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Last Updated : Oct 14, 2015 02:58 PM IST | Source: CNBC-TV18

Need to double capacity to carry more cargo: Mercator

New Delhi is proposing importers sign 5-year contracts with local shipping firms in a move designed to shift freight worth billions of dollars to Indian flag carriers and help boost fleet companies like Shipping Corp of India , Mercator Ltd , Great Eastern Shipping Co and Essar Shipping

India's Cabinet could as early as next month consider making it mandatory for state-owned oil, steel, coal and fertiliser importers to route at least half of their cargoes through local shippers as part of a broader agenda of Prime Minister Narendra Modi to shore up and protect the ailing sector, a government source said.

Atul Agarwal, MD, Mercator in an interview to CNBC-TV18 said the above ruling would help local shipping companies carry more cargo  but for that the company will have to ramp up capacity at least by two times. Currently companies carry on 10 percent of the total shipping cargo, adding that in the last few years the companies haven’t grown substantially.

New Delhi is proposing importers sign 5-year contracts with local shipping firms in a move designed to shift freight worth billions of dollars to Indian flag carriers and help boost fleet companies like Shipping Corp of India , Mercator Ltd , Great Eastern Shipping Co and Essar Shipping

Moreover with the government now promoting coastal transportation in a big way would further help shipping companies, said Agarwal.

As of date fifty percent of company’s revenues come from state owned companies, he said.

Below is the verbatim transcript of Atul Agarwal’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: How do you read this news that state owned companies will now have to use domestic shipping lines for their export–import requirements? How much will the business for the Indian shipping industry increase?

A: We are hoping that this measure will support the Indian shipping industries in a large way. Currently Indian Shipping companies carry less than 10 percent of the Indian cargo so we had requested the government to allow us to carry far more cargo than what we were doing earlier.

So, this should be a big boost for the Indian shipping companies. The government is also promoting coastal shipping, coastal transportation of cargo by sea in a big way which we are thankful to the government for. We see that we will bear fruits in the near future.

Latha: It is not a done deal yet, is it? It is more in terms of something the government intends to make as a rule?

A: We have requested the government and government is looking at it very seriously. We are hoping that it will become reality very soon.

Sonia: You said that the Indian shipping industry as a whole carries 10 percent of the government cargo but what proportion of your shipping revenues currently comes from state owned companies?

A: Our revenues from state owned companies will be roughly like 50 percent.

Latha: Your revenues 50 percent come from state owned companies?

A: That is correct.

Latha: If it is 10 percent and it rises to 50 percent for the industry can you give us a volume increase? What is the volume now and what will 50 percent mean?

A: 50 percent would be a large jump in the total scheme of things. That will mean Indian shipping industry also has to grow. This will happen only gradually, this cannot happen overnight because Indian shipping companies will also have to expand, buy ships. However, once we get cargo and we get fixed employments then obviously we have ability to borrow money and buy ships.

Sonia: Do you have the capacity to service any bump up in order or will you have to put fresh capacity and make fresh investments?

A: Capacities will have to be bumped up.

Latha: Is there a margin costing difference? Why are foreign lines preferred over you all?

A: It is not just a question of margin cost, it is a question of availability of capacities as well. Indian shipping companies in the last few years have not grown substantially as they should have. Indian volume of cargo has grown far more. Indian Exim Trade has grown far more then the Indian shipping companies could grow.

Sonia: As a whole can you just tell us how much will your capacity have to be raised, how much could your volumes go up by and any ballpark figure of how much the shipping industry as whole could grow?

A: Currently we are at 10 million gross registered tonnage (GRT) that is the term we use. So it has to grow to at least twice of that.

Latha: Of this 10 million GRT at the moment how much is being done by the state owned companies and how much can it rise to? In the next one year how much more business can come if this rule is marginally applied?

A: Substantially more; it should keep all Indian ships very busy.

Sonia: When do you see your own company report quarterly profits because in the quarter gone by as well you were sitting on a loss of almost about Rs 35 crore?

A: That loss was primarily due to our subsidiary in Singapore which is in the dry bulk division. Other divisions are not incurring loss. Our Board meeting is scheduled for the first half of November for the quarterly results.



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First Published on Oct 14, 2015 10:17 am
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