Faced with a capacity glut, coupled with the squeezed margins due to ongoing global economic turmoil, state-run Shipping Corporation of India has decided against going in for any capital expenditure to acquire vessels this fiscal, a top official has said.
"Margin is an issue. Both the topline as well as the bottomline are under pressure because the rates are very low," SCI Chairman and Managing Director S Hajara told PTI here.
He said the company will not be making any capital expenditure this fiscal apart from that on pending orders for acquiring 25 vessels which were placed prior to 2008.
"We are not immediately finalising any new vessels to be ordered because already 25 vessels are on order," he added.
In the period leading up to 2008, there was a shortage of capacity in the market which made many companies, including SCI, order more ships.
However, fulfilment of the orders, coupled with the global slowdown, came as a double whammy for shipping lines world over, creating an excess supply which has hit margins and utilisation.
Many shipping lines, including SCI, have been blamed for being over-ambitious in their plans and ordering more than required vessels during the happy days which has led to criticism from analysts for getting over leveraged.
The Shipping Ministry reportedly last year had raised concerns over SCI's plans to induct new vessels, warning that the corporation is on the brink of a financial collapse and going ahead with the orders would lead it into a debt-trap like the national carrier Air India.