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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 MUMBAI’S

ALKESH DINESH MODY INSTITUTE

FOR FINANCIAL AND MANAGEMENT STUDIES

AHSAN ABDUL RASHID KHAN Page 1 of 94


University of Mumbai’sAlkesh 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.



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



AHSAN ABDUL RASHID KHAN

University of Mumbai’sAlkesh Dinesh Mody Institute For Financial and

Management Studies

Name of Student: AHSAN ABDUL RASHID KHAN

Roll Number: 43

Title of the Project: INDIAN SHIPPING INDUSTRY-

AN OVERVIEW OF SCI



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.



INDEX

SR.NO CONTENTS PG.NO

1 Introduction 05

2 PESTEL Analysis of Indian Shipping Industry (ISI) 06

3 5 Forces Porters Model of ISI 19

4 Ownership pattern of Indian fleet 29

5 Regulation of ISI 30

6 Contribution of shipping to the world economy 33

7 Overview & Importance of Liner Shipping in India 35

8 What constitutes of ISI ? 41

9 Challenges & Opportunities of ISI 42

10 Shipping Corporation of India (SCI)- About SCI, Mission, Vision, Objectives

Of SCI

44

11 Organization structure of SCI 53

12 Operations of SCI 54

13 Types of Services provided by SCI 57

14 List of Customers & important persons to contacts 62

15 Types of Division & Types of Department 63

16 Redressal of Public Grievance 76

17 Conclusion 87

18 Executive Summary 03



19 References 88

20 Bibliography 88

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

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 explained. Then we come to the

competition laws governing liner shipping conferences all over the world explaining the

exemptions given to them. The rationale behind the exemption provided to this industry is also

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.



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

today’s unprecedented markets are unlikely to continue forever. However, virtually all sectors of the

industry have benefited from the recent global shipping boom.

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

country’s 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”. 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 criteria’s 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 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 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 :

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

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 6°44' and 35°30' north latitude and 68°7' and

97°25' 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, India’s 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 of the fastest growing economies in world. India is also a strong member of Commonwealth of

Nations, SAARC, and WTO. India’s strong 55,000 military personnel’s 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 redefined culture. This cultural shift has

definite 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.

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 human’s 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.

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 company’s system and internet. Shipping

lines and CHA’s 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 e-

business 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:

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 vessel’s 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 UN’s 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-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

world’s 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, 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 Organization’s 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

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.

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 Porter’s 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

representation of Porter’s 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 ATTRACTIVENESS

1. Threat of New Entrant is High Industry attractiveness is High.

2. Threat from Substitute is High Industry attractiveness is High.

3. Bargaining Power of Suppliers is Low Industry attractiveness is Low.

4. Bargaining Power of the Buyers is High Industry attractiveness is High.

5. Rivalry Among existing Players is Low 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 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 Attractiveness

High Moderate Low

Capital Requirement High

Profit Margin Moderate

Opportunity of Expansion in new sector Moderate

Economies of Scale High

Switching Cost High

Government Restriction High


Overall Threat from the new entry barriers High

Attractiveness of Shipping Industry 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:

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 Attractiveness

High Moderate Low

Availability of Substitutes Low

Price, Performance and quality of

services of Substitutes

High

Switching Cost High

Cost factor Moderate

Overall threat from Substitution High



Attractiveness of Shipping Industries 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.

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 don’t have to arrange separately. Port authority charges fixed amount towards

these handling from shipping lines and shipping lines charges the same from customers after adding their

profit margin.

Factors Barriers and threat from

Suppliers

Attractiveness

High Moderate Low

Number of Suppliers Moderate

Price Factor for Suppliers High

Availability of Raw material High

Profit Margin Low

Switching Cost Moderate

Operating and Hiring Cost Low

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 supplier’s bargaining power is low because of number of suppliers


Overall threat from Suppliers Bargaining Power Low

Attractiveness of Shipping Industry Moderate


but on the other hand the attractiveness of Shipping Industry is moderate because of more opportunities

of expansion in other sectors.

Buyer Power :

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 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 Attractiveness

High Moderate Low

Number of Customers High

Price and Quality of Services Moderate

Switching Costs High

Buyers information and Awareness High

Buyers ability to demand

Concessions while Purchasing

High

Freight Forwarders and Clearing

Agents

Low

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


Overall threat from customer’s bargaining Power High



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

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 doesn’t 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 Attractiveness

High Moderate Low

Number of Competitors High

Exit Barriers High

Buyers switching Costs Moderate

Cost Leadership Low

Industry Growth High

Competitors Fresh Moves Low

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.


Overall threat from competitors of industry High



Ownership pattern of Indian Fleet

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 world’s 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 don’t 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

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 country’s foreign trade stagnated in late

80’s 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.



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

Seamen’s Employment Offices

Seamen’s Welfare Office

Regional Offices (Sails)



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-90’s 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

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

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.

Table 2: Development of International Seaborne Trade, selected years a (Goods loaded)

Importance of Liner Shipping in India

In view of the continued liberalization and increasing globalization of the Indian economy, India’s

overseas trade has been growing at a rapid pace. Presently, India’s 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, India’s trade has performed at a much better

rate than in the pre-reform period. India’s 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.



Approximately 95% of India’s international trade by volume and 70% by value are seaborne. India has

12 major and 185 minor/intermediate ports along its coastline of around 7,517 Kms. India ranks 15th

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 country’s GDP, share of Indian shipping industry in India’s sea borne trade has declined

from 40.7% in FY 1988 to around 30-32% over the last few years. In terms of India’s 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



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%.



Table 5: India’s 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-à- 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.



Over v iew 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 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.

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 India’s shipping industry

The shipping sector plays an important role in India’s economy. Almost90% of the country’s trade by

volume is conducted via sea and the country boasts of having the largest merchant shipping fleet among

the 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 India’s 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 India’s power and fertiliser projects. This plan involves

huge 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 India’s 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 PortTrust’s 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.



SCI’s 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.

SCI’s Vision

To emerge as a team of inspired performers in the field of Maritime Transportation serving Indian and

Global trades with focus on:

Maintaining its “Numero Uno” position in Indian Shipping

Establishing a major global presence in Energy – related, Dry Bulk and niche container

shipping markets.


http://en.wikipedia.org/wiki/File:Shipping_Corporation_of_India_Logo.gif%00%E5%A1%B9%EF%92%81%E1%B4%BB%E4%A1%BF%E2%B2%AF%E5%B6%82%E8%97%84%E6%8C%A7%00%00%EA%AE%A5


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. SCI‟s Enterprise

Transformation through Information Technology).

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 world’s top 15 league.

Sailing through for nearly five decades, the SCI today has a significant presence on the global maritime

map and is undoubtedly the country’s 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



Keeping in view the demands of the nation’s 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.

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 India’s EXIM trade as well as contributing to the

Nation’s 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 country’s 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 SCI’s 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.



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.

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 year.

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 India’s 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

process. SCI’s 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)

Product Capacity Unit Status

Shipping Corporation's Purchase of

Vessels

Multi Locations Multi

Region MR 5,773

Fleet Expansion

Plan 58 Numbers

Under

Implementation

Six LR-I Product Tankers Purchase

Project


Region MR 1,658

Six LR-I Product

Tankers 73000 Dwt

Under

Implementation

Four Capesize Ships Procurement

Project


Region MR 1,600

Four Capesize

ships 100000 MTPA

Announced and

Stalled

Four Aframax Bulk Carriers Purchase

Project


Region MR 1,168

Aframax Bulk

Carriers 115000 Dwt

Under

Implementation

Six Handymax Bulk Carriers Purchase

Project


Region MR 1,061

Handymax Bulk

Carriers 57000 Dwt

Under

Implementation

Two Panamax Bulk Carriers Purchase

Project


Region MR 968

Panamax Bulk

Carriers 80655 Dwt

Under

Implementation



Two LR-II Crude Tanker Acquisition

Project


Region MR 586

LR-II Crude

Tankers 105000 Dwt

Under

Implementation

Two MR Product Tankers

Procurement Project


Region MR 411

MR Product Tanker

II 47000 Dwt

Under

Implementation

Four AHTS Vessels (80 T) Purchase

Project


Region MR 359 AHTS Vessels 80 Tonnes

Under

Implementation

Two AHTS Vessels Procurement

Project


Region MR AHTS Vessels 120 Tonnes

Under

Implementation

Two PSVs Acquisition Project


Region MR PSVs 3100 Dwt

Under

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

2008

Sep

2008

Dec

2008

Mar

2009

Jun

2009

Sep

2009

Total Shares 100 100 100 100 100 100

Promoters 80.12 80.12 80.12 80.12 80.12 80.12

Indian 80.12 80.12 80.12 80.12 80.12 80.12

Individuals & HUF

Central & State Govt. 80.12 80.12 80.12 80.12 80.12 80.12

Corporate Bodies

FIs & Banks

Others

Foreign



Non-promoters 19.88 19.88 19.88 19.88 19.88 19.88

Institutions 15.91 15.08 14.8 14.38 13.46 13.91

Mutual Funds/UTI 0.97 0.92 0.64 0.5 0.7 0.47

Banks, FIs,Insurance Cos. 8.74 9.01 9.32 10.23 10.41 11.28

Insurance Companies 8.53 8.77 8.98 9.92 9.54 11.16

Financial Institutions & Banks 0.21 0.24 0.34 0.31 0.87 0.12

Central & State Government

FIIs 6.2 5.14 4.84 3.64 2.35 2.16

Others

Non-institutions 3.97 4.8 5.08 5.5 6.42 5.97

Corporate Bodies 1.08 1.42 1.39 1.81 2.2 1.97

Individuals 2.76 3.24 3.51 3.52 4.03 3.79

Others 0.14 0.14 0.17 0.18 0.2 0.2

2. Fleet Strength

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 country‟s 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, passenger–cum-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 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.

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 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

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 India‟s 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:

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 owner‟s 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 India‟s 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 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 owner‟s 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 owner‟s 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):

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 India‟s west coast to several

ports in the Red Sea region and East African countries. The average allocation for SCI with owner‟s

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 India–UK Continent breakbulk

service from European ports to India jointly with Rickmers Linie on space sharing basis on their vessels.

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 Passenger-

cum-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 Passenger–Cum-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.

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 Inter-

Islands 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

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

Some of our major customers are:



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. SCI‟s 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

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-à-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

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, P‟sons,

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

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.

(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

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.

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.

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.

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.

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

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.

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

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:



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

Telephones: 022 – 22023970



022 – 22026666

Fax 022 - 22026283

E-Mail [email protected]

Bulk Carrier and Tanker Division

Mr.A.K.Gupta, SVP

Telephones: 022 – 24973555

022 – 22026666

Fax 022 - 24973560


Technical & Offshore Services Division

Capt. P.B. Joag, GM

Telephones: 022 – 22026666

Fax 022 - 22026905


FINANCE DIVISION

Mr. S. Kannan, ED

Telephones: 022 – 22028039

022 – 22026666

Fax 022 - 22026905


PERSONNEL & ADMINISTRATION DIVISION

Mr. D.S. Kanvinde, ED

Telephones: 022 – 22028370

022 – 22026666

Fax 022 - 22026905


Mr. Y. D. Chadha, SVP (FP)


mailto:[email protected]




Telephones: 022 – 22020808

022 – 22026666

Fax 022 – 22026905


PURCHASES & SERVICES DIVISION

Mr.T.R.Shetty, VP

Telephones: 022 – 22833471

022 – 22026666

Fax 022 - 22026905


INFORMATION TECHNOLOGY

Mr. S. N. Deshpande, SVP(IT)

Telephones: 022 – 22022953

022 – 22026666

Fax 022 – 22026905


PUBLIC RELATIONS DEPARTMENT

Mr. G. N. Shetti, DGM

Telephones: 022 – 22023792

022 – 22026666

Fax 022 – 22026905








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. Administer medical facilities for fleet personnel.

ii. Identify allocate and coordinate for training of the resources and personnel.

iii. Negotiate with MUI/NUSI for revision of service conditions

iv. 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

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

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

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

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.

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.

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 company‟s 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.

(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 officer’s 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 d’être of vigilance activity is to enhance the level of managerial efficiency and effectiveness

in the organization.



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.



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)


http://www.bignerds.com/

http://www.rbi.org.in/

http://ices.nic.in/Ices/home.aspx

http://finmin.nic.in/

http://www.incometaxindia.gov.in/

http://indiacode.nic.in/

http://www.dgshipping.com/

http://www.sistemar.com/CLTpropellers/desing.html

http://sezindia.nic.in/

http://ipa.nic.in/

http://infrastructure.gov.in/port.htm

http://india.gov.in/

http://www.imo.org/

http://www.shipping.nic.in/

http://www.censusindia.gov.in/



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