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Journalism of Courage
NEW DELHI, Dec 30: The Ministry of Surface Transport has torpedoed a proposal of the public sector Shipping Corporation of India (SCI) to enter into an incharter-cum-purchase agreement for two Aframax tankers with the Great Eastern Shipping Company (GESCO). The corporation had sought permission to charter two new oil tankers of GESCO for deployment on a back to back basis with the Oil Coordination Committee (OCC) – it proposed to purchase one of these in the last quarter of 1998.
Sources said that the proposal was turned down by the transport ministry in November because it felt that the increased presence of GESCO in the Indian Oil Circuit will affect the interests of SCI both in the short term as well as in the long term. Instead, the ministry favoured direct acquisition of tankers by the corporation. Incidentally, the proposal, which was approved by the board of directors of SCI on June 12, was forwarded to MoST despite similar objections from its Director (Finance) K.K.Kothari.
Information available with The Indian Express reveals that the finance director said the corporation should not facilitate the entry of GECSO in the Indian Oil Circuit "for if the falls and SCI tonnage cannot be deployed with OCC the corporation will stand to lose enormously." And in case everything went as per plans, the incharter-cum-purchase deal would result in a profit of Rs 52 crore for GESCO against a benefit of only Rs 14 crore for SCI, he pointed out. He also objected to payment of brokerage/commission for acquisition of vessels.
However, other board members favouring the deal said the objections were not valid as the deployment of tankers belonging to GESCO in cost plus circuit with oil industry was similar to an earlier deal with Essar and GESCO for deployment of Suez Max tankers in June 1995. "The only addition was decision to reserve option to acquire one of the two vessels," they pointed out.
Further, they said the corporation was only prohibited from paying any hidden commission/brokerage but an upfront commission on second-hand purchase and resale vessels was a "normal commercial requirement".
While the arguments did not find favour with the transport ministry, its decision to turndown the proposal is likely to affect availability of vessels for import of crude. Industry projections indicate that the crude cargo imports will spiral to 77.60 million metric tonnes (MMT) in 1999-2000; 84.73 MMT in 2000-01; and 101 MMT in 2001-02. However, SCI does not seem to be in a position to meet the anticipated spurt in demand. "
