Inside Companies: Shipping Corp pulls back expansion plans

State-run Shipping Corporation of India (SCI) wants to tread cautiously at a time when the company is sailing in choppy waters.

Hence, the state run firm has revised its fleet augmentation plan to control cash outgo as it made losses of Rs 141 crore during the September quarter compared to a Rs 251 crore profit year-on-year. This was the third straight quarter when the company reported losses.

According to SCI's earlier plan, it was to acquire around 62 vessels in the 11th plan period extending from 2007-2012 at an estimated cost of  USD 5 billion but since the sector itself is passing through a recessionary period, the company has acquired 36 vessels and has put its remaining purchases on hold.

The company had ordered vessels at relatively higher rates at the peak of the freight rate cycle. In the current scenario of weak freight rates, break-even of these vessels becomes challenging.

SCI, the country’s largest shipping line, currently has a fleet of 81 vessels with a total carrying capacity of 5.82 million deadweight tons

In an interview to moneycontrol.com, S Hajara, chairman and managing director of SCI said, "The shipping industry is in a recessionary phase and freight rates are at the lowest level in all segments, which is impacting bottomlines of shipping companies."

for Hajara's interview to moneycontrol.com's Shaheen Mansuri

He further said that due sluggish global trade and over supply of fleet, SCI wants to scale-back its fleet acquisition plan. “However, we will look at resale vessels if need be and this will bring down our cost by almost 40%,” he adds.

Read the transcript of the interview on the next page.