SCI may have to lobby to retain its Navratna status

After two consecutive years of losses, the company is set to lose the tag if it makes losses this year as well

The Shipping Corporation of India (SCI), the country’s largest shipping company, may soon have to lobby with the Department of Public Enterprises for retaining its Navratna status.

SCI registered a loss of Rs 428.2 crore in 2011-12 after incurring a net loss of Rs 114.3 crore in 2012-13. According to guidelines laid down by the Department of Public Enterprises for government-owned companies, Navratna status is taken away if a company posts losses on its books for three consecutive years.

Losing the coveted title would mean that SCI could lose the financial autonomy it has enjoyed for so many years. Currently, SCI can take its own decision for projects costing up to Rs 1,000 crore.

According to sources, SCI will present its case to the government after its annual general meeting expected to be held between August-September. The company is expected argue that it deserves to retain the Navratna tag, citing the cyclical nature of the shipping business and the global crisis in the sector. The shipping industry is grappling with a situation of oversupply in the market coupled with a severe drop in the freight rates.

SCI expects the market to improve in the second quarter, said a senior executive of the company, who did not wish to be named. The firm is also expanding its LNG business, he added. For instance, it has acquired a 29 per cent stake in GAIL (India) LNG shipping ventures to haul cargo from the US.  SCI is part of a ship-owning consortium that leased three LNG vessels to Petronet LNG to transport LNG from Qatar to its Dahej facility in Gujarat. The company’s overall fleet size comprises 80 vessels.

“SCI is suffering because of its decision to place huge number of orders for new building back in 2007 when the market was at its peak. It is still receiving vessels, not knowing what to do with them,” said a senior shipping ministry official.

Besides, the company has not managed to diversify well into other areas like offshore drilling.

SCI’s counterparts such as Essar Shipping, which has a fleet size of 27 vessels, has managed to make the most of the situation by expanding into oilfield businesses. Essar Shipping’s consolidated net profit declined by 2.80 per cent to Rs 35.80 crore for FY13, compared to Rs 36.83 crore in the previous year.