P&I clubs issue warning on ECDIS training concerns

Even before the ECDIS – the Electronic Chart Display and Information System- becomes  mandatory for all merchant vessels, growing industry concerns about confusion regarding mandatory training requirements has resulted in at least two P&I clubs issuing broad-based warnings about seafarer training on ECDIS.  

The Standard and the UK P&I Club have warned shipowners that the switchover from paper charts to electronic navigation entails serious issues that remain unresolved.  These changes are seen as major, the clubs say, and owners and crews need to be well aware that in the absence of proper training, there may well be more than a few “ECDIS assisted accidents” over the horizon. 

The clubs clearly see ECDIS as a leap in navigational operations rather than a simple progression from existing systems. The fact that ECDIS training- both generic and type specific- is mandatory makes implementation even more complicated. Moreover, says Karl Lumbers of the UK Club, “It will in many cases restrict the flexibility owners/managers currently enjoy to switch officers between the different ships in their fleets.” 

Industry watchers say that Flag States need to be clear on how they plan to implement the type-specific training rule. Some flags have indicated that this can be done on board, with the help of specially trained personnel if necessary. Others disagree, saying that training should take place ashore before joining a ship- they fear that shipboard training may degenerate into a sort of familiarisation exercise done quickly and cursorily. As the Standard Club says, “The legislative requirements for ECDIS training are daunting. The sheer numbers and scale of the training required is going to test many companies’ ability to complete the training in time and interpret the varying Flag States’ requirements.”

The fact that many managers handle ships registered across different flags and the plethora of different ECDIS systems already in the market makes the situation even more complex. Despite the voices of many who have been crying themselves hoarse asking for some standardisation in ECDIS equipment for months now, manufacturers and regulators seem to have studiously ignored such concerns. One can only hope that this confusion stops short of affecting safety of navigation at sea.

Is SCI really on the verge of financial collapse?

A report put out by news agency PTI presents an alarming picture about the future of the State run Shipping Corporation of India, quoting an internal Shipping Ministry document as saying that the shipping giant is "on the verge of financial collapse" because of its expansion plans. It also reveals that SCI's Directors wanted to stop all acquisitions at their last meeting.

"SCI, which has had a profitable run for the last 19 years, is on the brink of a financial collapse...the company will be in the red from this year onwards. The large and high cost orders are leading to a "debt-trap, almost on the lines of Air India," the document warns, before going on to underline the comparison with the beleaguered airline. It says that the shipping company may lose around USD 200 million because of the purchase of new ships. 

If these reports are true, the fact that that such thinking comes from within the Shipping Ministry will ring alarm bells across the industry and financial markets. SCI - that owns a third of Indian tonnage and has operating interests in practically all areas of the shipping business- had announced at its 61st AGM recently that it would spend Rs 3,700 crore in the ongoing fiscal to acquire 24 new vessels. Finance Director BK Mandal had said at the time, "Our capital expenditure for 2011-12 is Rs 3,700 crore and this will be used for acquiring 24 vessels."  It is those plans that may now become a question mark at the company that was conferred “Navratna” status three years ago, a status that gave SCI greater autonomy to decide on many issues like capital expenditure, formation of Joint Ventures and mergers. 

According to the document quoted, acquisition costs per vessel as contracted by SCI are lagging way behind present market value of the vessel's in question. "The overall loss to the company on account of such acquisitions, where there are gaps between the contract price and the present market value, is in excess of USD 200 million," the document said. SCI has 33 vessels on order, many at Chinese yards; it is believed to have tied up finance for just ten of these.  "It was in this context that the Board of Directors of SCI in its last meeting had desired a complete ban on all fresh acquisitions," the Ministry document stated.

SCI's Chairman and Managing Director S Hajara declined to comment on the observations made by the Shipping Ministry, PTI says.  On another note, media reports had said last month that Mr Hajara had hinted at the 61st AGM that the company was under financial pressure and was going slow with its plans to acquire a stake in private shipyards.  "When your bottom lines are under pressure... I cannot say when the plan will be implemented," he had said when a shareholder had asked about the status of the plan.

National Shipping Board moots waiver of income tax for seamen on Indian ships

In response to the longstanding demand that Indian seafarers working in domestic shipping be treated at par with their colleagues working in foreign companies, the National Shipping Board (NSB) will recommend a waiver of income tax on their salaries. In other developments, there have been suggestions at the NSB meeting that, given the maritime security environment around the country, all major and minor ports be brought under the control of Union Government. The National Shipping Board is a permanent statutory body established under Section 4 of the Merchant Shipping Act 1958.

The issue of taxation was just one of many on the agenda of its 117th meeting of the NSB in Kochi last week. In this connection, Director General of Shipping S B Agnihotri will coordinate with the government so that the Finance Ministry can put the taxation proposal on the table in the next Budget. The recommendation, if accepted, will profit almost 50,000 Indian seafarers on Indian flagships who pay income tax, often at the highest slab rates, while those working on foreign flags get NRI status- and tax free salaries- if they sail for six months or more in a year. 

This anomaly has long been a bone of contention with Indian companies who have claimed, with some justification, that the best seafarers leave the country to sail abroad mainly because they want to avoid high taxation at home. This results in a drain of qualified and experienced seafarers from the country, they say.

The National Shipping Board also wants to expand the Marine Mercantile Department to cater to new ports. "We have to augment the strength of the Directorate of Shipping as there is a shortage of manpower. Moreover, we have to expand as the number of ports and the number of ships coming to the country is increasing," the DGS said after the Kochi meeting. 

With piracy and terrorism threats continuing to plague the long and porous Indian coastline, some NSB members feel that the present administrative arrangement- where control of major ports is with the Union Government and minor ports are controlled by State Governments- is not good enough. NSB Member R. Rajamohan is one of them; he is believed to have mooted the idea of central control, also suggesting that the Colachel Port be developed as a container port given its strategic location close to major shipping routes.

The issue of armed private security guards on Indian merchant ships is believed to have also been discussed at the NSB Kochi meeting that was also attended by Union Shipping Secretary K. Mohandas, Members of Parliament K. V. P. Ramachadra Rao and Mr K. B. Shanappa, Chairman of the NSB Capt P. V. K. Mohan and Shipping Corporation of India's Chairman and Managing Director S. Hajara. 

Another member, Sandeep Chandra, said that the Indian Navy should be given greater powers to tackle piracy, so that pirates would not assume that force would not be used against them. The NSB has said that India should send a 'strong message against maritime piracy', especially in the Gulf of Aden. 

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Severe fallout of tanking tanker market

With the tanker market slumping amidst huge tonnage oversupply, spokesperson for Wilhelmsen Ship Management Arild Johannessen has told Bloomberg that an unnamed ship-owner will cold lay up a brand new supertanker in Malaysia. Reports from other industry sources say that younger tankers are being sold for scrap today - and that ship owners are seriously contemplating scrapping many more.

These developments come after a long period where the tanker market has been under severe pressure. With operators struggling to cover costs, charter rates for tankers have plunged since the 2007 peaks; Clarkson Plc, the world's largest shipbrokers, has said in a report that rates are down a massive 96 percent since that year when they had risen to a record $229,000 a day. Clarkson Research Services says that this promoted owners to order a record number of these tankers in the next two years, "depressing freight rates to a 14-year low, as the fleet swelled almost three times faster than demand." As a result, the industry is saddled today with the largest supertanker fleet in 29 years. There are 152 supertankers contracted to be built, to add to the 570 already existing, Clarkson says. Forty-one have been added In 2011 alone.

 The Wilhelmsen managed tanker will be the first to be mothballed since the 1980's slump in shipping. With a capacity of 2 million barrels of crude, it will be laid up in an undisclosed location in Malaysia. Johannessen did not name the ship or the owner for reasons to do with privacy. 

Halvor Ellefsen of London based shipbrokers Galbraith’s says that tanker layups are a short-term measure and may not change market dynamics fast enough. “More than anything else, it just shows how many ships there are. Even if this happens on a meaningful scale, it’s hard to see it saving the tanker industry as ships that get laid up will just come back into the market when freight rates jump,” the shipbroker says.

Many tanker owners are believed to be seriously considering the viability of their fleets as fears of a global double dip recession resurface in the aftermath of the European crisis. After two years of uncertainty, many of them have hoped that things would start looking up after the third quarter of 2011. It is becoming painfully apparent, however, that the glut of tonnage oversupply, with new tankers still slated to enter the market regularly, is a much bigger issue than earlier envisaged, especially after fears that the Chinese economy may be slowing down as well. 

Meanwhile, supertanker prices have fallen by more than a third, says tanker broker EA Gibson, who had said at the end of last year that this class of ship ordered in 2007 and 2008 would need daily earnings of $55,000 just to break even. London based Moore Stephens has pegged running costs of these giants at $10,645 a day, excluding fuel costs.  

British broker Braemar Shipping Services Plc says that supertanker earnings are averaging a paltry $1,000 a day today. German based tanker owners Dr. Peters Group add that ship-owners who have speculated with new tonnage are much worse off than owners who have been circumspect in securing revenues with long-term charters. Says spokesman Holger Romer, “If you have a new ship that was ordered in ‘07 and ‘08, it was at a high price and now if you don’t have a charterer, it’s a big problem.”

Vladmir Putin says Northern Route will rival the Suez Canal

Russian Prime Minister Vladimir Putin has disclosed his country's ambitious plans for shipping and resource development in the frigid Arctic. At a meeting at Arkhangelsk on the White Sea, he told the audience that the Arctic shipping route would shortly rival the Suez Canal for trade between Asia and Europe. Russia is pushing for major integrated rail and port hub development at the port of Murmansk and research into resources in the Barents Sea.  Along with a slew of other projects is a plan for a new self-contained city in the Arctic.

"The shortest route between Europe's largest markets and the Asia-Pacific region lie across the Arctic,” Putin said, hinting at the fact that this route is almost 4000 nautical miles shorter than the one through the Suez Canal.  

There has been unprecedented interest in the Northern Route in recent times; a few ships have already made the passage in the last year, usually with icebreaker escort when needed. The Arctic thaw has meant that countries in the region have renewed moves to survey and develop mineral exploration in the area. Much to the chagrin of environmentalists, oil exploration and the opening of new sea routes have meant increased pollution risk, which will only escalate in future. 

Russia has earmarked the equivalent of $733 million in the first tranche of funding for new icebreakers that will service the Northern Route. Russia plans to double the number of icebreakers deployed in the Arctic; three new nuclear and six new diesel icebreakers are planned over the next nine years. The Russian Transport Minister Igor Levitin announced that one nuclear icebreaker would be rolled out as early as next year. "This will be installed with safety and rescue systems, it will carry out search-and rescue operations at sea."

Environmental concerns or not, analysts say that the high cost of fuel will make greater use of the Arctic route inevitable. Not is it four thousand miles shorter, they say, but it bypasses the need to go through dangerous pirate infested waters in Asia. In Putin's words, "I want to stress the importance of the Northern Sea Route as an international transport artery that will rival traditional trade lanes in service fees, security and quality. States and private companies who chose the Arctic trade routes will undoubtedly reap economic advantages."

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