SCI to get 6 ships after Iran venture is dissolved

Officials said CCEA had given its nod for winding up the company last week. No official confirmation has come due to the sensitivity of the matter

Even as India has decided to dissolve its 39-year-old Iranian joint venture, Irano Hind Shipping Company (IHSC), government-controlled Shipping Corporation of India (SCI) has been able to earn much more than its investment in the venture, despite a troubled business journey. And, it stands to gain more.

A few months before the Cabinet Committee on Economic Affairs (CCEA) gave its nod for dissolving IHSC, the company had taken delivery of a 150,000-deadweight-tonnage (DWT) Suezmax tanker from South Korea. With the joint venture set to come to an end, SCI will get the vessel, with five others, when the company separates from its joint venture partner, Islamic Republic of Iran Shipping Lines.

SCI had invested close to Rs 40 lakh at the time of signing the venture for a 49 per cent equity. Though SCI’s profits from the company is not available, during the Iranian year ending March 19, 2012, IHSC earned net profit after tax of $35.08 million.

Officials said CCEA had given its approval for winding up the company in a meeting last week. No official confirmation has come due to the sensitivity of the matter.

The Irano Hind joint venture was incorporated in 1975 with a registered office in Iran, but the United Nations sanctions against Iran had made it difficult for the company to operate. Irano Hind has seven ships in all, including tankers and bulk carriers of 0.66 million DWT. SCI is expected to get the larger share of the liabilities and, therefore, the assets. The process of division of assets and liabilities will start soon, with the appointment of a liquidator, said a senior shipping ministry official. “The joint venture was doing very well. But due to sanctions, vessels are not finding employment and there are also problems in getting insurance cover. In its heydays, it would send ships to Holland, Sri Lanka and India for both oil and bulk trade.”

The purpose behind the partnership was not just to boost economic ties between the two countries but also to bring down transportation costs and time between India and Russia by creating a multi-modal transportation system via Iran. “The JV was a minor part of SCI’s operation. Transactions of Irano Hind had already become dormant. The Cabinet order is just a formal acknowledgement of this fact,” said Hemant Bhattbhatt, senior director, Deloitte India.

Due to the sanctions on Iran, Irano Hind and its subsidiaries were not able to deal in dollars or euros, making it difficult to do business.

SCI’s 2012 annual report says, “The IHSC and group companies have been given “notice of acceleration” by two bankers, DVB Bank and Commerzbank, requiring repayment of all-term loan of $88 million along with pending interest immediately. The matter is receiving the attention at proper level in the government, as your company has substantial interest in the joint venture and step-down subsidiaries.”

Shipping companies are in a tough spot as they have not been able to get indemnity cover following the European Union’s sanctions against those buying crude oil from Iran.