From THE HINDU group of publications
Monday, December 31, 2001


Ship management agencies -- A smooth sailing for owners

Raja Simhan T. E.

THIRD party service providers, commonly called application service providers (ASPs), are yet to make a mark in the IT industry. But in the shipping industry third party service providers, called `ship management agencies, have for two decades now established themselves as `providers of cost-effective vessel management to ship owners.

In the IT industry, an ASP offers the user a software product/solution for a fee. The user worries neither about the back-end processing nor about the technology. The ASP takes care of all this. However, the third party agency concept works differently in the shipping industry. The owner, or a vessel charterer, sources only the cargo, while the ship is handed over to the agency for a contract fee to manage and run it. The fee varies depending on the age and type of the vessel (tanker, bulk, car carrier or container) and its size (Panamax or Suezmax).

According to industry sources, an agency can get around $10,000 per month for a medium size vessel.

Ship management, says Mr Ranjit Narayanan, Regional Manager, Executive Ship Management (ESM), is the business of manning, equipping, provisioning and maintaining a ship. It covers also the technical, commercial, and crew management. Technical management includes maintenance, dry-docking and technical upgradation; commercial management vessel deployment and sale and purchase, and crew management, recruitment and selection of technical, deck officers and ratings, he said.

Hiring ship management agencies has not caught on among Indian ship owners. But for more than two decades, ship owners abroad have been using these agencies to manage ships cost effectively. Some vessel owners abroad have even handed over their fleet to these agencies, and concentrate only on procuring cargo and improving the companys bottomline, he said. This could give ship owners savings of 10-25 per cent than if they themselves run and maintain the vessels, sources said.

Where does India feature in this large global ship management industry? India is a large supplier of skilled manpower to the ship management industry. Sources estimate that some 200 ship-management firms of different sizes could be operating out of India; the majority of these are of foreign origin.

As Mr Narayanan says, some of the worlds best and largest ship management companies, such as Univan, Wallem, Barbers, V Ships and Fleet Ship Management, have been in the country for long, and have been recruiting seafarers. But ESM itself is a relatively new firm, owned by a Singapore-based Indian. Starting the year with only four ships, the company now manages some 15 vessels of various sizes, and hopes to double this by the middle of next year, he says.

The company recently got a contract from a Japanese firm to manage its new bulk carrier, Maersk Seraya. The vessel, built in March 2001, and on its maiden voyage to Chennai recently, is entirely managed by an Indian crew of 20, he said. ESM recently set up its office in Chennai. It has offices in Delhi, Chandigarh and Mumbai. According to Mr Narayanan, Indian seafarers, especially officers, are in great demand globally because of their skill and English speaking ability. This attracts a number of foreign ship management firms to set up shop in India. Sources estimate that at any point of time there are around 1.20 lakh Indian seafarers manning vessels all over the world. Around 15-20 per cent of this strength would be officers. As the Indian fleet strength is less than 10 million tonnes, most Indian seafarers work on foreign flag vessels.

However, unlike the foreign ship owners, the Indian ship owners do not outsource the manning function to ship management agencies, as the latter have full-fledged departments for this. However, some Indian owners now plan to seek out ship management agencies to bring down the cost, he said. Our main role is to bring down the cost for the ship owners, he added.

According to Capt G. Ramaswamy, Regional Manager, Wallem Ship Management, for a vessel owner to run a ship is a headache. Each vessel operation (like recruitment, purchase) requires a separate department. The most important issue, and a problem for foreign owners, is recruiting crew. The owners need to visit India, China or the Philippines to recruit seafarers. This could be a costly proposition for the company, he said. However, once the vessel is given to a ship management agency, the owner needs only to worry about sourcing cargo, and accordingly direct the agency to move the vessel to the respective destination. The agency, on the other hand, would manage the entire operation of the vessel including recruiting the crew, supplying the vessel, and taking care of crew repatriation, visa and insurance formalities.

Established in 1971, Wallem manages some 150 vessels worldwide, employing on board over 3,000 personnel. The company maintains the worlds biggest ship, Jahre Viking, a 5.64 lakh DWT ultra large crude carrier.

The company also manages gas and chemical tankers. Of the 150 vessels, says Capt Ramaswamy, 60 are tankers, seven container carriers and three ro-ro (roll on- roll off) vessels, and all are fully manned by Indian crew. In some of the other vessels the crew is a mix of Europeans, Chinese and Filipinos, he said.

Says Capt John Pope, Master of Maersk Seraya, for vessel owners, ship is most important, while for ship management agencies the crew is always the top priority. As an owner, he would have the companys name printed even on the crockery, while the ship management agencies are stringent, and do not spend unnecessarily on such things.

The presence of such a large number of ship management companies in India is mainly due to the vast pool of skilled seamen the country produces. But can India sustain its superior position of providing large number of skilled manpower to the world market?

Perhaps, but things are going to be difficult for Indians, says Capt Ramaswamy. Reason: Indian seafarers are becoming costly which could force ship owners and management agencies to look for sourcing manpower from such alternative sources as China, the Philippines, Ukraine, Russia and East European countries.

Today, compared to their competitors, Indians are skilled and have command over English. But the competitors are also slowly learning the ropes, and would be available at very competitive rates too, he said.

Picture: Maersk Seraya ship carrying iron ore at Chennai port.

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