BW Communities

SCI On Brink Of Financial Collapse

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Warning that an Air India-like situation is being replicated at SCI, the Shipping Ministry has raised red flag over the state-run company's plans to acquire fresh vessels, stating the firm stands to lose around $200 million from the proposed purchases. According to an internal document of the Shipping Ministry, Shipping Corporation of India (SCI) "is on the brink of financial collapse" and its plans to acquire 33 vessels would lead into a "debt-trap, almost on the lines of Air India". "SCI, which has had a profitable run for the last 19 years, is on the brink of a financial collapse...the company will be in the red from this year onwards. The large and high cost orders are leading to a debt-trap almost on the lines of Air India," the document said. According to the document, the is a significant gap emerging between the cost per vessel as per contract and market value of the vessel at present. "The overall loss to the company on account of such acquisitions, where there are gaps between the contract price and the present market value, is in excess of $200 million," the document said. As on date, SCI has 33 vessels on order, of which 21 are ordered on Chinese shipyards. The company has been able to tie up the financing in respect to only 10 of these vessels. "It was in this context that the broad of directors of SCI in its last meeting has desired a complete ban on all fresh acquisitions," it stated. When contacted, SCI Chairman S Hajara declined to comment on the observations made by the Shipping Ministry. SCI, which accounts for about one third of the total Indian shipping fleet of 9.61 million gross tonnage, planned to acquire 62 vessels during the 11th Five Year Plan (2007-12) but could acquire only 25 vessels. (PTI)