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IOC shipping plan in choppy waters

New Delhi, Nov. 9: Indian Oil Corporation’s (IOC) move to make its own shipping arrangements to import crude has run into rough weather. The company’s shipping bill works out to around Rs 1200 crore each year.

Sources disclose that the shipping ministry has rejected the proposal as it runs counter to the national shipping policy.

Currently, shipping arrangements for all the domestic public sector companies are made by Transchart — the chartering wing of the shipping ministry.

IOC had argued that since it is a navratna company and has the requisite expertise, it should be allowed to handle its own shipping arrangements.

The shipping ministry has pointed out that Transchart has saved over Rs 200 crore for IOC in 2002-03 by arranging cheaper ships through the globally competitive route. Apart from hiring ships at the lowest cost for PSUs, Transchart also ensures that Indian shipping companies such as Shipping Corporation of India (SCI) get preference, provided they are willing to match the lowest freight rate.

Interestingly, the empowered standing committee that purchases crude for the country has said Transchart is doing a good job. Apart from senior officials of the petroleum, finance and commerce ministries, the IOC chairman and director finance are also members of this committee. Senior shipping ministry officials, therefore, find the IOC proposal “a little puzzling”.

The shipping ministry has also pointed out that if IOC is allowed to make its own arrangements, it will have to set up a separate chartering wing, which requires specialised knowledge. This activity will have to be overseen by officials from the petroleum ministry to ensure that the shipping guidelines are met.

Similarly, if other companies such as Steel Authority of India or public sector fertiliser companies go in for their own shipping arrangements, they will also have to set up their own chartering wings. The steel ministry or the fertiliser ministry will have to appoint officials to oversee its functioning.

In short, ‘several mini-Transcharts’ will spring up in all ministries and PSUs will have to hire more staff for chartering ships. “This will only lead to wasteful duplication and more flab all around,” an official said.

Transchart is a lean organisation manned by experts and is not dependent on financial support from the government. Its budget is handled entirely out of the service fee that it charges shipping companies.

The shipping ministry has further stated that the expenditure reforms commission of the government has strongly commended the role that Transchart plays in reducing the nation’s shipping costs and at the same time safeguarding the interests of the shipping companies.

The national oil companies import around 70 million tonnes of crude every year. Earlier, IOC used to import crude for HPCL and BPCL as well, but now these companies have chalked out their own plans to import crude.

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