Mumbai: State-run Shipping Corp. of India Ltd (SCI), India’s biggest shipping firm by fleet size and revenues, has offered monthly incentives to around 1,300 floating staff that operates its ships in a bid to retain them amid an acute shortage of seafarers globally.
The Mumbai-based company that owns and operate about 79 ships, accounting for 35% of tonnage or cargo carrying capacity of Indian ships, has recorded lower growth in net profit and revenues in past two quarters and the main reason for that was the shortage of floating staff, a situation worsned by officers leaving SCI at regular intervals.
“The company’s ships remained idle due to shortage of floating staff. As a result, we lost about 80-90 revenue earning days,” said a SCI official who did not want to be named. Indian laws mandate that a ship should have a minimum of eight officers on board to meet the safe manning requirements. These include a master, a chief engineer, a chief officer, three engineers and two other officers.
Each ship-day lost meant an average loss of $15,000-20,000 (Rs591,000-788,000) in revenues per day per ship.
To make matters worse, the bulk carrier and tanker division, the biggest revenue generating unit of SCI, is without a director for close to a year after the last incumbent, R.K. Mitra, retired on 28 February. The Union government that owns 80.12% of SCI is yet to find a replacement for Mitra. Each business segment of SCI is headed by a director who in turn reports to the chairman and managing director.
Despite facing a shortage of officers, rivals such as Great Eastern Shipping Co. Ltd, Mercator Lines Ltd and Varun Shipping Co. Ltd have reported higher revenues and net profits in past quarters in a booming global freight market, particularly for shipping dry bulk cargo, as they could retain staff by offering incentives.
Now, SCI wants to follow their footsteps. “We are offering monthly incentives to our permanent floating staff across categories. The objective is to pay market-related salaries on a par with global companies,” said the SCI official. “Though, the incentive entails a huge burden on the company, it is better than ships remaining idle due to staff shortage.”
SCI is also offering a daily incentive to those permanent floating staff who are not satisfied by the monthly incentive scheme. Yet another option given to regular officers is to draw salaries as applicable to those working on contract basis, which are much higher than permanent employees.
The incentive package will be in force until June, when the new industry wide wage agreement for officers between the Maritime Union of India (MUI) and the Indian National Shipowners Association (Insa) is expected to be finalized. The existing two-year agreement ends on 31 March. MUI represents officers serving Indian registered ships while Insa represents Indian shipowners.
“A majority of the officers are not agreeable to the monthly and daily incentives offered by Shipping Corp., arguing that it was not enough,” said S.S. Khan, general secretary, MUI. Given the huge shortage of officers in the shipping market, officers can afford to hold their ground and argue for more.
For the third quarter ended 31 December, SCI’s net profit dropped 22% to Rs176.78 crore from a year earlier and revenues declined 11.5% to Rs981.12 crore. For the nine months ended 31 December, net profit declined to Rs565.21 crore from Rs729.93 crore. SCI had posted a net profit of Rs1,014.58 crore in the 12 months through March.
Officers working on Indian ships are leaving for foreign ships which pay higher salaries. The salaries paid by foreign ship owners are tax-free, while the salaries for those working on Indian ships are taxed unless they fulfil a criterion on non-resident status.
According to Indian tax laws, if an officer works on an Indian registered ship outside Indian territorial waters for 183 days or more at a stretch, then the salaries for those days will be tax-free. But, given the nature of shipping business, it is not possible for an Indian officer working on an Indian ship to meet the 183-day norm as ships sail across the globe.
For more than a decade, the shipping industry has been pushing the government to remove this rule to help retain officers. But, since the government cannot differentiate between seafarers and other tax payers, this appeal has not succeeded so far. “As a result, quality officers are joining foreign registered ships,” said the SCI official.