number to every citizen which would be used primarily as the basis for efficient delivery of welfare services. It would also act as a tool for effective monitoring of various programs and schemes of the Government. This program of unique identification will strengthen transparency and accountability. Plans are also underway to improve literacy rate of 60mn females among 70mn illiterate adults through introduction of Saakshar Bharat (Educate India) scheme. Enhancing post-matric scholarships schemes for scheduled caste students. Creation of 0.1mn skilled manpower under National Skill Development Corporation scheme. National Social Security Fund for unorganized sector workers to be set up with an initial allocation of Rs. 10,000mn. This fund will support schemes for weavers, toddy tappers, rickshaw pullers, bidi workers etc. Various such measures are being taken by government to improve the education level in rural areas, improving the health of rural people and those living below poverty line, developing rural infrastructure and rural housing.
Overall, socio cultural factors positively affect the industry. Because people are more relay on shipping and this will increases the growth. Technological Factors: Technologies significantly affect humans ability to control and adapt to their natural environments. Technological development like printing press, telephones and internet to name a few have lessened physical barriers to communication and allowed humans to interact freely on a global scale. However, not all technology innovations are good for society like development of nuclear and other weapons which only create destruction. In recent times, more encouragement is being given to new technologies which are environment friendly. Shipping industry is majorly dependant on technology which fastens movement of cargo and ships, processing of data, increases output, better delivery and communication, savings in fuel and controlling costs. We will see some of the benefits of technology which is revolutionizing shipping industry.
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Faster Data Processing:
Traditional methods of manual data entry using typewriters for preparation of shipping documents, bills of entry, survey reports, load/ discharge list has been taken over by computers and internet. Now customers are preparing shipping instructions in their own office using computers and directly sending them to shipping lines for preparation of bills of lading using internet. Customers are also receiving web invoices and are making payments to shipping lines through online banking. This technology improvement has changed the way people were traditionally working with more ease, flexibility and efficiently. Customers can also track estimated arrival/ departure of their cargo to/ from terminal on shipping lines website because of synchronization between companys system and internet. Shipping lines and CHAs have also benefited with this technological innovation, they are now able to communicate with customs, government offices easily through mails and can send official shipping documents using encrypted data transfer channel. These e-business solutions has benefited organizations by way of low costs, reduction in errors, short processing times, reusable data, real time information, less rekeying, saving of phone, fax and courier costs, secure solutions, seamless flow etc.
These e-solutions were further boosted in shipping industry with introduction of INTTRA (third party ebusiness platform) which has made possible for customers to send same data to multiple operators rather than sending each data individually to every operator. Almost every shipping communication between customer and shipping lines are now being done through this system. Another breakthrough in this field was implementation of Customs EDI system (Electronic Data Interchange), which connected Indian customs with players in international trade electronically. The main purpose for its implementation was to respond quickly to the needs of trade, reducing interaction of trade with government agencies, uniformity of assessment and valuation across all custom stations, providing quick and correct information and statistics to policy makers. It has reduced the paper work, operational time, costs drastically with increased data accuracy, security and management.
Ship Technology:
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Changes in ship building and designing technology have also made significant changes in order to decrease carbon emissions, reducing erosions to save marine ecosystem and to increase fuel efficiency. One innovation which is underway in field of recirculation of exhaust gases in ships, which will reduce pollution of Nitrogen Oxide in atmosphere. This exhaust gas recirculation (EGR) system from MAN Diesel can reduce nitrogen oxide emissions by 50% today and 80% in near future. The system works by directing part of a vessels exhaust gas back into the engine scavenge air, reducing the oxygen content in the combustion chamber. The resulting lower combustion temperature in turn reduces nitrogen oxide formation. Testing of this prototype system will be done in of the container vessel in current year (2010). Another technology is developed by SISTEMAR, in design of propeller which is expected to increase efficiency of ship by 5-8%. this contracted and loaded tip (CLT) propeller is an unconventional propeller which will reduce tip vortex, reduce cavitations, improve manoeuvring and will reduce emission by 5-8% compared to conventional propellers. After the initial testing it has been found that new propeller has significantly reduced vibrations onboard the ship, increased the efficiency and the propeller is causing low induced pressure pulses. Overall, technological factors positively affect the shipping industry, because development in technology will useful in reducing the time of process and useful in timely decisions. New technological advancement will increase the business by better service quality and fast data processing. Environment Factors: Over the decades, the depletion of ozone layer and its preservation had been high a priority for environmentalists and developed nations. Campaigns and initiatives are being taken globally to reduce these carbon emission levels through technological innovations and mass education. Following are some of the initiatives taken to control accelerating environment degradation. The UNs Intergovernmental Panel on Climate Change (IPCC) believes that global warming is largely due to increase in CO2 levels and other greenhouse gasses which are caused by human activity all over the world. Perhaps the most dramatic evidence of this change is that about half of the Arctic ice has disappeared over the last 20 years. From a CO2 emissions perspective, shipping is one of the most climate-
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friendly ways to transport goods with very less amount of CO2 emissions. It is essential to make sure that ships emit low carbon footprint, not only to help climate but also to remain competitive.
Globalization requires the transportation of goods between countries. A ship emits less CO2 per tone of goods transported than transportation by train, lorry or plane. Greater the proportion of goods transported by containership, the better it is for the climate. Therefore it is important to improve the efficiency of ships through better designs, hulls, propellers and better utilization of waste head.
Marine Protection Programmes:
United Nations Regional Seas Programme launched in 1974 to address the issues on degradation of worlds ocean and coastal areas by engaging neighboring countries in comprehensive actions to protect their shared marine environment. United Nations oversee the implementation of programmes and enact regional action plans on marine emergencies, information management and pollution monitoring. Nearly 20% of sea pollution comes from dumping of oil and other wastes from ships, from accidental spills and offshore oil drilling. Marine pollution can kill birds, marine mammals and fish, particularly near coastline. India is a member country of this programme and it has its own indigenous National Oil Spill Disaster Contingency Plan (1996) which looks after protection of marine environment around Indian coast with help of coast guard and other non government agencies. Another non profit organization The International Tanker Owners Pollution Federation Limited promotes effective response to marine spills of oil, chemicals and other hazards material by way of technical advice and information. It was established in 1968, in wake of Torrey Canyon incident, to administer the voluntary compensation agreement to those affected by oil spills. This policy is adversely affects the shipping industry, because of heavy and strict rules for transporting a hazardous chemicals and using of fuel in ships. Ship Recycling: After the expiry of operational life of ship, it needs to be recycled or dismantled whereby its parts and equipments can be reused for i.e. steel, copper cables and aluminum can be recycled to produce new steel,
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copper and aluminium respectively. Although this principle of ship recycling may sound good but the working practices and environmental standards are much different than expected. The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009, was adopted in May 2009 to ensure that ships, when being recycled do not pose any unnecessary risk to human health and safety of the environment. International Maritime Organizations new convention covers the design, construction, operation and preparation of ships so as to facilitate safe and environmentally sound recycling, without compromising the safety and operational efficiency of ships. Alang Ship Breaking Yard in western India is the one of the biggest centre for ship breaking in the world, with around 50% of ships salvaged globally is recycled here. This yard has been in controversy since recent past due to workers living condition and adverse impact on environment. Government has signed a memorandum of understanding (MoU) with Japan based on (PPP) model to upgrade this shipyard to international level complied by standards of International Maritime Organization.
Legal Factors: Law is a system of rules and regulations usually enforced through a set of institutions, government or international organizations. Legal factors are related to the legal environment in which firms operate which elaborate rights and responsibilities in variety of ways. International trade and in particular shipping industry functioning is too influenced with changes in these legal factors. We will look at some of the main acts on which shipping industry is dependant internationally as well as domestically.
The Dock Workers (Regulation of Employment) Act 1948:
Dock worker means a person employed or to be employed in any port in connection with the loading, unloading, movement or storage of cargo from ship or vessel. This act regulates the recruitment and management of dock workers in Indian ports either temporary or permanently including their entry and removal, regulating terms and conditions of employment, deciding rates of remuneration and hours of
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work, minimum wage in respect of non availability of work and prohibiting, restricting or controlling the employment of dock workers not covered under this scheme. Customs Act 1962 provide judicial and administrative powers for efficient working of shipping industry. The act deals with appointment and functioning of custom ports, airports and custom officers, determination of goods to be imported/ exported, prohibition on trade on specific commodities, power of levying and exempting goods from duties, assessments, claims, warehousing and clearance of cargo, security, confiscation, settlement of cases etc. The list of duties is exhaustive and not just limited to these activities. It almost covers each and every aspect of rules and regulations required for international trade of goods and services in India. This factor is also negatively affects the business of shipping industry, because as per the rules and regulations of this policy, one cannot force the employee to work more than prescribed time, and the risky work Is also not getting done, by all this factors the performance and the work of shipping industry is suffer, because work cannot complete on time and whole industry get suffers.
The Essential Commodities Act 1955:
This act gives powers to government to regulate or prohibit production, supply and distribution of essential commodities for commerce and trade in India. Essential commodity within this act pertains to sale and purchase of goods and services like crude and edible oils, petroleum products, iron and steel, paper, cotton, jute, coal, cattle fodder, food crops sugar etc. Government through judicial powers can control the purchase/ sale price of commodity, prohibit its sale or can order the person holding the stock of essential commodities to sale in part or in full which may otherwise result in horse-trading or inflation in country. This scenario was seen in India in last quarter of 2009-2010, where government has stopped the export of rice, wheat, pulses and sugar and has started importing more from foreign countries to fight against the rising prices in domestic market which was leading to inflation.
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This factor is positively affects the shipping industry, because as the government prevents production, the suppliers will import more goods from the foreign to meet the high demands of products. As the import increase, it will results into the beneficial for shipping industry in a way of transferring or movement of goods from one place to another.
Foreign Exchange Management Act 1999:
This is one of the important acts which have revolutionized international trade in and with India due to liberalized policies in foreign exchange management and regulation. The main objective behind this act was to consolidate the law relating to foreign exchange with objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. The act is applicable to all branches, offices and agencies in and outside India owned or controlled by a person who is resident of India. Reserve Bank of India (RBI) is the sole authority to approve or authorize any foreign exchange transactions coming in or out of India. Much of the provisions of this act affect shipping industry in one way or the other due to its close inter relation with foreign exchange transactions. Indian foreign exchange reserves were increased by 56% in 2008 compared to 2007 while it was declined by 19% in 2009 compared to 2008 (partly due to global recession). As stated above this factor is positively affects the Indian shipping industry in many ways. As this factor is helpful in earning foreign funds, and this is possible by transaction between two countries and most of the goods are moved by the sea way. So, the business and profit both are increased. Analysis of Porters Five Forces for Indian Shipping Industry Porter's five forces is a framework for analysis of industry and development of business strategy, it also determines the competitive intensity and attractiveness of a market. Attractiveness is referred to overall profitability of industry while unattractiveness drives down profitability. This model implies that profitability or return should be constant across firms and industries; however studies have affirmed that different industries can have different levels of profitability due to their varied structure. The model can be used by organizations to develop edge over rivals. Conventionally, this tool is used to identify whether new products, services or businesses have the potential to be profitable? Following is the graphical
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representation of Porters five force analysis which we will discuss here briefly, in relation to Indian shipping industry.
ATTRACTIVENESS FOR SHIPPING INDUSTRIES (Analysis of Container Line Business) FIVE FORCES 1. Threat of New Entrant is High 2. Threat from Substitute is High ATTRACTIVENESS Industry attractiveness is High. Industry attractiveness is High.
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3. Bargaining Power of Suppliers is Low 4. Bargaining Power of the Buyers is High 5. Rivalry Among existing Players is Low
Industry attractiveness is Low. Industry attractiveness is High. Industry attractiveness is High.
INTERPRETATION Here, the government is liberal towards the licensing and development of shipping business. So, the threat of new entrance is high, but as the profit margin is high, the attractiveness is also high. Many competitors are available in the market and they are provides perfect substitution in terms of services, freight rates etc, but the resources are also easily available. So, that attractiveness is also high, suppliers are very few but the available facility is very less with him and cost is high, which makes suppliers in weak and buyers in strong position. So, in this term the industry attractiveness is low. As competitors high, and there is perfect competition situation. The bargaining power of buyer is high, but potentiality of business is high and many buyers are there in the market. This will increase the attractiveness. Existing players are many, but constant technological advancement and updated services and facilities will increase the attractiveness. Threat of New Entry Every person would love to do business in India especially in shipping industry due to large profits involved. However this would seem easy but practically it is lot more difficult and virtually impossible to establish in container line business. The problem pertains to large capital investments in form of vessel and container procurements and risk of operating vessels. Therefore there are only two native Indian companies which are involved in this business, others all are foreign players or in other words are multinational companies having their business arm extended in India. Even if we take the examples of biggest companies like Maersk and APL we will see that it had taken more than 100 years for these companies to establish themselves today at this top level. While there can be threat from existing companies to expand into new sectors which would lessen the share of company operating in that region. For i.e. Maersk is generally operating in every part of the world, in certain regions it may be the only player operating in that case its profit margins from those operations would be enormous. However this profit can be severely affected if APL or MSC introduce their service in those regions, or the situation can be vice versa. If there are any
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new potential companies who would intend to jump into this sector with huge capital than other factors like licensing, government rules, regulations, policies are all secondary. Factors Threat of New Entrance High Capital Requirement Profit Margin Opportunity of Expansion in new sector Moderate Low High Moderate Moderate Attractiveness
Economies of Scale Switching Cost Government Restriction
High High High
Overall Threat from the new entry barriers Attractiveness of Shipping Industry
High High
From the above table I conclude that as the capital requirement is high but the profit margin is also high, so the attraction is high. Opportunity of expansion in new sector is moderate but the profit in present sector is high, so, attractiveness is high. Economies of scale is less because all market players are operating at their highest level, switching cost for buyer is high because of less experience of different players will increase the attractiveness. Government restriction is less. So, the attractiveness is high.
Threat of Substitution:
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Substitution factor is foremost important especially when something is going wrong in organization and competitors are waiting to catch that opportunity for their benefit. We have discussed above how competitive the market is in India and the core factors like price and service which affects the buying behavior of customers. Substitution threat is the result of change in buyer behavior towards competitor or against company. Substitution may also result because of change in quality of service, increase in freight rates and increase in transit time. From view point of switching costs, buyers are not affected at all due to higher number of suppliers and freight forwarders available in market. While it may affect the company to certain extent as they have to start new search of customer, establish strong relations and educate them on company policies and systems. Switching costs become even more at times of downturn due to decrease in supply of business from customers. Cost factor is primarily responsible for substitution while service specification comes secondary. Factors Threat of Substitution High Availability of Substitutes Price, Performance and quality of services of Substitutes Switching Cost Cost factor High Moderate Moderate Low Low High Attractiveness
Overall threat from Substitution Attractiveness of Shipping Industries
High High
More number of market players are available but they all are dealing in different prices, performance and quality will increase the attractiveness of shipping sector. As the switching cost is high, customer stick to their present seller will increase attractiveness. Cost factor is less important because all players are play a role of defender in market will moderate the attractiveness.
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Supplier Power Suppliers barely make any difference to companies involved in shipping line business in India, especially who are leading players in this business while it may affect to certain extent to small players who are struggling to establish within the industry. Many supplies are such which are borne directly by customers but arranged by shipping lines like fumigation, pesticide, wooden pallets, container repairs and truck transportation due to corporate contract or link ups of companies with service providers. While there are cases when these same services are borne by shipping lines but then these charges are included in freight rate which would be higher if the supplies were not arranged by company. Literally speaking suppliers of these services hardly make any difference to shipping line, financially as well as socially. If we consider supply of ship stores, food stuffs and other supplies in ships, than there are many suppliers of these supplies in market today while in contrast the demand is much less. Therefore the price factor remains weak in favor of suppliers here. Another supply which is related to loading of containers on third party vessels is very important here because this is the only supply where shipping lines have to face the brunt of suppliers. Not all shipping lines own the vessel and therefore they hire the service of other companies, to load their containers for different destinations. For i.e. Maersk is the largest container operator in Kandla port but its own vessels are not operating from Kandla due to drift problem and therefore they hire the services of third party feeder vessels to load its containers till JNPT port in Mumbai, from where Maersk mother vessels are operating across continents. In this case Maersk may have to pay some extra money if demanded by ship operators. While this is not the case with MSC which has its own small vessels operating from Kandla to different gulf locations but if we move to location like JNPT port in Mumbai, the situation is totally different. Maersk vessels are the biggest here operating among other carriers and those small carriers are using slot on Maersk vessels for transporting their cargo. There are other supplies like stevedoring, loading/ unloading of containers from vessel, movement of containers to CFS (container freight station) and vessel towing which are provided by port authorized suppliers and companies dont have to arrange separately. Port authority charges fixed amount towards
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these handling from shipping lines and shipping lines charges the same from customers after adding their profit margin.
Factors
Barriers and Suppliers High
threat from
Attractiveness
Moderate
Low Moderate High
Number of Suppliers Price Factor for Suppliers Availability of Raw material
High Low Low Moderate Moderate Low
Profit Margin Overall threat from Suppliers Bargaining Power Attractiveness of Shipping Industry Switching Cost Operating and Hiring Cost
Availability of large number of suppliers will increase the attractiveness. As the price factor rarely affect the industry would increase the attraction. Easily availability of raw material will increase attractiveness. High switching cost and moderate margin of profit will decrease the attractiveness. As the operating and hiring vessel will costs more and due to stiff competition in market will reduce the attractiveness of suppliers. So, the overall threat from suppliers bargaining power is low because of number of suppliers but on the other hand the attractiveness of Shipping Industry is moderate because of more opportunities of expansion in other sectors.
Buyer Power:
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Buyer is one the strongest factor in shipping line business. Buyers may be in form of importer or exporter, clearing agent, freight forwarder or manufacturer of goods. Sometimes manufacturer himself acts as an exporter or importer, if not than trader acts on behalf of manufacturer of goods. Container line business in India is based on two core factors viz price and quality of service. Price refers to freight rate at which one container is decided by shipping company to transport from one place to another. Due to much competition in this sector and limited number of operators, bargaining power of buyer has increased in relation to freight price. For i.e. almost all shipping lines have service to Jebel Ali (an important transit hub) from India and customer are sure to get very competitive rate for this location from market. For such locations customer are virtually like king but when it comes to transporting cargo to far Europe or America than this power is transferred to companies operating in those regions. Therefore companies like Maersk, APL and MSC strategize their businesses in such a way to get maximum profits from service to odd or far reaching areas and make normal profits from operation to common areas like Jebel Ali. Another factor Service refers to fast processing of documents, bill of lading and prompt loading and movement of containers etc. It is rather difficult for customers to get better quality of service than getting competitive freight rates. In this world of technology every company is trying to adapt to new technology in their day to day businesses like e-processing of documents and fastest data entry to name a few. For i.e. Maersk is so technologically advanced in this field that all its data processing is being done electronically by back office and customers are able to access all information relevant to shipment though dedicated space available on company website. Examples electronic processes are shipping bills, vessel certificates, freight invoices and bill of lading in encrypted format once the payment is done by customer either electronically or at Maersk local office. Companies like APL and MSC do have electronic processing systems but are not fully fledged and as a result much of the work is still being done manually. Other section of buyers which may affect container line business are freight forwarders or clearing agents, with rapid expansion of shipping industry and import/ export businesses in India, many agents acting as freight forwarders have came up in market to share the profit in form of commission. These agents earn commission by way of collecting excess freight from exporter than charged by shipping lines. It is relatively easy for shipping lines to entertain these agents as they bring big lot of containers from different
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small exporters which would be difficult if shipping company approaches those 10 different exporters for business instead of only one agent. Factors Threat of Buyers bargaining High Number of Customers Price and Quality of Services Switching Costs Buyers information and Awareness Buyers ability to demand Concessions while Purchasing Freight Agents Forwarders and Clearing Low Moderate Low High Moderate High High High Attractiveness
Overall threat from customers bargaining Power Attractiveness of Shipping Industry
High High
More number of customers will increase the overall attractiveness of the shipping industry. But the more or less same prices and same quality will moderate the attractiveness. Switching cost for buyer is low because of more number of market players is higher the attractiveness. As the perfect competition situation prevail in market will provide all kind of information easily, so, the seller will know the profile of buyer and their demand will increase the attractiveness. Buyers ability to demand Concessions while Purchasing is high because the seller in threaten of loosing customer will affects the action of seller. But on the other hand high switching cost for buyer will increase the attractiveness of shipping industry. Competitive Rivalry
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Rivalry exists in every field be it business, science, space, technology, education etc; actually speaking it is part and parcel of day to day businesses. It is sometimes bad because companies have to share hard earned profits with competitors and sometimes good because it gives opportunities to one company to stand in line with another in terms of quality of service, business strategy, job satisfaction etc. Considering the rivalry in shipping industry in India, will be held valid due to enormous margins of available profits combined with continuous growth of around 14% since last couple of years. If we consider the rivalry between our top of the table players (Maersk, MSC and APL) we will find that all these players are good in some and bad in some and therefore stiff competition exists between them. Maersk dominates the market due to its wide area coverage, better connectivity, best business practices, and cost controlling measures while it is outcry for many due to its strict and non flexible policies and highly technological advancement at very base levels which is not digested by people working in lower educated market. MSC on other hand has balance of advantages and disadvantages. It has done well in recent times in attracting business due to its competitive pricing model and better connectivity of services. In contrast it has failed to control administrative, operational and higher output costs. It has been seen practically at Kandla port location where Maersk is having higher outputs compared to MSC but staff recruited to control that output and time for completing the tasks was almost double compared to Maersk. APL on other hand has much controlled costs measures and highly technological advanced processes as in Maersk but it doesnt have far reaching connectivity like Maersk and MSC and therefore relies on third party services in certain regions. Also it has lagged behind in attracting customers due to non availability of killing marketing strategies.
Factors
Threat from Competitors High Moderate Low
Attractiveness
Number of Competitors
High
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Exit Barriers Buyers switching Costs Cost Leadership Industry Growth Competitors Fresh Moves
High Moderate Low High Low
Overall threat from competitors of industry Attractiveness of Shipping Industry
High High
More numbers of competitors increase the attractiveness on the basis of assumption that this sector has more profit opportunity. There is a less chance of exit of barriers will also higher the attractiveness of shipping industry. Moderate Buyers switching cost will also increase the attractiveness because of less familiar with new seller will results into conflict or controversy. But as the high industry growth will attract new players to deal in shipping industry. Cost leadership in case of major market players will lesser the attractiveness because the new entrance and minor players will not cope up with very lower cost of market leaders. Competitors fresh move is very low because most players are hesitate to deal with the new customers, because they are not well known about their profile is lower the attractiveness of shipping industry.
Ownership pattern of Indian Fleet
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Nearly 50 percent of Indian shipping tonnage is under the command of the Government of India, chiefly through the public sector enterprise, Shipping Corporation of India. This is typical of the Indian scenario where the government plays a major role in various business sectors. Given the heavy expenditure required in the industry the government has to play a major role in developing the sector. Shipping is also of strategic importance to the country with its vast coastline and thus it is important that the country should have a substantial amount of tonnage. Shipping Corporation of India has the largest chunk, it owns 44 percent of the total Indian tonnage. SCI is the only company with a fleet size of international standards. Some of the worlds largest shipowners like Mitsui OSK, World-wide, Vela International, COSCO, Nippon Yusen etc. own fleet of above 10 million DWT- equal to the size of the entire Indian fleet. Eleven companies share over 80 percent of the total tonnage in GRT. Of this, the Shipping Corporation of India owns a total tonnage which is a little more than 3 million GRT. This distribution is in the light that there are more than 100 companies owning ships in India. The presence of such a large number of companies with few vessels is a marked characteristic of the Indian shipping industry. This makes the revenues of the small companies susceptible to the vagaries of the shipping industry cycle. The risk of these companies is very high as their revenue sources are not diversified. The small sizes of vessels also dont help in taking advantage of the economies of scale. A major consolidation is long overdue in the Indian shipping industry. Companies whose core competence is not shipping are planning to divest their shipping divisions. L&T used to own ships, but it has sold off its division as its small number of ships were proving to be a costly affair for it to maintain. Sanmar and India Cements have substantial shipping tonnage but lately have had plans to separate and sell off their shipping division. It is now easier for the companies to outsource their shipping requirements
Regulation of Indian shipping industry
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In keeping with the strategic importance accorded to the shipping industry, the Indian government has historically on one hand, provided considerable protection to the industry through a scheme of cargo and freight support. And to bring in a measure of equity and control on the other hand, the government had also been following a practice of strictly regulating the industry through restrictive covenants in the Merchant Shipping Act, 1958 especially with regard to acquisition and disposal of ships, as well as the attendant financing mechanisms. A corollary arising from the above is that while the industry depended upon the regulations during its nascent stages of growth, in its mature state, they proved restrictive and hampered growth. The Indian industry was stuck with a relatively old fleet and without access to sufficient funds for expansion. As a result, the share of the domestic industry in the countrys foreign trade stagnated in late 80s and has never been fully exposed to international competition since. Liberalization in the Indian economy has been accompanied by lower levels of protection for the industry especially in the tanker and bulk cargo segments. In addition, funds from existing institutional sources has been raised in line with prevailing domestic rates. As a result Indian ship owners have been exposed to higher levels of competition. Regulatory Institution Ministry of Surface Transport Under the Constitution of India, Merchant Shipping is a central subject and is being dealt with by the Ministry of Surface Transport (MoST) of the Government of India. The Ministry deals mainly with the larger issues relating to policy and legislation while all executive matters relating to merchant shipping are dealt with by the Directorate General of Shipping.
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Directorate General of Shipping Directorate General of Shipping (DG Shipping) comes within the purview of Section 9 of the Merchant Shipping Act, 1958. It functions under MOST and is the main regulating authority of Indian Shipping Industry. However, with increasing deregulation of the industry, its role has also been diluting. DG Shipping is responsible for issuing licenses to vessels for operating on both international and coastal routes, as well as for licensing of vessels which are chartered by Indian citizens, including vessels flying foreign flags. MS Act also empowers the body to delegate survey work of Indian ships to the Indian Register of Shipping (IRS). The Director General of Shipping has the following allied offices and institutions under his administrative control: Mercantile Marine Department Training Institutes - T. S. Chanakya, Marine Engineering & Research Institute, Lal Bahadur Shastri College of Advance Maritime Studies and Research Rating Training Establishments Shipping Offices Seamens Employment Offices Seamens Welfare Office Regional Offices (Sails)
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Indian Register of Shipping Indian Register of Shipping (IRS) has been authorized by the Indian government to carry out surveys such as Assignment of International Load Lines, and for the issue of Cargo Ship Safety Construction and the International Oil Prevention (OPP) certificate. While the certification of the above is mandatory, it is not a stricture on the Indian shipping companies to get their vessels classified under IRS. The objective of IRS is to evaluate, assess and certify quality management systems in the shipping industry. Further, the organization establishes standards and formulates rules for the construction and maintenance of ships, amphibious installations, marine equipment and industrial and general engineering equipment.
IRS has classed over 700 ships since the time of its inception, with the gross registered tonnage (GRT) reaching 7.2 million tonnes. The organization has now diversified into various other activities and expanded its scope of services Previously the International Classification Societies including Lloyds Register of Shipping, NKK of Japan and American Bureau of Shipping could issue International Load Line certificates to Indian flag vessels. The government withdrew this permission in the mid-90s and instead has given exclusive authority to IRS to issue such certificates to Indian ships. In addition to certification, most of the Indian shipping companies get their vessels classified under Indian Register of Shipping simultaneously. However, these ships are also classified under a foreign classification society, the reason being that several of these ships are operating in international waters; if they have to take intermediate surveys, IRS would not be able to carry these out at a foreign port. Further, IRS is still not a member of International Association of Classification Societies and hence enjoys lower acceptability. The
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government feels that Indian Shipowners could get IRS services at a much lower rate than those charged by foreign societies. In any case, we believe that the government must leave the industry free to choose whichever agency it wants to for load line surveys, consistent with its commitment to liberalization and deregulation. It must intensify its effort to market its services to both Indian shippers and others and compete with other classification societies of international repute in respect of both quality and cost of service. In order to maintain acceptable standards and provide world-wide coverage for its services, the IRS has entered into agreements of mutual cooperation with all major International Classification Societies with arrangement of survey all over the world.
National Shipping Board National Shipping Board is a statutory body set up under the Merchant Shipping Act, 1958 to advice the central government on matters relating to Indian shipping. The board consists of six members elected by the Parliament, four by the house of the people from amongst its members and the other two by the council of states from amongst its members. The Central Government may appoint to the board other members to represent Central Government, ship owners and seaman. Contribution of Shipping to the World Economy The international shipping industry is responsible for the carriage of 90% of world trade and is the
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life blood of the global economy. Without shipping the import and export of goods on the scale necessary for the modern world would not be possible- half the world would starve and the other half would freeze! However, the growth potential of the shipping industry is directly dependent on growth in world output, world trade, and world maritime trade. In 2005, world output increased 4.8%, as compared with a growth of 5.3% in 2004. World output is expected to increase 4.9% in 2006, and 4.7% in 2007; primarily driven by higher growth in emerging economies. While output growth in emerging/developing countries is expected to be 6.9% in 2006 (7.2% in 2005), output growth in advanced economies is expected to be 3% in 2006 (2.7% in 2005). Over the period 1998-2007, world output is expected to expand 4.1% per annum. During 2005, the volume of world trade increased 7.2%, as compared with a growth of 10.7% in 2004 as shown in table 1. The increase in trade was driven by high oil and metals trade. Table 1: Volume Growth in World Trade in Goods (in %)
Source: International Monetary Fund, ICRA Report, Industry-Shipping and Ports, May 2006
World seaborne trade increased considerably in 2005, reaching 7.11 billion tons of loaded goods. The annual growth rate, calculated with the provisional data available for 2005, reached 3.8 per cent as shown in table 2 and figure 1.
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Table 2: Development of International Seaborne Trade, selected years
(Goods loaded)
Importance of Liner Shipping in India In view of the continued liberalization and increasing globalization of the Indian economy, Indias overseas trade has been growing at a rapid pace. Presently, Indias exports formed about 0.8% of the world merchandise exports and currently, India is ranked as the 31st leading exporter and 24th leading importer in world merchandise trade. During the post liberalization period i.e., FY1992-2006, Indias trade has performed at a much better rate than in the pre-reform period. Indias trade has been increasing since 2002. In value terms, its exports are almost US $100,607 million and imports are around $140,238 million leading to a large trade deficit.
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Approximately 95% of Indias international trade by volume and 70% by value are seaborne. India has th 12 major and 185 minor/intermediate ports along its coastline of around 7,517 Kms. India ranks 15 in the world by flag of registry forming approximately 1.5% of the world total tonnage with a favorable average age as compared to the world fleet. Contributing approximately 0.3 percent to the countrys GDP, share of Indian shipping industry in Indias sea borne trade has declined from 40.7% in FY 1988 to around 30-32% over the last few years. In terms of Indias overseas trade, the share of Indian shipping industry is only around 14% (ICRA Research Analysis, 2006). Indian shipping tonnage which was only 1.92 lakhs Gross Tonnage (GT) on the eve of Independence increased to 70.5 lakhs GT on 01.06.2004 stands at 84.17 lakhs GT with 774 vessels and 139.22 lakhs dead weight tonnage (dwt) as on 31.12.2006.
Table 4(a): Summary of Coastal Tonnage as on 31-12-2006
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Source: Ministry of Shipping, Annual Report 2006-07
Table 4(b): Summary of Overseas Tonnage as on 31-12-2006
Source: Ministry of Shipping, Annual Report 2006-2007
As shown in table 5, the share of Indian shipping in the carriage of general cargo during the year 2005-06 was about 3.9%, dry bulk cargo 8%, liquid bulk cargo 26.4%. However, the overall share of Indian ships in the total overseas trade was around 13.7%.
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Table 5: Indias Overseas Trade during 2005-06(P) (Share of Indian Shipping)
Source: Major and Non-Major Ports, Ministry of Shipping, Annual Report 2006-07 (P): Provisional To compare the robust growth being witnessed in the global container trades vis-- vis Indian container trades, about 85 per cent of general cargo in developed world was containerized, while in India it is only about 55 per cent.
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Overview of the Liner shipping services Marine transport on routes between foreign countries, or international shipping, can be broadly divided into shipping via liner shipping and tramp services depending on the type of shipping. Shipping via liner shipping refers to the shipping of cargo received from any number of shippers, with shipping schedules and shipping rates made publicly available and advertisements placed far and wide for shippers to use services. Shipping via tramp services, on the other hand, refers to the shipping of cargo received from specific shippers using specialized vessels. LINER trade and shipping is significant to the world economy, since it involves the transportation of finished or semi-finished goods, invariably high value exports. Today, the majority of liner shipping services consist of container shipping whereby goods are shipped in standard sized containers. As liner shipping services involve shipping cargo from any number of shippers, routes stopping off at numerous ports along the way are determined in order to provide services line with shippers various shipping needs. Globalization of international production and the international division of labor has impacted container trade resulting in a massive growth in container trade primarily from Asia in the past five years (Figure 3). Annual growth rates of container trade were two to five times as high as the annual growth rates of the real world gross domestic product. With average growth rates of world total container trade close to 8% during the last ten years, container transport has more than doubled. However, significant variations in experienced annual growth rates exist. From 1997 to 2002 ups and downs of annual growth rates amounted to variations between 4 and 7 percent points. For instance, in 2001 the annual growth was
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close to 4% and jumped up to around 11% in 2002. Since then the growth rate remained above 10% in 2003 and 2004. The future prospect of the global liner industry is a slowdown of annual growth rates that are expected to fall below 8% in the long term after 2005 as import substitution reaches a balance.
Figure 3: Total Container Trade in Millions of TEUs
Source: EC Final Report 2005, Global Insight The volume of container cargo shipped around the world in 2006 from figure-3 came to be above 90.0 million TEUs (twenty-foot equivalent unit). The breakdown of volume according to different routes shows that North American routes (between Asia and North America) and European routes (between Asia and Europe) are the highest volume routes, with routes within Asia accounting for roughly 50% of the global volume of container shipping.
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The driving forces behind the growth in container trades are the countries in the Far East and particular in China. From 1995 until now container exports in TEUs from the Far East to the world tripled. The share of the world total container export in TEUs of Far Eastern countries was growing steadily during that time. Compared to 40% in 1995 it reached around 55% in 2004 (Figure 4).
What constitutes Indian shipping industry? In India, there are three separate Acts which deal with regulation of vessels owned by Indian corporations: The Merchant Shipping Act, 1958 The Inland Vessels Act, 1917 The Coasting Vessels Act, 1838
The present study is confined to vessels registered under The Merchant Shipping Act. These vessels represent more than 97% of the cargo-carrying capacity of Indian shipping tonnage and constitute around 642 cargo-carrying ships of around 68.39 million tonnes dwt and another 410 non-cargo carrying ships. Further, lack of data on vessels covered by latter two Acts, makes However, it should be noted that shipping is not just about vessels, a fact that is even truer in a knowledge economy. The seafarer and the knowledge bank of shipping companies are also an integral part of shipping industry and defining shipping capabilities of a nation is incomplete without taking these into consideration. Challenges and opportunities for Indias shipping industry The shipping sector plays an important role in Indias economy. Almost90% of the countrys trade by volume is conducted via sea and the country boasts of having the largest merchant shipping fleet among the
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developing nations. The Indian shipping industry not only transports national and international cargoes, but also provides various other facilities such as ship building, ship repairing, lighthouse facilities, freight forwarding etc. With globalisation and liberalisation, the Indian shipping industry is all set to acquire new dimensions in terms of demand and infrastructural development. In order to resist stiff competition posed by foreign companies, the Indian shipping companies are striving to bring about rapid transformation. The way cargo traffic was handled has changed over the years. Earlier it was under a protected environment where a tonnage committee decided as to what type and size of ships the companies should opt for. Cargo was assured for those vessels which were acquired through government subsidy.
Crude petroleum products constitute a major chunk of Indias sea-borne cargo. Deregulation in the oil sector has been welcome news for the shipping companies as crude oil carriers do not have to deal with fixed freight rates irrespective of the market condition. However, there is another problem which has to be dealt with. Imports have decreased over the years because of higher production by the domestic refineries, which has reduced transportation. The government plans to introduce pipeline networks will seriously affect coastal transportation. New avenues to be explored by the shipping industry Meanwhile, there are opportunities that need to be grabbed by the shipping companies. Liquefied natural gas (LNG) is to be imported to harness Indias power and fertiliser projects. This plan involves huge
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volume of business for the shipping industry amounting to several billion dollars. However, this process is expensive because it costs US$200 million for one ship to carry LNG. Therefore, it is important for the Indian shipping companies to build strategic tie-ups with their foreign counterparts so that they do not miss out this business opportunity. The state-owned Shipping Corporation of India (SCI) has joined hands with Mitusi Osaka Shosen Kaisha (OSK), a consortium in Japan, to build LNG vessel to serve Indias needs. Even the private companies have shown interest in LNG transportation. Although the Indian shipping companies are interested in LNG transportation, lack of adequate experience and the huge amount of money required for LNG carriers act as major hindrances. However, certain core problems must be dealt with before the Indian shipping industry can scale new heights. Port congestion and lack of depth in channels are some of the problems plaguing the shipping industry. Recently, these two problems have plagued the Kolkata PortTrusts Haldia dock, resulting in huge loss of business. The Indian Shipping Summit 2009 that will be held in Mumbai, from October 20-22, 2009 will focus on certain core issues related to shipping industry such as the manner in which the shipping industry in India has handled the financial crisis, the present state of Indian ship building and whether India has the capability to become the leading ship building nation in the world.
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SCIs Mission To serve India's overseas and coastal seaborne trades as its primary flag carrier and be an important player in the field of global maritime transportation as also in diverse fields like Offshore and other marine transport infrastructure. SCIs Vision To emerge as a team of inspired performers in the field of Maritime Transportation serving Indian and Global trades with focus on:
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aintaining its Numero Uno position in Indian Shipping M Establishing a major global presence in Energy related, Dry Bulk and niche container shipping markets. Evolving suitable business models to exploit emerging opportunities in Offshore Oil Sector, Port / Terminal Management, Logistics etc. Safety of people and property and protection of Environment.
Objectives of the SCI 1. To provide its clientele safe, reliable, efficient and economic shipping services. 2. To be an optimally profitable, viable, commercial organization and contribute to the national economy by securing a reasonable return on capital. 3. To own or acquire through options like leasing, demise charter, joint ventures and other innovative financial measures an adequate fleet to cater to a significant portion of India's overseas trade, particularly in items of strategic importance like crude oil and petroleum products 4. To increasingly participate in India's offshore and other marine activities, and to continue to explore opportunities for diversification to ensure overall and steady growth of the Company. 5. To develop internal Human Resource with a view to achieving higher productivity. 6. To initiate e-governance in the working of the Company at the earliest covering areas such as operations, tendering and purchase through the SET-IT project. (i.e. SCIs Enterprise Transformation through Information Technology).
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About SCI On the day of amalgamation, the SCI's fleet stood at 19 vessels of 1.39 Lakh GT and 1.92 Lakh
DWT. Subsequently two more Shipping Companies viz. Jayanti Shipping Company and Mogul Line Ltd. were merged with the SCI in 1973 and 1986 respectively. The status of the SCI has changed from Private Limited Company to Public Limited Company with effect from 18.09.1992.
To fortify and grow is a character with which SCI is very conversant. This defined its earlier growth
path and catapulted SCI into a specialist category; the 1960s recognized SCI as a complete liner services company. In fact, as much as 90% of its entire tonnage was a consequence of liner ships regularly plying coastlines.
Thereafter, quick expansions of its fleet were undertaken, in sync with its progress plans. The fleet
structure thus developed, distinguished SCI as the most diversified fleet-owner in India.
Even by international standards, SCI employed a remarkably diversified ship line-up; liners, bulk
carriers and tankers, and offshore services that transport everything, from iron-ore to fertilizers, crude oil to petroleum products and critical materials used in offshore installations, and even tow rigs.
Representing India to the extent of 40% of its entire tonnage! Other critical points too, like a
presence in almost every major sea route in the world, have been instrumental in classifying SCI as a global player, slotting it in the worlds top 15 league.
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Sailing through for nearly five decades, the SCI today has a significant presence on the global
maritime map and is undoubtedly the countrys premier shipping line. It owns and operates about 33% of the Indian tonnage servicing both national and international trades
PLACES IN INDIA WHERE SHIPPING CORPORATION OF INDIA IS LOCATED
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Keeping in view the demands of the nations trade, the SCI over the years has diversified into a
large number of areas, and is today the only Indian shipping company providing overseas break-bulk and container services to Indian trade.
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Through its owned and managed fleets, the SCI operates shipping services in various segments viz.
container, break-bulk, crude oil & products, dry bulk, LPG / Ammonia, Phosphoric Acid / Chemicals, LNG, coastal passenger transportation, offshore logistic support services and other coastal services.
SCI mans / manages vessels on behalf of India LNG Transport Companies (Joint Venture
Companies), Andaman & Nicobar Administration, Union Territory of Lakshadweep Administration, Geological Survey of India (Ministry of Mines), Ministry of Earth Sciences (Department of Ocean Development), Oil and Natural Gas Corporation (PSU).
The SCI has contributed immensely to the growth of Indias EXIM trade as well as contributing to
the Nations exchequer by being a net earner / saver of valuable foreign exchange. Over the years, SCI has assumed the role of a lifeline for the country during times of emergency and distress by ensuring continued and uninterrupted supply of crude oil, the fuel, which drives the countrys economy.
The liberalization and globalization of Indian economy has presented the SCI with a whole lot of
opportunities to grow and diversify and the SCI is ideally positioned to avail of these opportunities due to the presence of a modern, young and diversified fleet coupled with the presence of a large pool of well trained and experienced manpower both ashore and afloat to operate it.
The SCI is a profitable commercial venture of Government of India and has an excellent track
record of earning profits since its inception barring a few years in the late 1970s and early 1980s when the shipping industry worldwide was under depression.
The SCIs annual performance has been consistently rated Excellent for more than a decade and a
half under the MOU signed with the Ministry of Shipping, Government of India.
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The Government of India, mindful of the excellent track record, conferred Navratna status to SCI
on 01.08.2008, leading to further enhanced autonomy and delegation of powers to the Company towards capital expenditure, formation of Joint Ventures, mergers, etc.
The continued profitability of the SCI has been due to the innovative and timely strategies and
measures adopted by the SCI Management which included, inter alia, judicious and optimal utilization of available tonnage by deploying it in the most remunerative sectors, commencement of new services in niche markets, phasing out of older tonnage, forging alliances with the significant players in the market to enhance cargo availability and apportion expenses, administrative cost cutting, etc.
The SCI takes pride in the fact that it is a responsible and socially committed ship-owner, placing
greater emphasis on the safety of life, vessels, cargo and the environment it operates in; and has evolved into a highly quality and safety conscious organization.
The SCI has also received numerous awards and accolades from various national and international
organizations for achieving excellence in customer satisfaction, operational efficiencies, Human Resource training, emergency preparedness etc.
year.
SCI is now certified as ISO 9001-2000 compliant by Indian Register of Quality Services (IRQS)
from 08.05.2007. The certificate is valid up to 09.05.2010 subject to surveillance audit at intervals of one In tune with the worldwide trend of specializations and the premium placed on core-
competencies, the SCI has charted a definitive course of action for the future. The thrust areas for growth and diversification focus on energy transportation including the sunrise segment of LNG transportation.
The SCI has heralded Indias entry into the specialized field of LNG transportation by acquiring a
stake in the three Indian LNG transportation agreements contracted till date that too after a global bidding
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process. SCIs presence in the three LNG joint venture companies would go a long way in establishing itself as a major LNG transportation player in the world.
The SCI possesses all the ingredients essential for emerging as a truly world class international
shipping company and the endeavor of the Management is to facilitate the release of the boundless streams of energy and initiatives and channeling it for the future growth and prosperity of the Company and the Nation.
SCI`s basic operating and earning unit is the ship, charting all the oceans of the world. SCI`s
interface viz. clients, vendors, service providers, etc are spread worldwide. The global nature of SCI`s business network puts a greater onus on the organization to reach both its operating units and interface with speed and efficiency with no room for any doubts or delay. FUTURE PLANS In the future, SCI plans to diversify into shipbuilding, dredging and land logistics (viz. container
freight stations, container terminal operations and inland container depots). It has also signed an agreement with Mediterranean Shipping Company, PSUs Container Corp. of India (Concor), and Central Warehousing Corporation (CWC) for setting up container terminals.
The government recently conferred the navratna status on SCI. This will enable the company to
take quick decisions with respect to fleet expansion without getting into lengthy procedures to obtain permission from the government. PROJECTS ON HAND
Project Name Location Cost (Rs. Crore) Shipping Corporation's Purchase of Vessels Multi Locations Multi 5,773 Fleet Plan Expansion 58 Numbers Under Implementation Product Capacit y Unit Status
Region MR
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Six LR-I Product Tankers Purchase Project Four Project Four Aframax Bulk Carriers Purchase Project Six Handymax Bulk Carriers Purchase Project Two Panamax Bulk Carriers Purchase Project Two LR-II Crude Tanker Acquisition Project Two MR Product Tankers Procurement Project Four AHTS Vessels (80 T) Purchase Project Two Project AHTS Vessels Procurement Capesize Ships Procurement
Multi
Locations
Multi 1,658 Multi 1,600 Multi 1,168 Multi 1,061 Multi 968 Multi 586 Multi 411 Multi 359 Multi
Six LR-I Product Tankers 73000 Dwt
Under Implementation Announced and
Region MR Multi Locations
Four Capesize ships Aframax Carriers Handymax Carriers Panamax Carriers LR-II Tankers MR Product Tanker II Crude Bulk Bulk Bulk
100000
MTPA
Stalled Under
115000
Dwt
Implementation Under
57000
Dwt
80655
Dwt
105000
Dwt
47000
Dwt
AHTS Vessels
80
Tonnes
Region MR Multi Locations Multi
AHTS Vessels
120
Tonnes
Two PSVs Acquisition Project
Region MR
PSVs
3100
Dwt
Implementation
Brief Profile of the Organization Presently, Authorised Capital of the SCI is Rs. 450 crores and Subscribed and Paid up Capital is Rs. 423.45 crores. The Equity Capital disinvested by the Government of India remains at 19.88%. The status of the SCI has changed from Private Limited Company to Public Limited Company with effect from 18.09.1992. The shares of the SCI are listed at major stock exchanges and are traded regularly. Equity holding by type of investors (% to total) Jun Sep Dec Mar Jun Sep
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Total Shares Promoters Indian Individuals & HUF Central & State Govt. Corporate Bodies FIs & Banks Others Foreign Non-promoters Institutions Mutual Funds/UTI Banks, FIs,Insurance Cos. Insurance Companies Financial Institutions & Banks Central & State Government FIIs Others Non-institutions Corporate Bodies Individuals Others 2. Fleet Strength
2008 100 80.12 80.12 80.12
2008 100 80.12 80.12 80.12
2008 100 80.12 80.12 80.12
2009 100 80.12 80.12 80.12
2009 100 80.12 80.12 80.12
2009 100 80.12 80.12 80.12
19.88 15.91 0.97 8.74 8.53 0.21 6.2 3.97 1.08 2.76 0.14
19.88 15.08 0.92 9.01 8.77 0.24 5.14 4.8 1.42 3.24 0.14
19.88 14.8 0.64 9.32 8.98 0.34 4.84 5.08 1.39 3.51 0.17
19.88 14.38 0.5 10.23 9.92 0.31 3.64 5.5 1.81 3.52 0.18
19.88 13.46 0.7 10.41 9.54 0.87 2.35 6.42 2.2 4.03 0.2
19.88 13.91 0.47 11.28 11.16 0.12 2.16 5.97 1.97 3.79 0.2
As on 01.07.2009, SCI has a significant presence on the global maritime map and has grown about 28 times in terms of DWT in the last 47 years. It is the countrys premier Shipping Line owning a fleet of 79 vessels of 30.46 Lakh GT (53.54 Lakh DWT) with a share of 34% of the total Indian tonnage and comprises cellular container vessels, crude oil tankers, product tankers, bulk carriers, LPG/Ammonia carriers, acid carriers, passengercum-cargo vessels and offshore supply vessels. In addition, SCI Mans / Manages 58 vessels of 3.07 Lakh GT (2.05 Lakh DWT) on behalf of LNG Joint Venture Companies, various Government Agencies / Departments and other Organisations such as ONGC. The managed vessels include LNG tankers, Passenger vessels, Passenger-cum-cargo vessels, Bunker barge, Offshore Supply Vessels, Seismic Survey vessel, Well Stimulation vessel, Diving Support vessel, Geo Technical vessel and
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Multipurpose Support vessel and Research vessels. The highly diversified fleet of the SCI includes modern and fuel-efficient ships giving it a qualitative status as also a distinct competitive edge over other fleet owners. 3. Financial Performance 3.1 The SCI has a consistent track record of making profits and has been earning good returns on its investment. For the year 2008-2009, the Gross Earnings was Rs. 4,564.49 crores and the Net Profit after Tax was Rs. 940.67 crores. The Board has proposed a dividend of 65% for the financial year ending 31st March 2009
Organisation Structure SCI is organised into 3 operating divisions supported by 2 service divisions. Each division is headed at the corporate level by a full time Director forming a Corporate Group. The Corporate Group works under the overall direction and control of the Chairman and the Managing Director. The Corporate Group has ensured a closer teamwork leading to better and efficient administration of fleet and in turn a better and more efficient service.
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The SCI board is headed by the Chairman and Managing Director, 5 full time directors of respective divisions and 10 part time directors (2 government and 8 non-official Independent) nominated by Government of India.
Operations The SCI operates in all areas of shipping business both in the National and the International arenas. The SCI today is an active player in the Crude Oil and Product transportation sector, Liner services, Dry Bulk movement, carriage of Phosphoric Acid Liquefied Petroleum Gas and Ammonia, Passenger transportation and Offshore services segment. A) LINER CONTAINER INDUSTRY STRUCTURE & DEVELOPMENTS World Scenario: Global Container trade in 2008 was characterised by surging volumes during much of the first half of the year, only to experience an unexpected sharp turnaround in growth during the later part. European imports from Asia saw the largest swings, with similar trends in the imports to Japan and Asian NIEs (Newly Industrialised Economies) such as South Korea. Chinese imports were also affected, falling even faster than its exports with domestic consumption reducing substantially. In 2008 as a whole, the main
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arterial routes namely the Transpacific Eastbound and Asia-Europe Westbound lanes experienced a negative growth of 9% and 0.5% respectively. Substantial corrections were seen in the Intra-Asia trades by year-end. This declining trend in trade volumes continued into the first two months of 2009 as well and eased only in March. Global Container trade in 2008-09 is estimated at around 129 million TEUs, marking a meager growth of 3.5% compared to over 10% witnessed in 2007-08. In this scenario of shrinking trade volumes and double-digit fleet expansion, Liner operators withdrew substantial tonnage plying in the main trade lanes during the final months of 2008 and January 2009. Yet vessel utilization and freight rates continued to slide. Liners announced additional capacity cuts for the next few months to scale back costs, while the amount of idle tonnage piled up. Leading carriers implemented substantive cost cutting measures such as charter-vessel discharge, laying up vessels, scrapping owned tonnage, slow-steaming in select routes, reducing administrative costs etc. The freight and charter rates fell sharply at the end of 2008 with the slide continuing into 2009. Liner operators increasingly re-delivered Charter vessels instead of renewing charter agreements. It is reported that several newbuilding vessels, including mega-ships over 7,000 TEU, will be directly proceeding for Lay-up from the shipyards. Indian Scenario: The Major Indian ports handled 6.85 Million TEUs of Container traffic in 2008-09 which was only 2% higher than the previous year. This is equivalent to 93 Million Tonnes of containerised cargo, representing a negligible growth of 0.9%. The SCI continues to be the only Indian mainline carrier providing services from India to some of the major global destinations. However, several international container majors are offering direct services or calling Indian ports enroute on their East - West services. B) OPPORTUNITIES & THREATS As per the projections of international organisations such as the IMF, WTO and OECD, the global output would decline for the first time since World War II in the year 2009, with a negative GDP growth of 1.3%. Global Container trade would be affected in turn and is projected to contract by 3.3% in 2009. The Newbuilding orderbook position indicates continuing double-digit fleet expansion during the next two years or so. A combination of these factors is likely to prolong the adverse impact on trade volumes and
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freight rates for the next year or two. The dominance of Mega Carriers now turning their attention towards the Indian market also poses a challenge to Indian shipping. However, there are some signs that the US housing sector and financial markets could stabilize in the near term. With recovery anticipated at end-2009 or early 2010, it is reckoned that Container trade could see a substantial upswing of around 7.3% in the year 2010 The prospects for growth in Indias container trade are thus encouraging after the recovery of world economy gets underway. Continuing growth of Chinese economy, the expected consolidation of other Asian economies and potential for feeder trade would provide further opportunities for growth. The breakbulk sector has good potential in respect of imports of Over-Dimensional Cargoes (ODC), Project cargoes, Heavy Lift cargoes etc. on account of the Government departments / PSUs
C. The SCI Liner & Passenger Services:
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Container Services Indian Subcontinent Europe Service (ISES): As per the earlier arrangement which would be phased out by end-May 2009 (loading), the UK-Continent cellular container service is being operated by a consortium of five Partners viz. SCI, Yang Ming Lines (YML) of Taiwan, ZIM lines of Israel, K-Line of Japan and MISC of Malaysia with 7 vessels of 2650 3400 TEU on a 49 day round voyage schedule. SCI deploys two owned 3400 TEU (4400 TEU nominal) container vessel delivered in October 2008 and the average weekly allocation for SCI with owners merit is about 1000 TEU per vessel. The ports of call of this service: Colombo / Nhava Sheva (JNP) / Mundra (SCI vessels) / Port Said / Barcelona / Felixstowe / Rotterdam/Hamburg/Genoa(SCI--vessels)/PortSaid/Colombo Two partners namely, M/s MISC and Zim had given notice of withdrawal from the Service in December 2008 and withdrew from the above mentioned arrangement in March 2009 and May 2009 respectively. The other two partners, M/s K-Line and YML also tendered withdrawal notice from the Service in March 2009. However, the arrangement is continuing with these two lines loading upto end-May 2009. Meantime, SCI has formed a new consortium, SCI-MSC, with M/s Mediterranean Shipping Lines w.e.f. 17.05.2009. The SCI-MSC consortium operates the new ISE service with 7 vessels ranging from 2750 to 3500 TEU capacity. SCI is contributing two owned vessels and two in-chartered vessels and MSC three vessels upto October 2009; thereafter SCI will deploy two owned vessels and one in-chartered vessel and MSC four vessels. The port rotation is: Colombo / JNP / Mundra / Salalah / Port Said / Barcelona / Hamburg / Rotterdam / Felixstowe / Port Said / Jeddah / Colombo. The allocation for each partner is on a 50:50 basis of the total space available in this Service, which works out to about.1650.TEU.per.vessel.each. Types of Services: India / Far East Cellular Service-1 (INDFEX 1): This is a weekly direct service from Indias West Coast to Central China, Korea, Hong Kong, Singapore and Malaysia operated with 5 vessels of 1950 2250 TEU on a round voyage schedule of 35 days. The three Vessel Operating Partners are SCI, PIL of Singapore and K-Line with each having one vessel; and of
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the other two vessels which are equally shared by the partners, SCI has contributed one vessel. The two vessels deployed by SCI are of 2250 TEU capacity and the average weekly allocation for SCI is about 750 TEU considering owners merit. The main ports of call are NSICT / Colombo / Singapore / Busan / Shanghai / Ningbo / Hong Kong / Singapore / Port Kelang / Colombo / NSICT. India / Far East Cellular Service-2 (INDFEX 2): This is a weekly direct service connecting East coast of India to North China operated with 5 vessels of 2100 2200 TEU on a round voyage schedule of 35 days. The constituents of the consortium are same as INDFEX-1 consortium. SCI deploys one 2200 TEU vessel and has an average weekly allocation of 440 TEU considering owners merit. The main ports of call are Chennai / Vizag / Singapore / Pasir Gudang / Hong Kong / Dalian / Xingang / Qingdao / Hong Kong / Shekou / Singapore / Port Kelang and Chennai. Through the INDFEX 1 and INDFEX 2 services, SCI covers the Chinese market extensively with direct calls at 6 mainland Chinese ports and Hong Kong. SCI Middle East India Liner Express (SMILE) Service: SCI is operating this new independent weekly service (commenced in March 2008) to the Gulf with its 3 owned 1600 TEU (1800 TEU nominal) vessels on a round voyage schedule of 21 days. This service covers India & the Indian Subcontinent - West Asia Gulf sector catering to the trade requirement in the Gulf markets as also the Far East, Red Sea, UK-Continent through transhipment at Colombo. Upper Gulf locations are also covered by feeder services ex-Jebel Ali. In December 2008, the SMILE service was expanded to carry feeder and coastal cargoes on the west coast of India. The main ports of call are Colombo / Tuticorin / Cochin / Nhava Sheva / Mundra / Jebel Ali / Mundra / Cochin / Tuticorin / Colombo. Through the Smile Service, SCI has commenced a coastal service on the west coast of India between Mundra, Cochin and Tuticorin from December 2008. India-Red Sea Service (RIX service):
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SCI commenced this service in consortium with Hull & Hatch (H&H) Lines Ltd. on 01.02.2009. The service is operated with 2 vessels, an 1100 TEU vessel deployed by H&H and a 1700 TEU vessel by SCI, on a round voyage schedule of 24 days with a 12 days frequency connecting Indias west coast to several ports in the Red Sea region and East African countries. The average allocation for SCI with owners merit is 775 TEU. The ports of call are Nhava Sheva Mundra - Aden - Djibouti Hodeidah - Jeddah - Port Sudan Aqaba Eilat (only SCI vessels). This is the only service making direct calls to Red Sea ports. Feeder Service From April 2008, after the termination of the earlier joint feeder service with M/s Seacon Consortium Ltd. (Singapore), the SCI makes feeder arrangements with Common Carriers between various destinations on the Indian subcontinent depending on market requirements. SCIMAX Feeder Service: SCI commenced a joint feeder service between Kolkata / Haldia and Colombo on 01.02.2009 with M/s MAXICON Shipping Agency (Vizag) to serve various trade lanes between these ports. The service is operated with 2 vessels of around 700 TEU each with a frequency of about 8-9 days. Due to draft restrictions at the Indian ports, the actual loadable parcel size reduces upto around 440 TEU, depending on the draft available during the voyage. Break-Bulk Services SCI is the only Indian company providing overseas liner break-bulk services to Indian trade. SCI arranges carriage of breakbulk cargoes on space charter basis from various regions across the globe including USA and Far East for imports on account of the Government departments / PSUs which includes Shipments of Over-Dimensional Cargoes (ODC) / Project cargoes / Heavy Lift cargoes / IMO Class I Cargoes etc. and also containers. SCI continues to operate its IndiaUK Continent breakbulk service from European ports to India jointly with Rickmers Linie on space sharing basis on their vessels.
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Domestic Passenger-Cum-Cargo Services: In addition to International operations, the SCI, with its 2 Owned Passenger-cum-Cargo vessels and 30 Managed vessels operates domestic passenger and cargo transportation services between Mainland and Andaman & Nicobar and Lakshadweep group of Islands, on behalf of the Government of India as follows: Andaman & Nicobar Islands Administration (25 vessels comprising of Passenger vessels and Passengercum-Cargo Vessels), Union Territory of Lakshadweep (5 vessels comprising of 1 Passenger-cum-Cargo Vessel, 3 Passenger Vessels and 1 Bunker Barge)
SCI's Owned PassengerCum-Cargo Vessels: The table below shows the profile of the owned Passenger-
cum-Cargo carrier fleet owned by SCI.
The deployment pattern of the above mentioned owned fleet was as under: m.v.Harshavardhana was deployed in the Mainland/Andaman Sector. m.v.Ramanujam was deployed in the Inter-Island Services of the Andaman and Nicobar Islands
Manned and Managed Vessels: The following table shows the profile of the vessels Passenger-cum-Cargo vessels and other vessels managed by SCI on behalf of the various Governmental Organisations/Departments.
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The deployment of these vessels on behalf of various organizations was as follows: Twenty five (25) Ships on account of the A&N Administration, of which 4 are for carrying Passengers and cargo between the Mainland and Andaman and Nicobar Islands and 21 for InterIslands run. Five (5) Ships on account of the Union Territory of Lakshadweep Administration, of which two (2) are for carrying Passengers and cargo between the Mainland and Lakshadweep Islands, 2 for Inter Islands and the remaining One (1) is an Oil Barge.
Five (5) Research vessels on behalf of various Governmental organisations/Departments, of which three (3) ships on behalf of the Geological Survey of India and two (2) on behalf of the Ministry of Earth Sciences (Department of Ocean Development).
During the year, the SCI carried Passengers and cargo on the Mainland/Island sector on owned and managed vessels as under
D. Plans & Bilateral Department
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This department specializes / deals in matters regarding Corporate Planning of the organization. The conceptualization, compiling, drafting of MOU is undertaken by this department, which later is signed by SCI with the MOSRTH. The SCI as a national line deals with various bilateral maritime agreements / trade agreements / WTO negotiations, which is also supported by the mentioned department E. Service Requirements a) Safe and timely delivery of cargoes / containers without loss or damage. b) Regularity of service as per Service schedules announced to the trade: Arrival / Departure at / from the designated ports of call without delays. ISES (Indian Subcontinent / Europe Service): Fixed day weekly service;Port of call Colombo/ JNP/ Mundra/ Salalah / Port Said/ Barcelona/ Gothenburg/ Hamburg/ Rotterdam/ Felixstowe/ Port Said/ Jeddah / Colombo.
SMILE Service (India / Middle East Gulf)): Fixed day weekly container service. Round voyage duration of 14 days and the ports of call are Colombo / Cochin / Nhava Sheva / Jebel Ali / Dammam / Colombo.
IndFex Service (India West Coast / Far East Southern China): Fixed day weekly container service; Transit time of 16 days between JNP to Shanghai.
IndFex - 2 Service (India East Coast / Far East Northern China): Fixed day weekly container service; Transit time of 10 days between Hongkong Chennai
India Red Sea Service (RIX Service) : 12 day frequency service with 21 days round voyage and ports of call are Mundra / JNP / Jeddah / Port Sudan / Hodeidah / Djibouti / Aden / Salalah / Mundra
LIST OF CUSTOMERS
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Some of our major customers are:
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2. BULK CARRIER & TANKER DIVISION 2.1 Tanker Department SCI is the largest tanker owner in India, having a well diversified fleet of crude tankers consisting of all sizes viz. MR, LR-I, LR-II, Aframax, Suezmax and VLCC tankers. SCIs tanker tonnage paralleled the growth of Indian Oil Industry since the mid-1970s. Since then, till late 1990s the tonnage was predominantly catering to Indian crude and product transportation and thus the tonnage had been acquired over the years keeping in view the specific constraints of terminals/ ports in India and infra-structural limitations like draft, availability of tankages, length/ capacity of jetties etc. Tanker Commercial Department is looking after scheduling and deployment of tankers for feeding crude to the various Indian oil refineries. Lighterage operations on the East Coast and West Coast are also undertaken to facilitate quick turnaround of tankers, which otherwise cannot call on ports due to port restrictions / limitations. The department also ensures commercial deployment of in-chartered tonnage to meet its obligations of lifting cargo under Contract of Affreightment (COA). a) Clients/Users of tankers services expect SCI to fulfil its obligation to lift the nominated quantity of
crude / product as specified in the COA, besides timely delivery of crude parcels to oil refineries and deployment of tonnage within specified lay-days. They also expect that the delivered cargo should be of correct specification as stated in Bills of Lading and no contamination or degradation of cargo should occur. Delivery of petroleum products of the right quantity and quality to the right place at the right time with adequate safety. (b) Major Customers of Tanker Dept are: Hindustan petroleum Corporation Ltd Bharat Petroleum Corporation Limited ( incl. Kochi Refineries Ltd.) Indian Oil Corporation Limited Oil and Natural Gas Commission
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Chennai Petroleum Corporation Limited Mangalore Refineries and Petrochemical Limited Major International customers include Shell, BP, Koch, ST Shipping, UNIPEC, Petrodiamond, Vitol, Trafigura, Petronas, Petrobras etc. Other Customers include: BRPL, British Gas India Ltd. Etc. Clients need to get in touch with VP (Tanker Commercial-Crude) or VP (Tanker Commercial-
Product), SR. VP (Tankers) and CMD in that order with specific complaints / problems in case agreed service standards are not fulfilled. SCI would endeavour its best to mutually resolve disputes / difficulty of clients / users of service to the benefit of both parties. 2.2. Bulk Carrier Department SCI is presently the major bulk carrier operator in India, having an assortment of 18 bulk carriers spanning the handy, handymax and panamax sizes of vessels. The fleet is about 20 years old on an average, but individual vessels are ranging from say about 9 years to 23 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, in particular. However, there is no physical constraint for these vessels cross-trading worldwide. They carry a variety of cargoes like iron ore, coal, coke, grain, fertilizer, steel products, plywood, bauxite etc. (a) It will be evident that in the discharge of the obligations cast on the department vis--vis its
customers, while carrying cargoes for them either on time charter or on voyage charter, the expectations of the parties have to be kept in mind. Generally, money is the critical factor and any deficiency that hampers the generation of a profit for the charterer qualifies for a penalty on the operator viz. SCI. In this context; The maintenance and upkeep of the vessel, prompt and pro-active action on the part of the on board personnel and also the staff ashore is paramount. Maintenance of time schedules, the breach of which would have implications in terms of additional cost for the operator and the ship owner are very material. Although the degree of
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responsibility for these individual items will vary, there could be scale of standards that could be devised to evaluate the meeting of the criteria standards set. Goals in this direction need to be devised and adhered. The clients/ users of bulk carrier services also expect SCI to fulfil its obligation to lift nominated quantity of cargoes as per the Charterparty / COA in a timely manner and thereby, calls for proper deployment of tonnage within specified laydays. The incidence of claims for shortage / loss of cargo should also be minimum, if not altogether eliminated. The delivered cargo should conform to specification as per Bills of Lading, taking care to avoid contamination or degradation.Delivery of the right quantity and quality at the right place and time and safely too. From customers point of view, the prompt settlement of their bills by SCI such as repair and brokerage bills is also important. Incidentally, when dealing with the loading and discharging of cargoes on Indian coast, the efficiency of the port and other infrastructure will also have a bearing on the productivity and satisfaction levels of the shipping customer and therefore, there should be a dovetailing of the charter parameters devised as between the various links in the shipping chain. Major Customers SAIL, IMR Resources, Noble, Marimpex, Panocean, Martrade, Amarante, Psons, Essel Mining, Comtrack, Crossbridge. Clients may get in touch with VP (Bulk Carriers), SVP (B&T), Director (B&T) and CMD in that order with specific complaint/ problem in case agreed service standards are not fulfilled. SCI would endeavour its best to mutually resolve the dispute/ difficulty of clients/ users of service to the benefit of both parties. If the particular complaint has not been satisfactorily attended to there is a grievance procedure with a Senior Officer in charge of the system and the client could take recourse to the same. (3) Specialized Vessels Cell
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The Specialized Vessels Cell is part of the Bulk Carrier & Tanker Division and deals with the operations and management of 2 Liquefied Petroleum Gas(LPG) carriers and 3 Chemical carriers, which are wholly owned by SCI. In addition, the SVC also deals with the operation and management of two Liquefied Natural Gas (LNG) tankers, which are owned by joint venture companies in which SCI has a sizeable share. The LPG tankers are of a capacity of 17,601 DWT while the Chemical tankers are 33,058 DWT each. The two LNG tankers S.S.Disha and S.S.Rahi, have a cargo capacity of about 138,000 cubic meters each. The third LNG Tanker, S.S.Aseem of capacity about 155000 cubic metres, is due for delivery in November, 2009. The chemical tankers are deployed on long-term Contract of Affreightment (COA) with Maroc Phosphore for transportation of phosphoric acid from Morocco to India. Charterers for the LPG carriers, in the recent past, include Indian Oil Corporation Ltd (IOC), Hindustan Petroleum Corporation Ltd (HPCL), Petronas MITCO etc.. They are currently employed on time charter to Indian Oil Corporation Ltd. The LNG tankers are on long term time charter to Petronet LNG Ltd. The SVC dept looks after the technical and commercial management of the tankers as per the COA for chemical tankers and as per the time/voyage charter-for the LPG tankers. The technical management activity involves regular planned maintenance of ships in line with international statutory regulations, periodic dry-docking and running repairs of the tankers. The commercial activity includes coordination with agents for smooth transit of ships to various ports of call & payment of port and other dues, arranging for ships bunker (fuel) and timely raising of debit notes and following up with the customers for prompt payment. (a) Clients/ users of SVC services expect SCI to fulfil its obligation to lift nominated quantity of Phosphoric Acid/LPG/LNG as specified in COA/other agreements and deliver nominated quantities to designated port(s) in line with the specified schedule. Moreover, Clients also expect that delivered cargo should be of correct specification as stated in Bills of Lading without contamination or degradation of cargo. Delivery of specified cargoes in the right quantity and quality from and to the designated ports, safely and on time, each time is the expectation of the customer.
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(b) Major Customers of SVC Dept are: India Oil Corporation Ltd. Hindustan Petroleum Corporation Limited Maroc Phosphore Sterlite Industries Ltd. Petronet LNG Limited. Other customers that are interested in transporting phosphoric acid, LPG, Ammonia and LNG.
(c) Clients need to get in touch with GM (SVC), VP (SVC), SVP (SVC), Director(B&T), and CMD in that order with specific complaints / problems in case agreed service standards are not fulfilled. SCI would endeavour its best to mutually resolve disputes / difficulty of clients / users of service to the benefit of both parties. (d) SCI expects its customers /user for reciprocal treatment in terms of maintaining payment schedule, reliability and trust fulfilment so that its trade interest can be pursued. SCI expects Client to forward voyage particulars, intimation of laydays well in advance so that tonnage can be deployed as schedule. Delays at disport should be reduced to minimum for quick turnaround of vessels. Clients/ Users should improve port/ inland infrastructure, which will reduce delays and bottlenecks and enable SCI to serve them better. Freight / demurrage settlement should be made promptly. Customer feed back / response is very important and would help SCI to improve / constantly upgrade the quality of its service. 2.3 Chartering Department The function of Chartering Department is of a corporate nature. Chartering Department is responsible for meeting all the requirements of SCI related to in/out chartering of all kind of ships. The in/out chartering requirements is advised to Chartering Department by the concerned Department. Accordingly, the department enters the requirement in the market through weekly brokers meeting or any other day during
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the week (depending upon urgency) as per the laid down chartering procedures. The negotiating officers then negotiate and finalize the business. The businesses or vessels are fixed normally through broking channel or sometimes directly with owners or charterers. Once the business or vessel is fully fixed, all the necessary documentation is done as per the laid down chartering procedures. The Charter Party is drawn and passed on to concerned department for necessary action. Besides above, the department is also involved in following activities. To provide market information to the management through daily/monthly reports. To prepare monthly report on in/out chartering fixtures concluded by the department. To prepare and processes Debit Notes for payment of brokerage commission after C/P is signed. To conduct weekly meeting with the brokers (on SCI panel). To review performance of the brokers on periodical basis. (a) Clients expect smooth operation and optimum utilization of the vessels in accordance with the charter party provisions. In order to give best of the services to the clients, concerned operation departments (technical and commercial) are in constant contact with the vessels/various agencies/clients so that the operations are performed as per the clients expectations and C/P provisions. (b) In case of dispute, if any, endeavour is always made to sort out the same amicably.However, in case of disputes where amicable solution is not possible, same is referred to Arbitrator as per the charter party provisions regarding arbitration.
(c) As regards expectations/ requirements from clients, charterers expect smooth and trouble-free operations of our vessels. When SCI being charterers, owners expect timely payments of hire/ freight as well as speedy settlement of outstanding, if any. Brokers expect timely clearance of their brokerage bills.
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3. TECHNICAL & OFFSHORE SERVICES DIVISION: The Technical & Offshore Services (T&OS) Division is both a profit centre as well as service centre in SCI. The functions of the T&OS Division can be broadly classified into the following areas: 1. Project Cell 2. Technical - Shipbuilding & Services 3. Technical Fleet Services 4. Offshore Services 3.1. PROJECT CELL: The Project Cell plans and processes acquisition of tonnage for SCI in consultation with the operating divisions. It monitors the SCI fleet and plans for the need for replacing some of the existing vessels or the requirement of addition of tonnage in tune with the developments in SCI as well as in the shipping industry. The Project Cell prepares Project Reports, floats tender for acquisition of vessels and carries out evaluation of the offers received. The technical details in the tender are taken care by the Shipbuilding & Services department and the commercial details of the tender are taken care by the Project Cell. a) The broad procedure for acquisition of newbuilding vessels by SCI is as follows: 1. The Tender for acquisition of vessels is floated. The tender notice is published in leading Newspapers and on SCI website.
2. Offers are invited from reputed shipyards in two stages i.e. Technical Offer and Commercial Offer.
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3. The shipyards are shortlisted based on the Technical offer submitted by the shipyard and their financial standing.
4. Technical discussions are held with all the shortlisted shipyards to bring them at par with each other and to acceptable levels of SCI.
5. The shortlisted shipyards are then requested to submit their Price offers on both cash and credit basis.
6. The selection of the shipyard is done based on the evaluation of the price offers submitted by the shipyards.
7. Upon selection of the shipyard, formal shipbuilding contract is signed between SCI and the shipyard.
b) The broad procedure for acquisition of secondhand vessels by SCI is as follows: 1. Advertisement is published in National and International newspapers.
2. Market scanning : SCI continuously scans the market for acquisition of suitable secondhand vessels. 3. Inspection of the vessels by SCI team, as and when suitable vessels are located or offered by the sellers/authorised brokers.
4. . Receipt of Inspection Report.
5.
Negotiations with the owner/their authorised brokers.
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6. . Finalisation of the deal with owner of the vessel.
7.
Final SCI Board approval for acquisition under MOU. Signing of contract.
3.2 TECHNICAL - SHIPBUILDING & SERVICES DEPARTMENT: The Shipbuilding & Services (SB&S) is the Technical Department involved in acquisition of tonnage for SCI. The SB&S department finalises the technical specifications for the vessels to be acquired and then supervises the construction of the vessels at the shipyard. The main activities of the department can be broadly termed as new construction services and technical consultancy services. a) New Construction Services: The various activities undertaken by SB&S department ensures that the SCI has a young, modern and technically competent fleet confirming to the latest international rules and regulations and requirements of class and also confirming to the most modern and exacting specifications. The department prepares the technical specifications for the newbuilding vessels based on the requirement of the operating division and the trends in the market. It is involved in technical discussions with the participating shipyards so as to bring them upto the SCI's specifications. After the order is placed with the shipyard the department is involved in on site supervision of the shipbuilding activity. b) Technical Consultancy services: The SB&S department also provides Technical Consultancy assistance to various organisations for their Tonnage Acquisition Programme. Organisations include The Andaman & Nicobar Administration, The Union Territory of Lakshadweep, Geological Survey of India, Directorate General of Lighthouses & Lightships, Department of Ocean Development etc. of the Government of India.
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The Consultancy assistance rendered for new building vessels include: 1. Project Viability and feasibility: which inter alia includes Market Study, Obtaining Statuary Approvals, Selection of Ship Building yards through international tendering procedure.
2. Design Consultancy: Preparation of Technical Specification, Preliminary GA Plan, Preliminary Machinery layout plan, Preliminary Accommodation Layout plan 3. Project Management: Preparation of Ship building contract, Monitoring of finances during construction, Delivery Protocols and related documents, Post delivery and guarantee matters.
4. Site Supervision: Plan Approval, Ship Building construction supervision at yard, Test and trial supervision, Delivery and acceptance of vessels
The Consultancy assistance rendered for acquisition of second-hand ships include: Identifying the type and size of vessels, receipt and evaluation of offers, inspection of class records, physical inspection of vessels, processing specific proposals for Owners / Government approval and taking delivery of the vessels etc. The clients can expect world class services from SCI making use of the latest technology available and the vast talent pool comprising of experts in shipping industry 3.3 TECHNICAL FLEET SERVICES: The Technical Fleet Services performs the following functions: i) Selection/empanelment and fixation of tariff for carrying out voyage repair on SCI vessels by various workshops ii) Rate Contracts, and
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iii) Disposal of vessels i) Selection / Empanelment of workshops: In order to carry out the above activities two committees are constituted viz. Workshop Appraisal Committee and Workshop Tariff Committee. a. Activities of Workshop Appraisal Committee: The applications received from various workshops are scrutinised and as per requirement inspections carried out to determine the suitability /technical competency of the shipyard. The tariff rates are asked from the competent workshops as recommended by the above committee. b. Activities of Tariff Committee: The competitive rates received from various workshops are analysed and empanelment is done on competitive basis for carrying out repairs on SCI vessels ii) Rate Contracts: The Technical Services Department also finalises rate contracts for spare parts with OEMs for various machinery such as Spare parts for Daihatsu Engines, Yanmar Engines and Wartsila Sulzer Engines.
iii) Disposal of vessels: The Technical Service department is also entrusted with the task of sale of SCI vessels which are technically and economically unviable for operation. The Technical Services Department in consultation with the operating Division prepares a phasing out plan for SCI vessels so as to maintain a young fleet for the company. The broad procedure for disposal of vessels is as follows: 1. The vessels, which have completed their economic life or are uneconomical for further operations are processed for disposal. Based on the balance life of the vessel, the vessel is either sold for further trading or for scrapping.
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2. The advertisement for further trading and for scrapping is simultaneously released in leading Indian/International news papers indicating the date of inspection and date & time of submission of tender. For giving wider publicity, the said advertisement is also placed on SCI website. The various authorities e.g. INSA, MSTC, shipbrokers associations etc are also duly informed of the above.
3. The tendering procedures are carried out on the stipulated day as mentioned in the advertisement and the successful bidder is identified based on the offers received.
4. MOA is then signed between the successful bidder and the SCI on receipt of first instalment and the EMD is converted to Security Deposit which is returned to the bidder after delivery of the vessel. The highest bidder is notified to make the balance payment and take physical delivery of the vessel within 4 banking days.
5. After obtaining confirmation regarding receipt of full and final payment, the vessel is physically handed over to the successful bidder.
3.4 OFFSHORE SERVICES DEPARTMENT: 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 10 Anchor Handling Tug-cum-Supply Vessels (AHTS), which are on charter to ONGC since 1984-85. Offshore Department also undertakes manning, management, maintenance and operations of various specialized vessels viz. Multi Support Vessels, Well Stimulation Vessel, Seismic Survey
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3. The clients can expect availability of vessels for offshore logistics support with minimum agreed downtime. 4 When SCI is providing required services to the clients by way of O&M of their vessels or chartering out SCI vessels to our client, the SCI expects payments of charter hire/remuneration/advance for repairs, dry-docking, etc. well in time/within agreed time limit, enable SCI to operate the vessel to optimum utilization. 5 If the agreed service standards have not been fulfilled, Client may take up the matter with the concerned Group of Offshore Department. If the problems persists, then the client may take up the matter with Vice President I/c (Offshore).
3.5 NAME & DETAILS OF THE CONTACT PERSON:
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5. PERSONNEL & ADMINISTRATION DIVISION The Personnel and Administration Division is under the charge of Director (Personnel & Administration). The SCI can draw officers and crew from a pool of Trainee Marine Engineers, Trainee Navigating officers and Ratings. The Division is responsible for provision of timely assistance and service to them as well as ensuring the smooth and effective administrative functioning of the Organization. The D(P&A) is overall in-charge of the safety management system of P&A Division and is responsible for the continuous management of all personnel both ashore and afloat. He is also the Director of Public Grievances. Redressal of Public Grievances Grievances if any can be forwarded to the Director (P&A) or to the Nodal Officers identified for each Division. The contact details are as under: Director (P&A) & Director of Public Grievances Mr. K. Gupta
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Telephones: 022 22023970 022 22026666 Fax 022 - 22026283 E-Mail k.gupta@sci.co.in Bulk Carrier and Tanker Division Mr.A.K.Gupta, SVP Telephones: 022 24973555 022 22026666 Fax 022 - 24973560 E-Mail ak.gupta@sci.co.in Technical & Offshore Services Division Capt. P.B. Joag, GM Telephones: 022 22026666 Fax 022 - 22026905 E-Mail pb.Joag@sci.co.in FINANCE DIVISION Mr. S. Kannan, ED Telephones: 022 22028039 022 22026666 Fax 022 - 22026905 E-Mail s.kannan@sci.co.in PERSONNEL & ADMINISTRATION DIVISION Mr. D.S. Kanvinde, ED Telephones: 022 22028370 022 22026666 Fax 022 - 22026905
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E-Mail ds.kanvinde@sci.co.in Mr. Y. D. Chadha, SVP (FP) Telephones: 022 22020808 022 22026666 Fax 022 22026905 E-Mail yd.chadha@sci.co.in PURCHASES & SERVICES DIVISION Mr.T.R.Shetty, VP Telephones: 022 22833471 022 22026666 Fax 022 - 22026905 E-Mail tr.shetty@sci.co.in INFORMATION TECHNOLOGY Mr. S. N. Deshpande, SVP(IT) Telephones: 022 22022953 022 22026666 Fax 022 22026905 E-Mail sn.deshpande@sci.co.in PUBLIC RELATIONS DEPARTMENT Mr. G. N. Shetti, DGM Telephones: 022 22023792 022 22026666 Fax 022 22026905 E-Mail gn.shetti@sci.co.in
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FLEET PERSONNEL DEPARTMENT The main functions of the Fleet Personnel Dept are : a) To execute policies and procedures formulated by the Director for the recruitment of officers and ratings and safe manning of the fleet. b) Study and implement the national and international rules and regulations regarding safe manning of ships. c) Manpower planning of Fleet Personnel dept. i. ii. iii. iv. Administer medical facilities for fleet personnel. Identify allocate and coordinate for training of the resources and personnel. Negotiate with MUI/NUSI for revision of service conditions Recruit contract officers for fleet personnel on board
The Fleet Personnel Dept. is responsible for engagement of officers and crew members on all its vessels and managed vessels. SCI maintains a roster of officers and crew from which the selection is made. In case the roster officers fall short then we had taken officers on contract. In case the roster crew falls short, the same is made good by selecting from the general roster seamen. Such seafarers from general roster is being selected every Tuesday and Thursday in SCI office. Selection of general roster seamen is made strictly on the basis of seniority
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d) The Travel Cell in FP Dept. looks after the arrangements for booking of air tickets, hotel accommodation for the concerned officers/crew during their stay in Mumbai. As per rules, entitlement, family carrying permission is granted to the officers. e) The Coordination & General Cell looks after the work relating to engagement of manning agencies for supply of manpower as and when required. Priority is given to agencies having adequate experience in supply of manpower to the Industry, good financial background and compliance with ISO quality systems. Manning agencies are empanelled with due approval of the Management. f) The work relating to empanelment of hotels for accommodating officers during transit is undertaken by the C&G Cell after obtaining due approval of the Management. The contract is renewed on yearly basis. On expiry of the existing contracts, fresh quotations are invited and normal procedure is followed for entering into new contract. g) The matter pertaining to legal cases, as well as remittances/advances at foreign ports in case of repatriation/medical treatment to the officers is also attended to by the C&G Cell. h) The confidential reports are scrutinized and officers/ratings are recommended for higher promotions. If any malpractices are reported, enquiries are conducted on board and disciplinary action taken as deemed fit. 6. ISM CELL By amendments to the International Convention for Safety of Life at Sea (SOLAS), 1974, which introduced new chapter IX into Convention, the International Safety Management (ISM) Code has been made mandatory with effect from 1st July 1998. The ISM Code was further amended in December 2000 and the amendments entered into force on 1st July 2002. SCI introduced the Safety Management System by setting up a dedicated ISM Cell, which developed, structured and documented procedures in compliance with the International Safety Management Code for
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Safe Operation of Ships and for Pollution Prevention (ISM Code), in accordance with the resolution A.788(19) of the International Maritime Organization (IMO) and SOLAS, Chapter IX. SCI has laid the foundation of the Safety Management System (SMS) by recognizing that the cornerstone of a good Safety Management is commitment from top, competence, attitude and motivation of individuals at all levels that determines the expectations of a good Safety Management System. SCI complied with all the functional requirements of the ISM Code, which includes the Safety and Environment Protection Policy as under. SAFETY, OCCUPATIONAL HEALTH AND ENVIRONMENT PROTECTION POLICY It is the aim of the Safety Management System of The Shipping Corporation of India Ltd. (SCI) to: Preserve Safety at Sea and Protect the Environment. In order to fulfill the aim of this Safety, Occupational Health and Environment Protection Policy, the SCI is committed to the following objectives: Prevention of injury and loss of life Avoidance of damage to the environment Avoidance of damage to property
In order to achieve these objectives, the SCI shall: Endeavour to continuously improve safety management skills of personnel ashore and aboard ships Establish procedures for shipboard emergencies Establish safe working practices in ship operation Provide a healthy and safe working environment Provide necessary resources to implement Occupational Health and Safety Programmed
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Establish safeguards against all identified shipboard safety and pollution hazard Comply with mandatory rules and regulations. Recognise applicable industry codes, guidelines and standards
SCI completed the task of ISM Code compliance through verification, control and certification of the Company and the vessels in the 1st phase, which included Bulk Carriers, Oil Tankers, Chemical Tankers, Gas Carriers, Passenger Ships and Passenger High Speed Crafts, well within the deadline of 1st July 1998, as required by the ISM Code. Document of Compliance (DOC) for the Company (for Phase I vessels), valid for five years, was obtained on 18.11.1997. This Document of Compliance was subsequently endorsed annually by DGS, after satisfactory verification. As per ISM Code requirement, the Company was put up for DOC Renewal External Audit by DGS in November 2007 and DOC was renewed. Renewal DOC (Phase-I) is valid for five years i.e. up to 18.11.2012, subject to annual verification by DGS. Similarly, SCI completed the task of compliance through verification, control and certification of the Company and the vessels in the 2nd phase, which include Other Cargo Ships (Liner Ships, OSVs and MSVs), well before the deadline of 1st July 2002, as required by the ISM Code. DOC for Phase-II was obtained on 30.03.2001 and is valid till 15.03.2006, subject to annual verification by DGS. Document of Compliance (DOC) for the Company (for Phase II vessels), valid for five years, was obtained on 30.03.2001. This Document of Compliance was subsequently endorsed annually by DGS, after satisfactory verification. As per ISM Code requirement, the Company was put up for DOC Renewal External Audit by DGS in January 2006 and DOC was renewed. Renewal DOC (Phase-II) is valid for five years i.e. up to 14.03.2011, subject to annual verification by DGS SCI also implemented Safety Management System on board all its vessels and obtained Safety Management Certificate (SMC) from DGS for each ship. The SMC is valid for five years, subject to
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periodic verification by the Administration, which normally takes place between the second and third anniversary dates of the issue of the SMC. New acquisitions are brought under SMS, before delivery, with full compliance of the ISM Code. The time bound achievement was the result of SCI's strength of professional experience, planning, training, execution, systematic analysis and quality expertise, which is an asset for any world class ship operator or owner. SCI is also in a position to provide such management expertise to any other national/international ship operators. 7. ISPS CELL The ISPS Code (International Ship & Port Facility Security Code) was adopted by the IMO in December 2002 and became mandatory from 1st July 2004. Objectives of the code are: To establish an International framework involving co-operation between Contracting Governments, Government Agencies, local administrations and the shipping and port industries to detect security threats and take preventive measures against security incidents affecting or port facilities used in international trade. To establish the respective roles and responsibilities of the Contracting Governments, Government Agencies, local administrations and the shipping and port industries at the national and international level, for ensuring maritime security. To ensure the early and efficient collection and exchange of security related information. To provide a methodology for security assessments so as to have in place plans and procedures to react to changing security levels.
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To ensure confidence that adequate and proportionate maritime security measures are in place. In order to meet the above objectives, SCI has a security policy signed by the C&MD, which aims to PROVIDE SAFE & SECURE SHIPS FOR ITS CREW, PASSENGERS AND CARGOES WHILST AT SEA AND PORTS ALL OVER THE WORLD.
SCI is committed to the following objectives to fulfil the requirements of its security policy: Security of its ships and their crew, passengers and cargo Support to its ships in implementing and maintaining the Ship Security Plan.
The ISPS Cell headed by the Company Security Officer (CSO) monitors the security aspects of the ships and ensures that: The ships security assessment (SSA) of every ship of the fleet is carried out. Based on the SSA the Ship Security Plan (SSP) is developed for each ship. The SSP so developed is scrutinized and approved by the Director General of Shipping (DGS). The DGS approved SSP is placed onboard and implemented effectively. After implementation the security internal and external audits are carried out, shortcomings if any are rectified and the statutory certificates (ISSC & CSR) are issued and connected onboard. The annual internal audits are carried out along with the ISM audits for checking the continuous effectiveness of the SSP and the deficiencies/ non conformities identified are rectified. Reviews of the security activities are carried out and the SSPs are modified if required.
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The security information available from all sources is collected, and relevant ones are sent to the ships and operating departments for increasing the security awareness of all concerned.
Concerned personnel from the ship and office undergo necessary training. Consistency between safety requirements and security requirements is maintained. Necessary security drills and exercises are carried out. 24 hour contact number of the CSO is available to all the ships for security related communication.
A special cell in the Director General of Shipping has been created for round the clock monitoring of security alerts from the ships and security related communication and Gulf of Aden Piracy threats.
6. VIGILANCE DEPARTMENT The Chief Vigilance Officers are the extended hands of the CVC. The Chief Vigilance Officers are considerably high-level officers who are appointed in each and every Government Organization to assist the Head of Organization in all vigilance matter. The Chief Vigilance Officer thus constitutes an important link between the organization and the Central Vigilance Commission (as also the CBI). Vigilance department under the supervision of Chief Vigilance Officer eyes the vigilance matter i.e. the matters having vigilance angle. Vigilance angle is obvious in following acts: (i) Demanding and/or accepting gratification or offering and/or giving gratification other than legal remuneration in respect of an official act or for using his influence with any other official. (ii) Obtaining a property, movable or immovable, whose value is beyond the companys norm, without consideration or with inadequate consideration from a person with whom he has or likely to have official dealings or his subordinates have official dealings or where he can exert influence.
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(iii) Obtaining for himself or for any other person any valuable thing or pecuniary advantage by corrupt or illegal means or by abusing his position as a public servant. (iv)Possessions of assets disproportionate to his known sources of income.
(v) Cases of misappropriation, forgery or cheating or other similar criminal offences There are, however, other irregularities where circumstances will have to be weighed carefully to take a view whether the officers integrity is in doubt. Gross or wilful negligence; recklessness in decision making; blatant violation of system and procedures; exercise of discretion in excess, where no ostensible/public interest is evident; failure to keep the controlling authority/superiors informed in time these are some of the irregularities where disciplinary authority with the help of CVO carefully studies the case and weigh the circumstances to come to a conclusion whether there is reasonable ground to doubt the integrity of the officer concerned. The raison dtre of vigilance activity is to enhance the level of managerial efficiency and effectiveness in the organization.
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CONCLUSION Shipping is a global industry and its prospects are closely tied to the level of economic activity in the world. A higher level of economic growth would generally lead to higher demand for industrial raw materials, which in turn will boost imports and exports. The shipping market is cyclical in nature and freight rates generally tend to be volatile
In line with the revised higher estimates of global economic growth and upturn in global consumption, the shipping freight rates have posted some improvement in the current year. Anyways, the outcome of the ongoing European crisis as well as impact of the new-building deliveries would be critical for the future direction of shipping rates. Container line business is a flamboyant industry not only in India but in whole world. Due to rapid economic development since recent past, trade between India and developed countries has increased significantly and India is being seen as export making country from its traditional tag of import specific country. As a result of this development shipping industry is progressing at average rate of 10% during the last 3 years. It is also essential that government of India and Ministry of Shipping in particular should take more proactive steps like setting up automated container terminals, developing more dry cargo berths, liberal regulations in free movement of foreign exchange and international trade, easing export/ import duties to make this industry work more freely and contribute even more to economic development of country. Companies at same time should adapt more technology to make easy and efficient work environment for customers and employees.
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References
Census of India 2001,www.censusindia.gov.in Ministry of Shipping, Government of India www.shipping.nic.in Marine Environment, www.imo.org National Portal of India, http://india.gov.in Infrastructure, Government of India, http://infrastructure.gov.in/port.htm Indian Ports Association, http://ipa.nic.in Special Economic Zones in India, Government of India, http://sezindia.nic.in CLT propeller Design, SISTEMAR, http://www.sistemar.com/CLTpropellers/desing.html Directorate General of Shipping, http://www.dgshipping.com Legislative Department, India Code, http://indiacode.nic.in Income Tax Department, Government of India, http://www.incometaxindia.gov.in Ministry of Finance, Government of India, http://finmin.nic.in Indian Custom EDI System, http://ices.nic.in/Ices/home.aspx Reserve Bank of India, http://www.rbi.org.in http://www.bignerds.com
Bibliography
Indian Shipping Report-2005 by imaritime Research Division Shipping Management International Magazine Book on Competition Concerns In Shipping Conferences by NIKHIL GUPTA
Report of Shipping Corporation of India by Vinod Ahujha (Former PRO of SCI)
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Indian Shipping Industry- An overview of SCI

INDIAN SHIPPING INDUSTRY AN OVERVIEW OF SCI

Under the Guidance of

Prof. ARUNA DESHPANDE

ALKESH DINESH MODY INSTITUTE

FINANCIAL AND MANAGEMENT STUDIES

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

Signature of Guide with Date: -

Signature of the Students with date

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

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Name of Student: AHSAN ABDUL RASHID KHAN Roll Number: 43

Title of the Project: INDIAN SHIPPING INDUSTRYAN OVERVIEW OF SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

Signature of Student with date:

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

Push n Pull Factors:

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

Faster Data Processing:

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

The Essential Commodities Act 1955:

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI

AHSAN ABDUL RASHID KHAN

Indian Shipping Industry- An overview of SCI