Bangalore: The steel ministry is set to ask the cabinet to approve of Steel Authority of India Ltd (SAIL) and Rashtriya Ispat Nigam Ltd (RINL) making their own shipping arrangements to import raw materials, two officials at the firms said.
This would mean they could bypass Transchart, the centralized state-run ship chartering arm attached to the shipping ministry. Public sector enterprises had to go through Transchart because a five-decade-old policy mandated support to domestic shipowners.
Both SAIL and RINL are facing procedural problems at Transchart, which has been without a chief since previous chief controller of chartering, T.V. Shanbhag, quit in March 2005, the two logistics executives at the state-owned steel makers said on condition of anonymity.
If the cabinet allows it, steel will be the second commodity to skirt Transchart—after oil—a shipping ministry official said, but declined to be named.
Meanwhile, SAIL and state-run Shipping Corp. of India Ltd (SCI) have decided to induct two more partners into a joint venture (JV) company they are setting up to provide shipping services to the steel maker. These two will hold at least 51% stake in the new venture to ensure it functions outside of government control.
“The moment both SAIL and SCI hold 51% stake in the company, it becomes another PSU (public sector unit). We don’t want that to happen,” said U.C. Grover, SCI’s technical and offshore services director. The new JV is being structured like a private company so it can negotiate and buy ships without going through the cumbersome auction process typically followed at state-owned firms.
The move to exempt the steel producers from Transchart requirements is seen as a big blow to the local shipping industry, at a time they are asking the government for a cargo support policy to see them through the rough times brought on by a global credit crunch, inter-bank credit issues and a sharp fall in global trade volumes.
“A cargo reservation policy that would direct PSUs to set aside a predetermined quantity of cargo to be transported exclusively on Indian registered ships would provide them minimum level of employment during these unprecedented times,” industry lobby group Indian National Shipowners’ Association wrote in a letter to the Prime Minister in January.
Such a move would not only protect shipowners from payment defaults, a key concern in the current scenario, but would also get them assured business.
SAIL imports about 11 million tonnes (mt) of coking coal a year, which is used to fire steel plants, while RINL buys around 5mt.
Under the rules that mandate PSUs go through Transchart, Indian ships get first preference provided they match the lowest rates quoted by foreign shipowners.
In 2005, following a proposal from the petroleum ministry, the cabinet granted an exception to Indian Oil Corp. Ltd to make its own arrangements to import crude oil for one year. This was later regularized in 2007. Similar exceptions were subsequently made for public sector oil refiners Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd.
Meanwhile, Deloitte Touche Tohmatsu India Pvt. Ltd, consultants hired by SAIL and SCI to advise them on the new JV and prepare a project report, has suggested that the two partners could be a port and a foreign shipping company. It has also suggested that the new firm could start operations with an initial fleet of eight dry bulk carriers.