Sorry state of the PSUs under UPA
SCI: Sailing in troubled waters
By Ravi Shanker Kapoor
When Prime Minister Manmohan Singh showered fulsome praise on Shipping Corporation of India (SCI) at its golden jubilee celebrations on October 1 for having “rendered outstanding services to the nation,” there was a great deal that was left unsaid. And the crux of it was that SCI “is on the brink of financial collapse”.
This is not the opinion of private investment experts, though they would not be widely of the mark for reaching a similar conclusion. For the SCI share price is trading near the 52-week low and the prospects do not seem very encouraging in the foreseeable future. It is no other that the Shipping Ministry which believes that the plans to buy 33 vessels would lead into a “debt-trap, almost on the lines of Air India”.
According to an internal document of the line ministry, “SCI, which has had a profitable run for the last 19 years, is on the brink of a financial collapse… The company will be in the red from this year onwards. The large and high cost orders are leading to a debt-trap almost on the lines of Air India.”
Further, it said, the gap between the cost per vessel as per contract and the market value of the vessel at present is significant. “The overall loss to the company on account of such acquisitions, where there are gaps between the contract price and the present market value, is in excess of USD 200 million,” says the document, prepared by Vijay Chibber, Financial Advisor & Additional Secretary in the Shipping Ministry.
SCI has announced a capital expenditure of Rs 3,700 crore in the current fiscal to buy 24 new vessels across categories. These will include like bulk carriers and crude carriers. At present, the average age of its vessels is 14 years; after the new acquisitions, it would decline 13 years. Apparently, the line ministry and the Public Sector Undertaking (PSU) are not on the same page as far as new acquisitions are concerned.
The Prime Minister, however, did not sound any alarm bells. “I find it particularly commendable that apart from being the largest, the SCI is also the most diversified Indian shipping company operating in varied shipping sectors and carrying a wide range of cargo such as oil, coal, iron ore, food grains, gas, steel and containers.”
Further, he said, “SCI has been a pioneer in several areas. It is the only Indian shipping company providing long haul container services to international markets. It is also the only Indian shipping company to have ventured into the highly specialised area of LNG transportation, in joint ventures with leading international shipping companies.”
Singh underlined the “need for seamless integration of various modes of transportation… We have set up the National Transport Development Policy Committee under the chairmanship of Dr Rakesh Mohan, and I am confident that the Committee will provide useful suggestions for the future growth of the sector in years to come.”
We only hope that the relevant recommendations of the panel do not gather dust, for such suggestions often call for tough measures which the UPA regime, beset with its own countless problems, is often unable to undertake.
Highlighting the important of maritime sector, including shipping, ports, shipbuilding, and ship-repair, Singh said, “We should collectively make every effort possible for the growth of this vital sector… there is an urgent need to further develop our national fleet. I call upon the Indian shipping companies to pursue their growth plans in the right earnest and in tune with the global economic environment.”
Good sentiments indeed, but they need to be backed up with the requisite policy framework. Unfortunately, the UPA government attitude and predilections smack of an unmistakable Leftist bias, something that does not go down with the investing community.
The Prime Minister also spoke about the issue of sea piracy. “Our Navy, our Coast Guard and the shipping companies are putting up a concerted effort in close co-ordination with other international agencies to deal with this menace. But I suggest more needs to be done in this area to provide safety and security.” Done by whom, Mr. Prime Minister?
The primary responsibility is that of the government which has not been carried out in right earnest. A former Chief of Naval Staff has gone public on the obstructionist role played by the Ministry of External Affairs. It is time the UPA government should go its act together, chalk out realistic policies, and execute them in an efficient manner. Otherwise, the Prime Minister’s hope that in the next fifty years of SCI’s existence “we will see still more cooperative, productive contribution to the growth of this vital sector of our economy.”
(The author is a freelance journalist)