Indian Shipping

7/27/2019 Indian Shipping

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A REPORT ON INDIAN SHIPPING

INDUSTRY

SUBMITTED BY:

G.SRIKANTH

A.GAYATHRI

NITIN

MEGHNA VASIREDDY


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INDIAN SHIPPING INDUSTRY:

Overview:

Shipping plays an important role in the transport sector of Indias economy.

India has one of the largest merchant shipping fleet among the developing

countries and is ranked 16th in the world. Indian maritime sector facilitates not

only transportation of national and international cargoes but also provides a

variety of other services such as cargo handling services, shipbuilding and ship

repairing, freight forwarding, light house facilities, training of marine personnel,

etc. The Indian shipping industry is subject to the macro-economic factors ofinternational trade and commerce as well as the national economic scenario.

India has over 110 companies in the shipping sector. Major domestic players

include Shipping Corporation of India Ltd, Great Eastern Shipping Co Ltd,

Essar Shipping, and Varun Shipping Company Limited. However, India's

shipping industry has not grown at a pace commensurate with its international

trade. From 1990-91-2005-06, the Indian fleet's total gross tonnage grew at

around 1.8 percent per annum compared to the average trade growth of about 14

percent. Consequently, India's maritime trade is dominated by foreign fleets and

the ratio between foreign and Indian fleets in Indian maritime trade is 70:30.

Also, the average age of Indian ships is 16.5 years as against the world average

of 12.2 years. The Indian fleet is mostly deployed on international operations,

which account for 93 percent of the total capacity, while coastal shipping

accounts for 5.7 percent of capacity and offshore shipping the rest.

The market share of Indian shipping companies also declined due to decreasing

tonnage and a fall in assured cargo on account of the liberalization of the

regulatory environment and the start of shipping operations by major customers,

like refineries.

Multi-modal Transportation


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India would also need to focus on multi-modal transport to facilitate movement

of goods from inland locations to ports and vice-versa. This would require

development of road and rail infrastructure, improvement in multi-modal

transport, and modifications in procedural arrangements to allow smooth flow

of traffic (load limits on road, etc.).

Overall, the Indian maritime sector is poised for healthy growth in line with the

growth in Indian economy. This requires planning and investments by all

stakeholders, including the government and the public and private sector, fordeveloping the requisite infrastructure, improving current processes and

introducing policy measures that create a conducive environment for players in

the sector.

TYPES OF VESSELS:

The international cargo market is immense, served by numerous ships of all

sizes, ranging from general-cargo and specialised vessels through to

commonplace bulk carriers, and from small 'coasters' with a cargo capacity of a

hundred or so tonnes up to enormous 'cape-size' bulk carriers capable of

carrying cargoes in excess of a quarter of a million tonnes of a bulk commodity

such as iron ore. There are still a few elderly sailing ships engaged in this most

fascinating of markets, as well as the latest, highly sophisticated, fuel-efficient

and 'cargo-friendly' modern vessels. Some ships are highly specialised and able

to carry only one particular commodity - others are flexible in design and able

to transport a variety of cargoes.

Small Feeder

The small feeder container vessels are normally applied for short sea container

transportation. The beam of the small feeders is, in general, less than 23 m.


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Feeder

The feeder container vessels greater than 1,000 teu are normally applied for

feeding the very large container vessels, but are also servicing markets and

areas where the demand for large container vessels is too low. The beam of the

feeders is, in general, 23-30 m.

Panamax Until 1988, the hull dimensions of the largest container ships, the so-

called Panamax-size vessels, were limited by the length and breadth of the lock

chambers of the Panama Canal, i.e. a max. ship breadth (beam) of 32.3 m, a

maximum overall ship length of 294.1 m (965 ft), and a maximum draught of12.0 m (39.5 ft) for passing through the Canal. The corresponding cargo

capacity was between 4,500 and 5,000 teu.

These maximum ship dimensions are also valid for passenger ships, but for

other ships the maximum length is 289.6 m (950 ft). However, it should be

noted that, for example, for bulk carriers and tankers, the term Panamax-size is

defined as 32.2/32.3 m (106 ft) breadth, an overall length of 225.0 m for bulk

carriers and 228.6 m (750 ft) for tankers, and no more than 12.0 m (39.5 ft)

draught. The reason for the smaller length used for these ship types is that a

large part of the worlds harbors and corresponding facilities are based on these

two lengths, respectively.

Post-Panamax In 1988, the first container ship was built with a breadth of more

than 32.3 m. This was the first post-Panamax container ship. The largest vessels

on order with a capacity of approx. 9,600 teu have exceeded the Panamax beam

by approximately 13 m.

Suezmax It is probable that Ultra Large Container Ships (ULCS) carrying some

12,000 teu containers can be expected. This ship size, with a breadth of 50 m /

57 m, and corresponding max. Draught of 16.4 m /14.4 m for passing through

the Suez Canal, may just meet the present Suezmax size.


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Post-Suezmax It is possible that in about 10 years the ULCS will perhaps be as

big as 18,000 teu, with a ship breadth of 60 m and a max. draught of 21 m.

Today, this ship size would be classified as a post-Suezmax ship, as the cross-

section of the ship is too big for the present Suez Canal. It is claimed that the

transportation cost per container for such a big ship may be about 30% lower

than that of a typical 5,000-6,000 teu container vessel of today.

A draught of 21 m is the maximum permissible draught through the Malacca

Strait. The name Malaccamax has therefore been used.

With the intended increase of the cross- section breadth and depth of the SuezCanal over the coming ten years, the 18,000 teu container ship will also be able

to pass the Suez Canal. On the other hand, a future container ship with a draught

of 21 m would require existing harbours to be dredged. Today, only the

harbours of Singapore and Rotterdam are deep enough


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TYPES OF SHIPPING FLEET

Regulators Plan to Monitor Shipping Rates:

As the global trade shrunk by over 10%, many shipping lines found themselves

in a situation of excess capacity (many liners ordered new ships during the

economic boom period). Some analysts predicted that at least few shipping lines

would go out of business to match with the supply demand situation. However,

it is believed that shipping lines, in an informal arrangement, collectively


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reduced the capacity through slow steaming (spending more days in sea,

which helped them to save on fuel and reduce capacity). It is estimated that

slow-steaming cut a liners capacity by around 5%. It is also believed that some

shipping lines have teamed up to levy a voluntary surcharge of US $ 400 per

container. Both the Federal Maritime Commission (USA) and the European

Monitoring Agency are closely monitoring the developments to see any

evidence of price fixing by shipping liners.

Maritime Transport and Climate Change Challenge

Like other economic sectors, maritime transport, which by volume carries over80% of global trade, has a role to play in addressing formidable challenge of

climate change. International maritime transport is playing a part in contributing

to climate change, but more importantly, it is also likely to be directly and

indirectly impacted by the various climate change factors, such as rising sea

levels, extreme weather events and rising temperatures. The wide-ranging

impacts of climate change, including that from maritime transport, and their

potential implications for trade, economic growth and development, underscore

the need to integrate climate considerations into strategies for transport planning

and development. Increasingly, it is being recognized that considered and

concerted actions are urgently required to ensure effective control of greenhouse

gas emissions and to establish the requisite adaptive capacity in the shipping

industry, especially in developing countries. Recognizing the importance for the

maritime transport sector of contributing to global efforts at reducing emissions

of greenhouse gases, IMOs Marine Environment Protection Committee

(MEPC) is considering a number of mitigation measures aimed at reducing

emissions of greenhouse gases from international shipping.

Integration of Shipping Industry with Global Logistics and Supply Chains


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Global shipping majors, like other segments of the conventional transport

industry, are increasingly getting integrated with the emerging global logistics

and supply chain activities, owing to both external and internal dynamics. Many

firms are entering into the enhanced canvas of offering logistics solutions, such

as door-to-door delivery systems, integrating with rail/road haulage movements

of cargo, customs brokerage, cargo consolidation, packaging/ re-packaging, and

distribution services, thereby substantially consolidating their market position,

and supplementing their ocean freight income. The global shipping industry is

thus going through a major redefinition by undertaking logistic integration of

their cargo operations.

Change in Directions in Trade Volume:

Multi-polarity of trade flows, and the growth in trade volumes of Asian region

is expected to impact the world shipping, as profoundly done by liner shipping

and containerised cargo some decades ago. One may recall that the earlier phase

of trade volume witnessed shipping growth in TransAtlantic and TransPacific

routes, and the growing volume of world trade, especially from Asia, is likely to

position the Pacific Rim and Indian Ocean Rim routes in the lime light.

INDIAN SHIPBUILDING INDUSTRY:

shipbuilding statistics shows that during 2009, the world order book was close

to 9226 ships, which was around (-) 18.6% less compared to previous year. In

fact,The world after 2007, new orders for shipbuilding had reduced by almost

half in 2008 and in 2009. However, completions of the shipbuilding orders have

shown improvement over the years.

India, currently, has around 32 shipyards, owned by: Central Government (6),

State Governments (2), public listed private shipyards (3), and privately held

shipyards (22). However, the major share of the present ship-building capacity


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in India is held by eight public sector yards, with Cochin Shipyard Limited and

Hindustan Shipyard Limited having capacity and infrastructure to build vessels

of 1.1 lakh dwt, and 80,000 dwt, respectively. Barring these two shipyards, the

majority of private sector shipyards have limited ability to build vessels in

respect of capacity and size of the vessels. Also Indias capability of building

technologically advanced ships, like LNG carriers are relatively less.

According to the world order book position, during 2009, Indian shipyards had

an order book of close to 260 ships constituting 1% share in terms of GT and

2.8% share in terms of number of bookings. China was top in the list with the

largest number of bookings of 3523 ships, followed by South Korea (1675),

Japan (1286) and Europe (447). India stood at the sixth position in the world

order book, after Vietnam (287).

Although India occupies a small percentage of the global shipbuilding market,

the Indian shipbuilding industry is well positioned for growth. According to a

study by the Indian Shipbuilders Association, the industry can grow at a rate of

more than 30%, and this rate of growth could be achieved through supportive

measures by the Government, including incentives for shipyards. As growth in

international trade results in increased global and domestic demand for new

vessels, Indian shipyards have certain advantages over shipyards in developed

nations. India possesses a large pool of technical workers, and its cost of

workforce is relatively low, compared to most other shipbuilding countries.

Apart from this, the Indian navy usually gives orders to Indian shipyards based

on national interests. This will also act in favour of the Indian shipbuilding

industry.

Shipbuilding acts as a catalyst for overall industrial growth due to spin offs to

other industries, including steel, engineering equipments, port infrastructure,

trade and shipping services. The indirect potential of shipbuilding industry in


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employment generation and contribution to GDP is therefore tremendous. The

dynamics of Indias economic growth will continue to create demand for new

ships, and ship-building capacity within the country needs to be augmented to

cater to this demand. If the domestic ship-building capacity is augmented, the

benefits to the economy would be manifold, with spill over effects on other

associated/ ancillary sectors, and generation of employment.

Increasing Investment in Shipping Industry

Shipping analysts feel that there is a pressing need for the Government to take

on the role of a facilitator and create opportunities for a healthy business climateto attract fresh investments in the shipping sector. The old ships are being used

by the ship owners primarily due to low investment capacity to buy new ships,

and the tremendous shortage in the availability of ships. Usage of old ship is

highly risky apart from being operationally more expensive. Further, several

countries around the world have banned certain class of ships, as per their build

and age, to be operated from their ports. A large part of the current order book

of the shipyards would go towards replacing these old vessels and the

incremental growth in capacities would be additionally catered by orders placed

outside India.

Developed countries have evolved various innovative structured models for

financing shipping industry. Norway has evolved the kommandittselskap

structure (KS Model), which is a tax-deferral method employed to finance ship

acquisitions. The German adopted the Kommanditgesellschaft (KG) model for

financing of various projects including that of shipping industry. Both KS and

KG models operate more or less on similar principles. Such models would be

best suited for Indian shipping industry too. According to the Directorate

General of Shipping, Government of India, innovative methods are required to

raise the needed resources. One such suggestion was exploring the possibility of


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creating innovative financing models like German KG Model for shipping

finance in India.

Indian shipping industry does not attract much of the requisite investments, at

present. The German KG Model would help the Indian shipping industry in

mobilizing necessary funds for the shipping companies, as also would serve as

an effective investment tool for high net-worth individuals, who would benefit

from tax exemption and also earnings. The Indian shipping industry can also

use this model for the purpose of purchasing LNG vessels as they are perceived

to be relatively safe investments backed by long term charters.

Strengthening Shipbuilding Industry:

Shipbuilding acts as a catalyst for overall industrial growth due to spin offs to

other industries, including steel, engineering equipment, port infrastructure,

trade and shipping. The dynamics of Indias economic growth has created, and

will continue to create a demand for new ships, most of which will have to bebuilt abroad, due to inadequate indigenous capacity. On the other hand, the

benefits to Indian industry and potential for employment generation from

shipbuilding and the associated ancillary industry would grow manifold, if India

builds ships for meeting its entire tonnage requirements. Also single window

clearance system needs to be brought into place for according clearances to new

shipyard projects covering land acquisition, environmental clearance, power andwater etc., so that project implementation is not delayed. The present

requirement to obtain multiple clearances from various departments acts as a

deterrent to attracting investment into this sector.

Developing Adequate Container Freight Stations

To increase the competitiveness of the countrys exports in the global market,

by reducing the transaction cost (both absolute and implicit cost) in exports, the


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Government of India is laying stress on developing a number of container

freight stations (CFSs) in the country. Modern and technologically advanced

CFSs play a significant role in effective custom clearance activities in the port,

and thereby shorten the turnaround time of ships. More CFSs need to be

developed in the vicinity of export clusters across the country. Mapping of

existing network of CFSs with the Towns of Export Excellence shows that the

CFS network needs to be strengthened further. It may be mentioned that Towns

of Export Excellence are identified by the Ministry of Commerce and Industry,

Government of India, if the value of production in the identified town exceeds

`750 crore.

Modal Shift to Coastal Waterways:

Movement of freight by coastal ship and integration of coastal shipping into the

transport network could supplement land based transport modes and relieve the

burden on them.

A north-south land movement, which could possibly be substituted by a

multimodal chain that includes coastal shipping, is shown here. Such amultimodal chain would reduce the length of the road or rail legs, significantly

reducing congestion on land. The coastal leg, apart from being more fuel

efficient, can also carry larger parcel sizes.

Land based transport modes, especially road transport typically carry huge

external costs, hidden costs thatburden not only road users but also society at

large.These include accidents, air and noise pollution and climate change Over

1,40,000 lives were lost in road accidents in India in 2011. Road transport

emissions cause respiratory illnesses such as asthma and bronchitis. A recent

survey of 10 European cities has shown that exposure to vehicular pollution

near busy roads is responsible for 14% of chronic childhood asthma cases. The

negative impact of vehicular pollution is expected to be much greater in India.

Further, road transport accounts for as much as 87% of the CO2 emissions


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of the transport sector in India, making it a significant contributor to climate

change.

Coastal shipping industry is of the view that high cost of coastal shipping in

India is on account of port dues, marine fuels, manning scales etc. While Major

ports are mandated to fix tariff for coastal cargo at 60% of EXIM cargo, certain

items like Thermal coal and POL products are exempt from this stipulation,

even in major ports. Minor ports, especially Minor private ports have uniform

tariff for coastal or EXIM cargo. From ports perspective, the costs it incurs for

servicing coastal cargo or EXIM cargo is same and hence there need not be any

distinction in charges. In specific case of GMB private ports, if GMB levies a

lower waterfront royalty for coastal cargoes, private ports may pass on the cost

savings to coastal shipper.

In our view, coastal shipping Industry is a classic case of Chicken or egg

situation. More than the constraints of fuel costs and port charges, the fact is

that coastal cargo volumes are low and continue to be so. Hence economies of

scale in terms of ship size and limited number of port of calls cannot beleveraged for cost savings. The main reason is that cargo movement is not

always 100% coastal i.e. it has a rail / road leg on both sides which results in

high overall cost to the end user. Second major reason is one-directional traffic

with vessel coming back empty on return leg. One possible solution is

relaxation of Cabotage laws so that EXIM vessels can carry domestic cargo.

This will nullify both the above constraints. However, this is not acceptable toIndian ship owners.

Another possible solution, for certain commodities in specific trade lanes is use

of inland waterways at least on one stretch of the logistics chain.

Compared to 7500 Kms of coastline, India has 14,500 Kms of Navigable inland

waterways of which approx 4500 kms is declared as National waterways and

comes under the purview of Central government. All other waterways are under


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the purview of respective state government.

Total cargo movement by Inland waterways including national and state level

waterways in less than 0.5 % of the total rail and road movement. The various

reasons for low user of Inland waterways are:

1. Insufficient depths throughout the stretches of Inland waterways.

2. Navigation being relegated to fourth position after drinking water, irrigation

and Hydra power generation.

3. Non-availability of cargo terminals.

4. One way cargo movement.

DCIS PORTFOLIO OF SERVICES:

Capital dredging (creating depths) - Capital dredging projects are primarily port

creation and expansion projects, which also involve the deepening and/or

widening of channels to allow access by larger and deeper draught ships.

Maintenance dredging (maintaining depths)- Maintenance dredging consists ofthe restoration of designed depths of waterways and harbors by removing silt,

sand and other accumulated sediments. Due to natural sedimentation, active

channels generally require periodic maintenance dredging. Dredging for land

reclamation, beach nourishment and shore protection - Reclamation dredging

involves dredging and raising of land levels and creation of land. Beach

nourishment dredging generally involves moving sand from the seabed toshoreline locations when erosion has progressed to a stage that threatens

substantial shoreline assets or affects tourism.

CUSTOMER PROFILE:

DCIs main customers are:

Major Ports

Non-Major Ports

Private Ports


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Indian Navy

Shipyards

OPERATIONS:

The Company is catering to the dredging requirements of the Haldia/ Kolkata

Port for the past thirty years. The Company also caters to the maintenance

dredging requirements of other major ports/ India Navy etc. The Company is

taking up capital dredging assignments depending on the availability of the

vessels and other logistic requirements. During the year 2012-13, maintenance

dredging contracts were executed for Kolkata Port, Visakhapatnam Port Trust,

Gangavaram Port, Cochin Port, Kandla Port and Chettinad Coal Terminal at

Ennore. Capital Dredging Contracts were executed at Paradip Port, Ennore

Port, Cochin Port and Kandla Port. The long pending dredging works at the

ICTT of Cochin Port Trust was successfully completed and the container

terminal was fully commissioned. The above works were executed either under

the existing contracts or renewal of the contracts entered into with the Ports

etc., during the previous years or new contracts entered into during the year.Recently DCI had completed (April-May2013) dredging work at

Kankesanthurai Harbor at Sri Lanka as part of GOIs initiativefor rehabilitation

of the KKS harbour near Jaffna, Sri Lanka.

OPERATIONS OF SCI:

Present Fleet Profile

Sailing through for five decades, SCI continues to be the countrys premierShipping Line, owning a fleet of 74 vessels aggregating to 3.28 Million GT and

5.85 Million DWT tonnes (as on 01.01.2014) with a share of more than one

third (in DWT) of the total Indian tonnage and thus being the largest Indian

Shipping company in India. SCIs owned fleet includes Bulk carriers, Crude oil

tankers, Product tankers, Container vessels, Passenger-cum-Cargo vessels,

Phosphoric Acid / Chemical carriers, LPG / Ammonia carriers and Offshore

Supply Vessels.


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4.1 In addition, SCI presently mans / manages 41 vessels of 0.29 Million DWT

tonnes and 0.41 million GT on behalf of: India LNG Transport Companies

(JVCs), Andaman & Nicobar Administration, Geological Survey of India

(Ministry of Mines), Ministry of Earth Sciences (Department of Ocean

Development), and Oil and Natural Gas Corporation (PSU). SCIs managed

fleet includes LNG Tankers, Passenger Vessels, PassengercumCargo Vessels,

Bunker Barge, Research Vessels, Ocean Research Vessel, Fishing &

Oceanographic Research Vessel, Offshore Supply Vessels, Seismic Survey

Vessel, Well Stimulation Vessel, Diving Support Vessel, 3Geotechnical Vessel

and Multipurpose Geotechnical Vessel and Multipurpose Support Vessel.

Unlike conventional cargo carrying vessels, these managed vessels perform

specialized functions and require expert skills for their operations.

Today, SCI operates in three segments viz. Bulk Carrier & Tankers, Liner &

Passenger Services and Technical & Offshore. SCI operates in almost all areas

of shipping business catering to both national and international trades and is an

active player in various sectors.Feeder Operations

SCI makes feeder arrangements with Common Carriers between various

Destinations on the Indian subcontinent.

Slot swap arrangements SCI has entered into slot swap arrangements with

ZimLine and STX Line on their China-India service to have more extensive

coverage of China market.Break-Bulk Services

SCI arranges carriage of break-bulk 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 and other commercial organisations which

includes Shipments of Over-Dimensional Cargoes (ODC) / Project cargoes /

Heavy Lift cargoes/ IMO Class I Cargoes etc. and also containers.


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CHANGES IN SHIPPING LICENSING RENEWAL IN INDIA

1. Reduces documentation work: Every year, every company in the Indian

shipping industry had to go to the Directorate General of Shipping's office in

Mumbai to renew its trading certificate for every ship it plies. Considering India

has hundreds of ships, it was a huge headache for the companies and

bureaucracy.

"It is like having a life-time passport. We will be able save on time and money

and concentrate on our core activity.

2. Reduces licence fee: Earlier companies paid Rs. 10,000 for annual

registration of each coastal ship and Rs. 20,000 for each overseas ship. Now

with the new rule, the companies are expected to pay only double of the earlier

rate once. Indian shipping companies, especially the ones plying on the coastal

route, have been cash strapped, hurt by high taxes and poor trade recently.

Lower licensing fee is a welcome respite."The one-time fee will be lower than the total fees we pay every year.

3. Decentralization of licensing: Against the earlier procedure where only DG

Shipping's office in Mumbai gave out licences, all five Registrars of Ships at

Mumbai, Chennai, Kolkata, Goa and Cochin will be able to do so now, making

it less cumbersome for companies based out of Mumbai.

4. No changes in licensing conditions: Even though one-time licensing rule

eases the burden for companies, stringent conditions regarding the safety of

vessels do not change. "The DG shipping's office will continue to monitor the

various conditions based on which licences are handed out.

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