The ministry of surface transport has urged the petroleum ministry to postpone an Indian Oil Corporations (IOC) tender for coastal transportation of clean petroleum products.
The surface transport ministry has written to the petroleum ministry that the award of contracts needs to be postponed by at least a month in view of objections raised by the Indian National Shipping Association (Insa) on the tender conditions and the demand to restrict coastal shipping to domestic vessels.
The surface transport ministry said it needed time to ascertain how many Indian shipping companies were genuinely Indian and qualified to bid for the tender.
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The IOC tender was slated to close last week. It allowed vessel operators who had acquired ships through bareboat-charter-cum-demise methods, a method of cross-border lease financing. Consequently, vessels acquired through this method usually fly the flag of the lessors' country.
Sources said investigations were under way to find out whether the BBCD method of vessel acquisition would lead to an increase in the domestic tonnage or the method was being done just for balance sheet purposes. They said it would take at least one month to arrive at any firm conclusion.
This is the first time that IOC is resorting to the tender route for transportation of high-speed diesel, petrol and kerosene. Till June this year, all contracts were awarded on a negotiated basis. This year, after the tenders were announced, at least 14 shipping companies submitted bids.
IOC's demand is only for about 22 vessels with a configuration of 30,000 dead weight tonnes.
The number of vessels on offer for the IOC tender is about 30, which include bareboat charter operators. The vessels are to be contracted on a time charter basis for a year. The ceiling fixed by IOC for time charter rental is about $15,000 per day. This is way above international time charter rates, which are less than $10,000 per day. This year, however, with international shipping in the downturn, there has been an unusual interest in coastal shipping, especially since the terms offered are attractive.
The increase in the number of players for the coastal shipping contract in turn is expected to bring pressure on the rates, the sources said and help IOC to secure the best possible terms for the coastal shipping contract.
So far, IOC had adopted the charter terms were on a negotiated basis. Accordingly the terms of the contracts have favoured the domestic shipping companies, since they were in a position to make cartelised bids.