The 3 Week Diet System

Thursday, June 25, 2015

India set to further ease shipping rules as oil exporters step on gas

June 25:

If proposal is accepted, state-owned oil firms can buy cargo on a so-called cost, insurance and freight basis, wherein the task of shipping cargo rests with overseas seller as it is part of supply pact

India set to further ease shipping rules as oil exporters step on gas
The proposal comes at a time when the local shipping industry is clamouring for a cargo support policy to see it through the tough times brought on by a global oversupply of ships, low rentals and rising costs. Photo: Bloomberg
India is weighing a plan to relax a rule that requires state-owned oil refiners to buy crude oil from overseas suppliers under which the responsibility for arranging the ships to transport the fuel lies with the buyer.
If the proposal is accepted, state-owned oil companies will be allowed to buy cargo on a so-called cost, insurance and freight (c.i.f.) basis, wherein the task of shipping the cargo rests with the overseas seller because it is part of the supply contract. In 2007, the cabinet allowed Indian Oil Corp. Ltd to arrange ships on its own for bringing imported crude without taking the help of Transchart—the centralized ship chartering wing of the government.
Similar exceptions were subsequently granted to other state-run refiners Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd. State-owned steel-makers Steel Authority of India Ltd (SAIL) and Rashtriya Ispat Nigam Ltd (RINL) were also granted permission to hire ships directly for importing raw materials—mainly coking coal—without following the mandatory policy requirement of doing this through Transchart.
A five-decade old Union government policy mandates that all state-owned firms, when importing cargo, have to make their shipping arrangements through Transchart.
This policy gave first preference to Indian ships to move cargo into India, provided they match the lowest rates quoted by foreign shipowners when Transchart calls for price quotations. This system was designed to provide cargo support to Indian ships.
Even while allowing state-owned oil refiners and steel-makers to hire ships on their own, bypassing Transchart, the cabinet kept one key element unchanged—these entities will have to continue buying cargo on a so-called free-on-board (f.o.b.) basis under which the Indian buyer had to take responsibility for shipping the cargo.
This kind of ensured that Indian fleet owners had some hope of getting a portion of this business, running into millions of dollars annually.
India—the fourth biggest energy consumer in the world after the US, China and Japan—depends on imports for more than 80% of the crude oil it processes for domestic consumption. About three-fourths of the crude requirements are sourced from suppliers in the Middle East.
The proposal to let state-run oil refiners buy crude on a c.i.f. basis has been triggered by an offer from Saudi Arabia, the world’s top oil exporter, of better (lower) prices if it is allowed to bundle shipping into the oil contracts.
For Saudi Arabia, it would be an opportunity to make full use of the large tanker fleet, including the 31 oil super tankers, or so-called very large crude carriers owned by the state-owned The National Shipping Co. of Saudi Arabia, or Bahri. Saudi Aramco, the state-owned oil company of Saudi Arabia, is a part owner of Bahri.
If the proposal finds favour with the Indian government, it could set a trend for other oil exporting countries such as Kuwait, Iraq and Iran to demand signing oil deals on a c.i.f. basis.
The proposal comes at a time when the local shipping industry is clamouring for a cargo support policy to see it through the tough times brought on by a global oversupply of ships, low rentals and rising costs.
Local fleet owners have been lobbying the government to introduce a cargo reservation policy by issuing a directive to state-run firms to set aside as much as half of their annual cargo (raw mateials) to be transported exclusively by Indian registered ships. Such a move, they argue, would provide them a minimum level of employment and assured business during tough times. To support their cause, local owners point out that the share of Indian ships carrying Indian cargo has fallen below 10% from about 40% in the 1980s.
Among the local fleet owners, the most affected by a potential easing of the rule will be the state-run Shipping Corp. of India Ltd, which runs four oil super tankers and 16 other lesser-capacity crude oil tankers.
It could also nudge overseas suppliers of other commodities such as thermal coal and fertilizers which are imported in large quantities by India to seek c.i.f. deals to support their shipping fleet.
As such, most of the thermal coal imported by NTPC Ltd is bought on a c.i.f. basis because the power utility wants the transporter to take responsibility for shipping the cargo from an overseas destination to its power plants, covering both ocean shipping and land transportation. Earlier, NTPC arranged for moving the coal from discharge ports to the power stations.
This stipulation ensured that complying with the mandatory purchase of coal on an f.o.b. basis was not practical. Indian shipowners were, thus, excluded from the coal shipping deals of NTPC because they don’t have the expertise for land movement of coal and have to rely on third parties to deliver cargo to the power plants. 
P. Manoj looks at trends in the shipping industry.


Source: www.livemint.com/Opinion/dD3gyAfFku936PpMvg6XcO/India-set-to-further-ease-shipping-rules-as-oil-exporters-st.html?

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