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Divestment Ministry spikes SCI plan to buy VLCCs

P. Manoj

The plan mooted by SCI to buy VLCCs comes in the backdrop of a decision by Indian Oil Corporation to bring a major portion of its crude cargo imported from the Persian Gulf on VLCCs from this fiscal onwards.

NEW DELHI, June 24

THE Ministry of Disinvestment has spiked the planned acquisition of two new very large crude carriers (VLCCs) of 3,00,000 dead weight tonnes each by the privatisation-bound Shipping Corporation of India (SCI).

The total cost of the two new VLCCs, estimated at around Rs 679 crore, is considered a very high expenditure.

"An investment of this magnitude should be deferred till SCI is privatised, the process for which is at an advanced stage," the Disinvestment Ministry recently informed the Ministry of Shipping, which controls SCI.

The Disinvestment Ministry reckons that the ongoing process for privatisation of SCI is expected to be completed in about two months time by August/September.

While opposing SCI's proposal to acquire VLCCs in view of the privatisation exercise, the Disinvestment Ministry has suggested that the plan can be revived after taking into account the opinion of the strategic partner. The Shipping Ministry had sought the opinion of the Disinvestment Ministry on the proposed acquisition of VLCCs by SCI for which it had invited offers from ship builders.

The purpose was to see whether SCI could be given an exemption from the earlier Government directive to put all major commercial investment decisions on hold till SCI is privatised. Hyundai, Samho, Daewoo, Samsung, Mitsubishi and Nantong-Cosco yards had submitted their offers in response to the tender floated by SCI.

Based on the offers, SCI had held technical discussions with the short-listed bidders on the VLCC deal.

The plan mooted by SCI to buy VLCCs comes in the backdrop of a decision by Indian Oil Corporation to bring a major portion of its crude cargo imported from the Persian Gulf on VLCCs from this fiscal onwards to achieve economies of scale as larger quantities of crude can be transported at a time. Currently, SCI does not have a VLCC on its fleet.

IOC was so far contracting crude purchases to suit the vessel sizes owned by SCI in the regulated era, which was scrapped from April 1 this year.

The acquisition of VLCCs is aimed at positioning itself for the requirements of IOC in the deregulated era, when national oil refining companies would be free to buy and transport crude on their own without going through the erstwhile nodal agency system.

After deliberating on the VLCC acquisition plan several times, the SCI board, at its meeting held on April 30, had decided to refer the proposal to the Union Government for further processing.

SCI had maintained that it was not seeking any budgetary support from the Government for funding the new vessels, which would be done through a mix of internal resources and borrowings.

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