In a brazen violation of official norms, power giant NTPC Ltd wants to import coal on a cost and freight (CFR) basis instead of the free-onboard ( FOB) method, which the government has put in place for public sector companies so that Indian ships get a chance to carry the cargo.
NTPC imports huge quantities of coal to run its 15-odd thermal power plants and its tentative requirement for 2011-12 is a whopping 14.5 million tonnes.
The official policy stipulates that imports by public sector companies have to be contracted on an FOB basis so that the tonnage passes into Indian hands and the country's own ships get preference to bring the cargo home. The government has set up a specialised wing in the shipping ministry to make arrangements for ships to carry the goods to Indian shores.
"Although Indian ships are given the preference to carry the cargo they do not get any price preference. If foreign ships are willing to bring the cargo at a cheaper cost then the Indian company will have to match this freight,'' a Shipping Corporation of India (SCI) official told Mail Today. When the contracts are made on a CFR basis the payment is made for both the coal and ship freight to the contractor who charters the ships.
According to industry sources, the official arrangement of arranging vessels is more reliable and transparent as well. When purchases are made on an FOB basis the price of coal and freight are two separate clear-cut transactions. In the CFR arrangement the price of the product often tends to be masked as freight rates often fluctuate widely.
"We will like to inform that all the coal imports by NTPC till date have been through trading PSUs on free on rail (FOR) till our power stations," the NTPC spokesperson told Mail Today. However, this comment deals only with the final inland handling of the coal consignments from the Indian port to the plant site and does not address the controversy over shipping arrangements, which stems from importing on a CFR basis instead of FOB. In fact, the NTPC tender NTPC clearly lists this portion of "inland handling and transportation" as a separate "transaction structure" independent of the import contract.
Industry sources are of the view that Indian shipping tonnage has not been able to grow at the required pace in recent years and needs cargo support to help it expand further.
It is a vital sector that helps earn and conserve precious foreign exchange for the country and provides a substantial number of jobs.
The Indian shipping industry consists of about 616 ships, with a total capacity of 6.62 million tonnes gross registered tonnage (GRT). Of these, about 258 ships are engaged in overseas trade. There are about 55 shipping companies in the sector, of which 29 are engaged in overseas trade.
Major companies such, as SCI and the private sector Great Eastern Shipping, have mixed fleets that carry dry bulk cargo as well as tankers that carry oil.
To a large extent the demand for bulk carriers depends on energy products, such as coal.
SCI has chalked out ambitious expansion plans with a warchest of $ 1 billion per annum for the next three- year period. The public sector company, which had successfully launched its follow-on public offering (FPO) recently, has already ordered 30 vessels and plans to place orders for 15 more vessels by March- end 2012.
"Clearly, if we do not get cargo support from our companies our bottomline will get hit,'' an SCI official said.
Courtesy: Mail Today
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