Struggling for survival, shipping firms have asked the government to allow a tax-free bond issue similar to the Rs 5,000-crore infrastructure one for the ports sector.
Anil Devli, chief executive officer, Indian National Shipowners’ Association (Insa), told Business Standard, “We have specifically asked the government to permit State Bank of India or somebody to come out with such a foreign currency bond, to develop tonnage.”
An industry official said close to half of the tonnage in India is over 20 years old and will have to be phased out in the next five years. Insa has 37 members, with a combined gross 9.08 million tonnes, representing 86 per cent of total Indian tonnage.
Devli said, “We want the government to back this (proposed) bond (issue), as shipping companies have no assets left with them. The government will have to stand guarantee and help us raise this money.”
However, the infrastructure bond for the port sector was a rupee bond and this is where the demand for the shipping companies differs. Hence, Devli said, “We are asking them to back a company like SBI, etc, which can raise foreign money for us.”
Most Indian shipping firms are highly leveraged and do not have any appetite left to raise money on their own.
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Also, Indian rules clearly specify external commercial borrowing (ECB) cannot be used to repay a rupee loan. Industry insiders say the sector has combined debt of Rs 22,000 crore and equity of about Rs 7,000 crore. The companies are leveraged three times, on average, and cannot raise capital on their own.
The Union budget for 2012-13 proposed tax-free bonds of Rs 30,000 crore in all, with a Rs 5,000-crore allocation to the ports sector.
