A REPORT ON INDIAN SHIPPING

INDUSTRY



SUBMITTED BY:
G.SRIKANTH
A.GAYATHRI
NITIN
MEGHNA VASIREDDY


INDIAN SHIPPING INDUSTRY:
Overview:
Shipping plays an important role in the transport sector of Indias economy.
India has one of the largest merchant shipping fleet among the developing
countries and is ranked 16th in the world. Indian maritime sector facilitates not
only transportation of national and international cargoes but also provides a
variety of other services such as cargo handling services, shipbuilding and ship
repairing, freight forwarding, light house facilities, training of marine personnel,
etc. The Indian shipping industry is subject to the macro-economic factors of
international trade and commerce as well as the national economic scenario.
India has over 110 companies in the shipping sector. Major domestic players
include Shipping Corporation of India Ltd, Great Eastern Shipping Co Ltd,
Essar Shipping, and Varun Shipping Company Limited. However, India's
shipping industry has not grown at a pace commensurate with its international
trade. From 1990-91-2005-06, the Indian fleet's total gross tonnage grew at
around 1.8 percent per annum compared to the average trade growth of about 14
percent. Consequently, India's maritime trade is dominated by foreign fleets and
the ratio between foreign and Indian fleets in Indian maritime trade is 70:30.
Also, the average age of Indian ships is 16.5 years as against the world average
of 12.2 years. The Indian fleet is mostly deployed on international operations,
which account for 93 percent of the total capacity, while coastal shipping
accounts for 5.7 percent of capacity and offshore shipping the rest.
The market share of Indian shipping companies also declined due to decreasing
tonnage and a fall in assured cargo on account of the liberalization of the
regulatory environment and the start of shipping operations by major customers,
like refineries.
Multi-modal Transportation
India would also need to focus on multi-modal transport to facilitate movement
of goods from inland locations to ports and vice-versa. This would require
development of road and rail infrastructure, improvement in multi-modal
transport, and modifications in procedural arrangements to allow smooth flow
of traffic (load limits on road, etc.).

Overall, the Indian maritime sector is poised for healthy growth in line with the
growth in Indian economy. This requires planning and investments by all
stakeholders, including the government and the public and private sector, for
developing the requisite infrastructure, improving current processes and
introducing policy measures that create a conducive environment for players in
the sector.
TYPES OF VESSELS:
The international cargo market is immense, served by numerous ships of all
sizes, ranging from general-cargo and specialised vessels through to
commonplace bulk carriers, and from small 'coasters' with a cargo capacity of a
hundred or so tonnes up to enormous 'cape-size' bulk carriers capable of
carrying cargoes in excess of a quarter of a million tonnes of a bulk commodity
such as iron ore. There are still a few elderly sailing ships engaged in this most
fascinating of markets, as well as the latest, highly sophisticated, fuel-efficient
and 'cargo-friendly' modern vessels. Some ships are highly specialised and able
to carry only one particular commodity - others are flexible in design and able
to transport a variety of cargoes.
Small Feeder
The small feeder container vessels are normally applied for short sea container
transportation. The beam of the small feeders is, in general, less than 23 m.
Feeder
The feeder container vessels greater than 1,000 teu are normally applied for
feeding the very large container vessels, but are also servicing markets and
areas where the demand for large container vessels is too low. The beam of the
feeders is, in general, 23-30 m.
Panamax Until 1988, the hull dimensions of the largest container ships, the so-
called Panamax-size vessels, were limited by the length and breadth of the lock
chambers of the Panama Canal, i.e. a max. ship breadth (beam) of 32.3 m, a
maximum overall ship length of 294.1 m (965 ft), and a maximum draught of
12.0 m (39.5 ft) for passing through the Canal. The corresponding cargo
capacity was between 4,500 and 5,000 teu.
These maximum ship dimensions are also valid for passenger ships, but for
other ships the maximum length is 289.6 m (950 ft). However, it should be
noted that, for example, for bulk carriers and tankers, the term Panamax-size is
defined as 32.2/32.3 m (106 ft) breadth, an overall length of 225.0 m for bulk
carriers and 228.6 m (750 ft) for tankers, and no more than 12.0 m (39.5 ft)
draught. The reason for the smaller length used for these ship types is that a
large part of the worlds harbors and corresponding facilities are based on these
two lengths, respectively.
Post-Panamax In 1988, the first container ship was built with a breadth of more
than 32.3 m. This was the first post-Panamax container ship. The largest vessels
on order with a capacity of approx. 9,600 teu have exceeded the Panamax beam
by approximately 13 m.
Suezmax It is probable that Ultra Large Container Ships (ULCS) carrying some
12,000 teu containers can be expected. This ship size, with a breadth of 50 m /
57 m, and corresponding max. Draught of 16.4 m /14.4 m for passing through
the Suez Canal, may just meet the present Suezmax size.
Post-Suezmax It is possible that in about 10 years the ULCS will perhaps be as
big as 18,000 teu, with a ship breadth of 60 m and a max. draught of 21 m.
Today, this ship size would be classified as a post-Suezmax ship, as the cross-
section of the ship is too big for the present Suez Canal. It is claimed that the
transportation cost per container for such a big ship may be about 30% lower
than that of a typical 5,000-6,000 teu container vessel of today.
A draught of 21 m is the maximum permissible draught through the Malacca
Strait. The name Malaccamax has therefore been used.
With the intended increase of the cross- section breadth and depth of the Suez
Canal over the coming ten years, the 18,000 teu container ship will also be able
to pass the Suez Canal. On the other hand, a future container ship with a draught
of 21 m would require existing harbours to be dredged. Today, only the
harbours of Singapore and Rotterdam are deep enough











TYPES OF SHIPPING FLEET

Regulators Plan to Monitor Shipping Rates:
As the global trade shrunk by over 10%, many shipping lines found themselves
in a situation of excess capacity (many liners ordered new ships during the
economic boom period). Some analysts predicted that at least few shipping lines
would go out of business to match with the supply demand situation. However,
it is believed that shipping lines, in an informal arrangement, collectively
reduced the capacity through slow steaming (spending more days in sea,
which helped them to save on fuel and reduce capacity). It is estimated that
slow-steaming cut a liners capacity by around 5%. It is also believed that some
shipping lines have teamed up to levy a voluntary surcharge of US $ 400 per
container. Both the Federal Maritime Commission (USA) and the European
Monitoring Agency are closely monitoring the developments to see any
evidence of price fixing by shipping liners.
Maritime Transport and Climate Change Challenge
Like other economic sectors, maritime transport, which by volume carries over
80% of global trade, has a role to play in addressing formidable challenge of
climate change. International maritime transport is playing a part in contributing
to climate change, but more importantly, it is also likely to be directly and
indirectly impacted by the various climate change factors, such as rising sea
levels, extreme weather events and rising temperatures. The wide-ranging
impacts of climate change, including that from maritime transport, and their
potential implications for trade, economic growth and development, underscore
the need to integrate climate considerations into strategies for transport planning
and development. Increasingly, it is being recognized that considered and
concerted actions are urgently required to ensure effective control of greenhouse
gas emissions and to establish the requisite adaptive capacity in the shipping
industry, especially in developing countries. Recognizing the importance for the
maritime transport sector of contributing to global efforts at reducing emissions
of greenhouse gases, IMOs Marine Environment Protection Committee
(MEPC) is considering a number of mitigation measures aimed at reducing
emissions of greenhouse gases from international shipping.
Integration of Shipping Industry with Global Logistics and Supply Chains
Global shipping majors, like other segments of the conventional transport
industry, are increasingly getting integrated with the emerging global logistics
and supply chain activities, owing to both external and internal dynamics. Many
firms are entering into the enhanced canvas of offering logistics solutions, such
as door-to-door delivery systems, integrating with rail/road haulage movements
of cargo, customs brokerage, cargo consolidation, packaging/ re-packaging, and
distribution services, thereby substantially consolidating their market position,
and supplementing their ocean freight income. The global shipping industry is
thus going through a major redefinition by undertaking logistic integration of
their cargo operations.
Change in Directions in Trade Volume:
Multi-polarity of trade flows, and the growth in trade volumes of Asian region
is expected to impact the world shipping, as profoundly done by liner shipping
and containerised cargo some decades ago. One may recall that the earlier phase
of trade volume witnessed shipping growth in TransAtlantic and TransPacific
routes, and the growing volume of world trade, especially from Asia, is likely to
position the Pacific Rim and Indian Ocean Rim routes in the lime light.
INDIAN SHIPBUILDING INDUSTRY:

shipbuilding statistics shows that during 2009, the world order book was close
to 9226 ships, which was around (-) 18.6% less compared to previous year. In
fact,The world after 2007, new orders for shipbuilding had reduced by almost
half in 2008 and in 2009. However, completions of the shipbuilding orders have
shown improvement over the years.
India, currently, has around 32 shipyards, owned by: Central Government (6),
State Governments (2), public listed private shipyards (3), and privately held
shipyards (22). However, the major share of the present ship-building capacity
in India is held by eight public sector yards, with Cochin Shipyard Limited and
Hindustan Shipyard Limited having capacity and infrastructure to build vessels
of 1.1 lakh dwt, and 80,000 dwt, respectively. Barring these two shipyards, the
majority of private sector shipyards have limited ability to build vessels in
respect of capacity and size of the vessels. Also Indias capability of building
technologically advanced ships, like LNG carriers are relatively less.
According to the world order book position, during 2009, Indian shipyards had
an order book of close to 260 ships constituting 1% share in terms of GT and
2.8% share in terms of number of bookings. China was top in the list with the
largest number of bookings of 3523 ships, followed by South Korea (1675),
Japan (1286) and Europe (447). India stood at the sixth position in the world
order book, after Vietnam (287).
Although India occupies a small percentage of the global shipbuilding market,
the Indian shipbuilding industry is well positioned for growth. According to a
study by the Indian Shipbuilders Association, the industry can grow at a rate of
more than 30%, and this rate of growth could be achieved through supportive
measures by the Government, including incentives for shipyards. As growth in
international trade results in increased global and domestic demand for new
vessels, Indian shipyards have certain advantages over shipyards in developed
nations. India possesses a large pool of technical workers, and its cost of
workforce is relatively low, compared to most other shipbuilding countries.
Apart from this, the Indian navy usually gives orders to Indian shipyards based
on national interests. This will also act in favour of the Indian shipbuilding
industry.
Shipbuilding acts as a catalyst for overall industrial growth due to spin offs to
other industries, including steel, engineering equipments, port infrastructure,
trade and shipping services. The indirect potential of shipbuilding industry in
employment generation and contribution to GDP is therefore tremendous. The
dynamics of Indias economic growth will continue to create demand for new
ships, and ship-building capacity within the country needs to be augmented to
cater to this demand. If the domestic ship-building capacity is augmented, the
benefits to the economy would be manifold, with spill over effects on other
associated/ ancillary sectors, and generation of employment.
Increasing Investment in Shipping Industry
Shipping analysts feel that there is a pressing need for the Government to take
on the role of a facilitator and create opportunities for a healthy business climate
to attract fresh investments in the shipping sector. The old ships are being used
by the ship owners primarily due to low investment capacity to buy new ships,
and the tremendous shortage in the availability of ships. Usage of old ship is
highly risky apart from being operationally more expensive. Further, several
countries around the world have banned certain class of ships, as per their build
and age, to be operated from their ports. A large part of the current order book
of the shipyards would go towards replacing these old vessels and the
incremental growth in capacities would be additionally catered by orders placed
outside India.
Developed countries have evolved various innovative structured models for
financing shipping industry. Norway has evolved the kommandittselskap
structure (KS Model), which is a tax-deferral method employed to finance ship
acquisitions. The German adopted the Kommanditgesellschaft (KG) model for
financing of various projects including that of shipping industry. Both KS and
KG models operate more or less on similar principles. Such models would be
best suited for Indian shipping industry too. According to the Directorate
General of Shipping, Government of India, innovative methods are required to
raise the needed resources. One such suggestion was exploring the possibility of
creating innovative financing models like German KG Model for shipping
finance in India.
Indian shipping industry does not attract much of the requisite investments, at
present. The German KG Model would help the Indian shipping industry in
mobilizing necessary funds for the shipping companies, as also would serve as
an effective investment tool for high net-worth individuals, who would benefit
from tax exemption and also earnings. The Indian shipping industry can also
use this model for the purpose of purchasing LNG vessels as they are perceived
to be relatively safe investments backed by long term charters.

Strengthening Shipbuilding Industry:

Shipbuilding acts as a catalyst for overall industrial growth due to spin offs to
other industries, including steel, engineering equipment, port infrastructure,
trade and shipping. The dynamics of Indias economic growth has created, and
will continue to create a demand for new ships, most of which will have to be
built abroad, due to inadequate indigenous capacity. On the other hand, the
benefits to Indian industry and potential for employment generation from
shipbuilding and the associated ancillary industry would grow manifold, if India
builds ships for meeting its entire tonnage requirements. Also single window
clearance system needs to be brought into place for according clearances to new
shipyard projects covering land acquisition, environmental clearance, power and
water etc., so that project implementation is not delayed. The present
requirement to obtain multiple clearances from various departments acts as a
deterrent to attracting investment into this sector.

Developing Adequate Container Freight Stations
To increase the competitiveness of the countrys exports in the global market,
by reducing the transaction cost (both absolute and implicit cost) in exports, the
Government of India is laying stress on developing a number of container
freight stations (CFSs) in the country. Modern and technologically advanced
CFSs play a significant role in effective custom clearance activities in the port,
and thereby shorten the turnaround time of ships. More CFSs need to be
developed in the vicinity of export clusters across the country. Mapping of
existing network of CFSs with the Towns of Export Excellence shows that the
CFS network needs to be strengthened further. It may be mentioned that Towns
of Export Excellence are identified by the Ministry of Commerce and Industry,
Government of India, if the value of production in the identified town exceeds
`750 crore.
Modal Shift to Coastal Waterways:
Movement of freight by coastal ship and integration of coastal shipping into the
transport network could supplement land based transport modes and relieve the
burden on them.
A north-south land movement, which could possibly be substituted by a
multimodal chain that includes coastal shipping, is shown here. Such a
multimodal chain would reduce the length of the road or rail legs, significantly
reducing congestion on land. The coastal leg, apart from being more fuel
efficient, can also carry larger parcel sizes.
Land based transport modes, especially road transport typically carry huge
external costs, hidden costs that burden not only road users but also society at
large.
These include accidents, air and noise pollution and climate change Over
1,40,000 lives were lost in road accidents in India in 2011. Road transport
emissions cause respiratory illnesses such as asthma and bronchitis. A recent
survey of 10 European cities has shown that exposure to vehicular pollution
near busy roads is responsible for 14% of chronic childhood asthma cases. The
negative impact of vehicular pollution is expected to be much greater in India.
Further, road transport accounts for as much as 87% of the CO2 emissions
of the transport sector in India, making it a significant contributor to climate
change.
Coastal shipping industry is of the view that high cost of coastal shipping in
India is on account of port dues, marine fuels, manning scales etc. While Major
ports are mandated to fix tariff for coastal cargo at 60% of EXIM cargo, certain
items like Thermal coal and POL products are exempt from this stipulation,
even in major ports. Minor ports, especially Minor private ports have uniform
tariff for coastal or EXIM cargo. From ports perspective, the costs it incurs for
servicing coastal cargo or EXIM cargo is same and hence there need not be any
distinction in charges. In specific case of GMB private ports, if GMB levies a
lower waterfront royalty for coastal cargoes, private ports may pass on the cost
savings to coastal shipper.
In our view, coastal shipping Industry is a classic case of Chicken or egg
situation. More than the constraints of fuel costs and port charges, the fact is
that coastal cargo volumes are low and continue to be so. Hence economies of
scale in terms of ship size and limited number of port of calls cannot be
leveraged for cost savings. The main reason is that cargo movement is not
always 100% coastal i.e. it has a rail / road leg on both sides which results in
high overall cost to the end user. Second major reason is one-directional traffic
with vessel coming back empty on return leg. One possible solution is
relaxation of Cabotage laws so that EXIM vessels can carry domestic cargo.
This will nullify both the above constraints. However, this is not acceptable to
Indian ship owners.
Another possible solution, for certain commodities in specific trade lanes is use
of inland waterways at least on one stretch of the logistics chain.
Compared to 7500 Kms of coastline, India has 14,500 Kms of Navigable inland
waterways of which approx 4500 kms is declared as National waterways and
comes under the purview of Central government. All other waterways are under
the purview of respective state government.

Total cargo movement by Inland waterways including national and state level
waterways in less than 0.5 % of the total rail and road movement. The various
reasons for low user of Inland waterways are:
1. Insufficient depths throughout the stretches of Inland waterways.
2. Navigation being relegated to fourth position after drinking water, irrigation
and Hydra power generation.
3. Non-availability of cargo terminals.
4. One way cargo movement.

DCIS PORTFOLIO OF SERVICES:
Capital dredging (creating depths) - Capital dredging projects are primarily port
creation and expansion projects, which also involve the deepening and/or
widening of channels to allow access by larger and deeper draught ships.
Maintenance dredging (maintaining depths)- Maintenance dredging consists of
the restoration of designed depths of waterways and harbors by removing silt,
sand and other accumulated sediments. Due to natural sedimentation, active
channels generally require periodic maintenance dredging. Dredging for land
reclamation, beach nourishment and shore protection - Reclamation dredging
involves dredging and raising of land levels and creation of land. Beach
nourishment dredging generally involves moving sand from the seabed to
shoreline locations when erosion has progressed to a stage that threatens
substantial shoreline assets or affects tourism.
CUSTOMER PROFILE:
DCIs main customers are:
Major Ports
Non-Major Ports
Private Ports
Indian Navy
Shipyards
OPERATIONS:
The Company is catering to the dredging requirements of the Haldia/ Kolkata
Port for the past thirty years. The Company also caters to the maintenance
dredging requirements of other major ports/ India Navy etc. The Company is
taking up capital dredging assignments depending on the availability of the
vessels and other logistic requirements. During the year 2012-13, maintenance
dredging contracts were executed for Kolkata Port, Visakhapatnam Port Trust,
Gangavaram Port, Cochin Port, Kandla Port and Chettinad Coal Terminal at
Ennore. Capital Dredging Contracts were executed at Paradip Port, Ennore
Port, Cochin Port and Kandla Port. The long pending dredging works at the
ICTT of Cochin Port Trust was successfully completed and the container
terminal was fully commissioned. The above works were executed either under
the existing contracts or renewal of the contracts entered into with the Ports
etc., during the previous years or new contracts entered into during the year.
Recently DCI had completed (April-May2013) dredging work at
Kankesanthurai Harbor at Sri Lanka as part of GOIs initiative for rehabilitation
of the KKS harbour near Jaffna, Sri Lanka.
OPERATIONS OF SCI:
Present Fleet Profile
Sailing through for five decades, SCI continues to be the countrys premier
Shipping Line, owning a fleet of 74 vessels aggregating to 3.28 Million GT and
5.85 Million DWT tonnes (as on 01.01.2014) with a share of more than one
third (in DWT) of the total Indian tonnage and thus being the largest Indian
Shipping company in India. SCIs owned fleet includes Bulk carriers, Crude oil
tankers, Product tankers, Container vessels, Passenger-cum-Cargo vessels,
Phosphoric Acid / Chemical carriers, LPG / Ammonia carriers and Offshore
Supply Vessels.
4.1 In addition, SCI presently mans / manages 41 vessels of 0.29 Million DWT
tonnes and 0.41 million GT on behalf of: India LNG Transport Companies
(JVCs), Andaman & Nicobar Administration, Geological Survey of India
(Ministry of Mines), Ministry of Earth Sciences (Department of Ocean
Development), and Oil and Natural Gas Corporation (PSU). SCIs managed
fleet includes LNG Tankers, Passenger Vessels, PassengercumCargo Vessels,
Bunker Barge, Research Vessels, Ocean Research Vessel, Fishing &
Oceanographic Research Vessel, Offshore Supply Vessels, Seismic Survey
Vessel, Well Stimulation Vessel, Diving Support Vessel, 3Geotechnical Vessel
and Multipurpose Geotechnical Vessel and Multipurpose Support Vessel.
Unlike conventional cargo carrying vessels, these managed vessels perform
specialized functions and require expert skills for their operations.
Today, SCI operates in three segments viz. Bulk Carrier & Tankers, Liner &
Passenger Services and Technical & Offshore. SCI operates in almost all areas
of shipping business catering to both national and international trades and is an
active player in various sectors.
Feeder Operations
SCI makes feeder arrangements with Common Carriers between various
Destinations on the Indian subcontinent.
Slot swap arrangements SCI has entered into slot swap arrangements with
ZimLine and STX Line on their China-India service to have more extensive
coverage of China market.
Break-Bulk Services
SCI arranges carriage of break-bulk cargoes on space charter basis from various
regions across the globe including USA and Far East for imports on account of
the Government departments / PSUs and other commercial organisations which
includes Shipments of Over-Dimensional Cargoes (ODC) / Project cargoes /
Heavy Lift cargoes/ IMO Class I Cargoes etc. and also containers.

CHANGES IN SHIPPING LICENSING RENEWAL IN INDIA

1. Reduces documentation work: Every year, every company in the Indian
shipping industry had to go to the Directorate General of Shipping's office in
Mumbai to renew its trading certificate for every ship it plies. Considering India
has hundreds of ships, it was a huge headache for the companies and
bureaucracy.
"It is like having a life-time passport. We will be able save on time and money
and concentrate on our core activity.

2. Reduces licence fee: Earlier companies paid Rs. 10,000 for annual
registration of each coastal ship and Rs. 20,000 for each overseas ship. Now
with the new rule, the companies are expected to pay only double of the earlier
rate once. Indian shipping companies, especially the ones plying on the coastal
route, have been cash strapped, hurt by high taxes and poor trade recently.
Lower licensing fee is a welcome respite.
"The one-time fee will be lower than the total fees we pay every year.

3. Decentralization of licensing: Against the earlier procedure where only DG
Shipping's office in Mumbai gave out licences, all five Registrars of Ships at
Mumbai, Chennai, Kolkata, Goa and Cochin will be able to do so now, making
it less cumbersome for companies based out of Mumbai.

4. No changes in licensing conditions: Even though one-time licensing rule
eases the burden for companies, stringent conditions regarding the safety of
vessels do not change. "The DG shipping's office will continue to monitor the
various conditions based on which licences are handed out.