It is an industry that may be in the midst of an unprecedented boom. But its captains are not famed for their communication skills and are by and large media shy. |
P K Srivastava, CMD of Shipping Corporation of India, is, however, not the archetypal shipping industry chief. The soft and suave Srivastava, who is also the president of the apex industry body, the Indian National Shipowners Association (INSA), does not duck questions even on the vexed issue of the privatisation of SCI which is now shrouded in uncertainty due to litigation. |
In an interview with Business Standard, he says this is one issue he would like to sort out at the earliest. |
There is a lot of uncertainty over the divestment of SCI. Litigation by the employees has only added to this. How confident are you about the divestment? The divestment of SCI has been in the air since January 2002 and we have gone through the process of due diligence twice. From SCI' s side, we are all ready. |
Last time, just as the financial bids were about to be invited on November 20, suddenly there was some litigation. The government took the view that it would rather wait for a clarity on judgement. These issues are beyond SCI. |
Personally, I feel that the privatisation of SCI is just a matter of time. We have embarked on the path of privatisation not just for the benefit of SCI alone but for the economy as whole. If the government's guiding principle is that its business is not to be in business, then SCI will fall in line. |
I will say as a professional that I would want this to happen within a definite time frame. It is very bad to be in a state of limbo for such a long time. It is going to affect SCI's fortune three years down the line. I have been assured that the government is committed to the policy of privatisation. |
We (the SCI management) have been telling the government that as professional managers we are not bothered about who our owners are as long as we have the freedom to run the company. My feeling is that once the Supreme Court judgement comes this month, there will be greater clarity. |
Our case is similar to that of Jessop where the unions have contended that the bidders are not worthy. Our unions have made such a plea too. It is a matter of perception. |
I want the process to come to a conclusion soon. Either go ahead with privatisation or come out of it so that I can run my company in the best interest of the shareholders "" the government of India. |
These are boom times for the shipping industry with the freight markets on a real high. What is driving this boom? In my career of nearly 35 years, I have never seen such a bullish sentiment in the shipping market. In the final analysis, the boom results from an imbalance in the demand-supply position. That is the trigger. |
China is also a key driver. China is importing and exporting so much material that it has created a phenomenal demand for tonnage of any type. |
This perhaps was not anticipated. The new building orders were not synchronising with the demand. Coupled with that, the new international regulations have been coming in force for tanker security and safety. This has forced some of the vintage tonnage into the scrapyard. On the one hand, ship scrapping was expedited. |
On the other, the new building orders were not as anticipated. This imbalance has created such huge demand that if you have a ship today that it is worth its weight in gold. |
This is a very unique situation that is primarily driven by the Chinese economy and supported by the resurgence in the Indian economy. Even the US markets are improving. |
Economic revival is the driving force. If economic revival takes place, it pulls with it all the markets. Shipping is a function of international trade and that is the reason why you see this kind of high market rates. |
How long do you think this boom will last? I agree that such a level (of boom) cannot sustain for long. It is only a question of time before the cycle turns southwards. It is difficult to predict when would it happen. |
When the US went into Iraq, everyone thought it will be catastrophic for international shipping. Actually, it was the other way round. There are hundreds of imponderables. I feel this bullish trend will continue for at least a year. I cannot predict anything accurately beyond that. |
In the past, when the freight markets were booming, the stock markets still did not reward investors. Now we have a situation where the shipping stocks are actually outperforming the Sensex. What is the reason for this? It is very difficult for anyone to find out the real reason for a boom in the stock market. Generally, on a macro-basis, the stock markets indicate the general economic conditions. |
Today there is a feel-good factor in India for any activity "" whether it is manufacturing or services. The stock market is reflecting the revival of Indian economy. It so happens that this is coinciding with the boom in the shipping market. |
I would say to some extent the proposed divestment of SCI has also contributed to the interest in the shipping industry. Indian shipowners have come out of the closet. Until a few years back, it was a very secluded industry with hardly any press coverage. |
I think the Indian shipowners have also realised that they have to really present themselves to the investors. |
So it is a combination of factors "" the efforts made by the Indian shipowners to make themselves known in the industry, the talk that has been going around about tonnage tax plus the overall economic revival. It is all happening at the same time. Also, the stock markets always have some favourites. |
It was the information technology industry at one time, then it was the FMCG. Every industry has its turn. Another, factor that I see today is that the Indian capital markets are also maturing and looking out for new opportunities. |
How important is tonnage tax in the present context? Tonnage tax has two implications. It has a real financial impact and an emotional impact. In our country, shipping is one sector where 100 per cent foreign direct investment was permitted, but not a dollar came. |
You have to reflect on this. It is not that our taxation laws are bad. Tonnage tax, however, has the advantage of familiarity as it is an international concept. All investors know what tonnage tax is. |