Occ To Settle Shipping Corp Dues In Cash

The Oil Coordination Committee (OCC) has agreed to the Shipping Corporation of Indias (SCI) demand that its outstandings dues be paid in cash. Official sources here said that SCI would receive its outstanding payments worth about Rs 85 crore during the current financial year itself.

The outstandings on oil payments to the SCI for crude shipment is approximately Rs 35 crore. In addition, SCI also has other dues from the OCC amounting to another Rs 50 crore. The OCC had initially proposed settlement of all outstanding dues in the form of 10-year bonds. SCI, however, declined to accept payments in such a form as, according to it, this method would impact its acquisition patterns.

 

SCIs tankers are used by the OCC for petroleum imports on a time-charter _ rentals related to tonnage and time of use _ basis. In addition to vessels from the SCI, vessels from other shipping companies are also taken on a time-charter basis for petroleum shipment. About 80 per cent of the oil shipment is made through domestic liners with the bulk of it through the SCI.

The sources said that SCI had argued that if the payments were made in bonds then it would have resulted in the creation of non-core assets in its balance sheet. Besides, such payment would result in a cash flow of only about 10 per cent per annum.

In addition, it would result in a severe liquidity crisis for the SCI. As a result of the delayed payments, SCI has already sold two vessels and leased back the same in order to stave off a liquidity crunch. SCI realised a cash inflow of about Rs 14.57 crore on these two vessels.

The sources said that if the outstanding amounts were used to acquire tankers in the second-hand market, the return on equity could exceed 20 per cent annually. This is based on a time charter rate of $18,000 per day. OCC, with effect from the next financial year, is expected to shift to a market related rate for shipment of crude.

The sources said that at the rate of return offered by the ministry of finance on the oil bonds, investment in them would actually result in a loss for SCI; especially since the interest income from the bonds are not tax-deductible. The ministry last year took a decision to convert about Rs 18,500 crore outstandings from the OCC into 10-year bonds.