Monday, 31 December 2012

‘Lack of foresight’ to blame for SCI’s financial crisis, says Parliamentary report

The Parliamentary Standing Committee on Transport, headed by Sitaram Yechury, has pulled up the Shipping Corporation of India for lack of foresight and blamed the PSU giant’s ambitious plans for its  ongoing financial woes. The Indian Government, however, disagrees with these findings, saying instead that depressed market conditions are to blame for the crisis. 

“The Committee finds the lack of foresightedness on the part of SCI as it could not sense the steep decline in the ship prices in the international markets thereby throwing SCI into deep trouble and huge financial losses in the form of ship purchase order,” the Committee said in its latest report, and has demanded to know “under what circumstances such an ambitious project was initiated.” 

Recommending immediate corrective measures, the report said that revenue generation was adversely affected at SCI, and that the company was “in depletion of reserve(s).” The report also expressed surprise at seeing “nil” new acquisition proposals for the next year, agreeing with last year’s CAG audit that SCI did not pursue acquisition plans to augment and modernise its fleet . SCI had plans of buying more than sixty ships in the five years ending 2012; it acquired only about two dozen. The CAG had said that the shortfall in acquisition had ended up costing the company Rs 2,100 crore in cost overruns, adversely impacted SCI’s business growth and delayed modernisation when Indian trade was growing at 8.5 per cent annually.

The government, in its response, has said that SCI’s actions were correct, and acquisition plans had been postponed given the present global conditions of gross tonnage oversupply. The reason for the fall in SCI’s revenues, it stated, were the depressed conditions prevailing in the freight markets.  

The Committee noted, however, that SCI had not been able to meet even the 10 per cent vessel requirement of the all PSUs taken together. “SCI should make efforts to ensure that at least the PSU orders should not slip from their hands” due to lack of its business-oriented approach,” it said.


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