Friday’s decision by the Union cabinet to allow state-owned Shipping Corp. of India Ltd and Dredging Corp. of India Ltd to expand their operations comes at a time when increasing economic activity is boosting demand for more cargo-carrying ships, and ports are deepening their channels and berths to allow larger ships to call at them to load and unload cargo.
The block approval, the first ever, given by the cabinet allows Shipping Corp. to spend Rs3,190 crore buying four different types of ships and 12 ships in all. Until this approval, the government required the company to submit proposals that dealt with buying only one kind of ship at a time, a restriction that hampered Shipping Corp’s ability to take quick decisions. The cabinet also allows Dredging Corp. to spend Rs1,087 crore to buy three dredgers.
According to Umesh C. Grover, director, technical and offshore services at Shipping Corp., the company will buy four new Aframax carriers and two long range-II product tankers from South Korea’s Hyundai Heavy Industries Co. for Rs1,900 crore.
Hyundai, which has a shipbuilding facility located along the coast of Mipo Bay in Ulsan, Korea, is the world’s biggest shipbuilder with a 15% share of the market.
Aframax tankers can carry as much as 120,000 tonnes of crude-oil and are deployed on short haul routes where draft or other size restrictions prevent the use of larger tankers. The long range-II product tankers can typically carry as much as 160,000 tonnes of petroleum products. Grover added that Shipping Corp. would also select the yard that will build four Panamax bulk carriers and two 5,000 twenty-foot equivalent unit (teu) capacity container vessels at a total cost of Rs1,290 crore. A teu is the standard size of a container and is a common measure of capacity in the container business.
Panamax carriers, called so because they can sail through the Panama Canal, typically carry as much as 75,000 tonnes of dry bulk commodities such as coal, iron ore and steel.
Shipping Corp. plans to borrow 80% (Rs2,552 crore) of the cost of acquiring these vessels from the market, while the balance 20% (Rs638 crore) will be invested by the company from its internal resources.
“The new ships will start coming into the company’s fleet over a one-year period starting September 2010,” said Grover.
India’s largest dredging firm Dredging Corp. plans to buy new dredgers, each having a capacity to dredge 20 million cu. m of sand, stone and silt from the sea that will boost its dredging capacity to 100 million cu. m a year.
Dredging Corp., which is in the process of finalizing the yard to build the dredgers, currently has 12 dredgers in its fleet with a capacity to dredge 80 million cu. m a year. A shortage of dredgers has affected the dredging works at Indian ports and harbours.
India’s 12 major ports, owned by the Union government, have lined up investments worth Rs6,304 crore to deepen their channels and berths over the next five years in an effort to accommodate larger ships as economic growth stokes demand to carry more cargo.
The Union government’s shipping ministry has also started work on a Rs2,427.40 crore Sethusamudram ship channel project that involves dredging a ship channel across the Palk Straits between India and Sri Lanka.