INDIAN SHIPPING – Resuscitation Needed

Not with air, but oxygen! Else head for Alang, given average age of the fleet. No need to repeat facts as they speak for themselves. How much of our trade do our ships carry? What is the priority? Is it generating employment, in this case for our seamen? Lower freight rates for competitive trades: export and import? Is it multiplier effect of shipowning -per GT: Gross Tonnage- as sometimes claimed? Is it to demonstrate our strength as a potential economic superpower?

Sadly, none of the above questions get encouraging answers. That takes us to Strength and Weakness analysis. Weakness first, as in digesting bad news before elation with good news. We aren’t capital surplus. Yes we have fared well since flying out gold and launching liberalisation. Isn’t ship owning capital intensive? How and where do we raise it from? Yes, the stock markets are on daily highs with foreign investors cashing in, after driving it up, booking profits while selling, after attracting more investors: gullible or not. Quick returns anywhere is a sign of fundamental weakness. Take care!

Where should capital be employed for best returns -with security aka safety? What -not one, but all- measures best use of capital and best returns on it like ROI, ROCE etc, without forgetting Poseidon Principles driving lenders funds -if not their hearts. How many Indian shipping (and related firms also) listed and how are they rated? What’s their historical dividend pay outs, reserves and stock price ranges? How many have survived boom and bust cyclicals in shipping? What are lenders: banks and others’ perceptions about Indian Shipping risks? Isn’t Sovereign rating worrisome? Learn lessons from owners that have stayed put and those who have jumped ship and migrated and emigrating too!

Are we trade driven? Yes and no! We aren’t a major exporter, though we export almost anything: food, medicines, vehicles; cheap and well-trained labour too; not to forget that we have had famines and are monsoon driven for farming. We are a big importer to serve our humungous populace who are turning seasonal heavy shoppers in metros, cities and even towns with surpluses to spare, that are prioritised to stock markets after meeting necessities.

We are energy deficient that needs exports to balance, and so trade driven. Fair enough but would ships bring down cost of shipments a la logistics, to be competitive to trade internationally to lower our direct costs and reap profits in cross trades? Elementary, as it is said. Logistics first: from and to ships through terminals, ports, their connectivities, etc. That’s Keynesian fundamental infrastructure developmental State responsibility.

In a global context, no country owns ships for their trades to make them competitive. Yes China does because they are into everything. Japan used to: in everything else too: from safety pin to ships, steel, cars etc. Almost all countries use ships of other country flags, available anywhere cheaply and easily, so much so that FOC or Flag of Convenience is what dominates trade in numbers, volume and earning share, profits and reinvestments too. Freight booms are shorter than breakeven stagnation and longer recessions. Then why develop our shipping?

Yes, for foreseeable situations and that cannot be anticipated too. Like, embargo, blockade, trade restrictions imposed, etc; wars and the like. These call for Reserve Tonnage that can be requisitioned and Emergency Tonnage to respond in disasters, natural and manmade, as there is no provision under NDMA for off-shore and Coast, like standby salvage tug.

History is worth revisiting to learn lessons! Sadly stories are worse than bad. Firstly entrepreneurs cornered soft loans and defaulted, accounting practices led to denial of `Depreciation for higher capital replacement costs’. They never learned cross trades, bent on trucking -sorry shipping- with PSUs and leveraging inherent weaknesses! Heard of 1000TPWWDSHEX EIU to boot? That’s more fouling than barnacles. Lacking commercial experience-instinct, at mercy of brokers, they chose ‘Pooling’ learning lessons from raw deals. BBCD was shot down. MAT was welcome. ROFR prevails but some say no `Cabotage’ through MSA S 406 & 407!

Technically, it was hands tied with Forex restrictions but `Cost Plus’ was fun! Dry docking challenging. Maritime Law and Charter Party were nemeses. Having copied from Colonialists, all were reliant on English twice: language and judgments. Twisting CP terms didn’t work even with anglicised jugaad. SAIL’s CP Rider was judged out in London! Surveying was lessons learned by hard work, leading to IRS and IACS Chair head itself. Support systems were bureaucratic starting with MMD-DG; ports were nightmares, TM prioritising finrangi ships and exports that meant homebound imports of and on Indian ships queued up. Citizens paying through inflation. Port Trusts making a killing converting Port Charges to $ at old ex-rate since liberalisation!!

Congestion led to Port development and terminals for box trades; SBM for POL was late comers. Aha, the Ports now are at a loss as to how to recover `sunken’ costs jettisoning labour with friendly SOS lay-offs. More the merrier, TAMP drawing swords at outset.

Has INSA gone with Port led Shipping development demagoguery of the bourgeois? If so, that’s it. More on it in the next piece. Oh Ha yes, Stena has inked contract with Peels Ports lasting till 2100!!

Marex Media