Shipping firms face $4 bn bill

56% of the fleet headed for the scrapyard in five years.

The Indian shipping industry will be required to spend about $4 billion on fleet renewal, as 56 per cent of the ships owned by Indian companies will have to be scrapped in five years, according to the Indian National Shipowners' Association.

The average age of the Indian fleet is about 18 years and 40 per cent of the ships are more than 20 years old, said the association's Secretary-General, SS Kulkarani.

According to international practice, all ships over 17, if they have to continue in service, must be overhauled and re-deployed. Even after that, they can serve only up to the age of 25. Internationally, the average age for retiring ships is 22 years.

Moreover, most ships owned by private Indian companies are single-hull, all of which have to be phased out by 2010 under India's commitment to the International Maritime Organisation.

"For expansion and replacement, along with the International Maritime Organisation's phase-out programme, the country will have to invest $4 billion by 2009," said Indian National Shipowners' Association President Yudhishthir Khatau. As of March this year, Indian companies owned 739 ships.

To make matters worse, the threat of scrapping looms over the industry at a time when the share of Indian ships in the country's overseas seaborne trade has slipped to 13.7 per cent from the high of 40 per cent in the late 1980s, while the share of foreign companies has been rising steadily.

"Indian ships' share in the country's overseas trade is continuously decreasing and as a result, the country has to depend on foreign ships to a considerable extent, resulting in higher freight payments," said Shipping Corporation of India Chairman and Managing Director SS Hajara.

Companies will feel the pinch of replacement as the prices of second-hand ships have shot up by as much as 60 per cent in the last three years.

Only the state-owned Shipping Corporation of India has a policy of buying just new ships, while the private sector generally prefers pre-owned ones.