Mumbai: The ministry of petroleum is exploring possibilities to grant a preferential treatment to Shipping Corporation of India (SCI) for crude movements of national oil companies in the post-SCI disinvestment regime.
The petroleum ministrys initiation is based on a request forwarded by the ministry of disinvestment recently. While clearing the disinvestment proposal of SCI in December 2001, the Cabinet Committee of Disinvestment (CCD) had decided to continue with the preferential treatment granted to SCI for crude movement and the favoured treatment given by Transchart to SCI ships for two years after disinvestment.
The move was aimed at enhancing the value of SCI in which the government has initiated the process of selling 51 per cent of its equity in favour of a strategic partner. But, the events that have unfolded in the petroleum sector with the dismantling of the administered price mechanism (APM) from 1 April 2002 have made the task of implementing the CCD decision difficult.
With the dismantling of APM, SCI has lost its nodal agency status for crude transportation, which entitled the company to carry the crude imported by Indian Oil Corporation (IOC), the canalising agency, for itself and also for other oil refiners like Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd.
This would bring grim prospects to the corporation in the post-disinvestment regime, as SCI will have to compete with other players in the industry and secure these contracts. Crude is the mainstay of SCI business and is considered a value-enhancer at the time of sale.
During the regulated period, IOC was purchasing crude from the Persian Gulf to suit the vessel sizes owned by SCI and was transported on AFRA rates. The coastal movement of crude was also given to SCI on a negotiated time-charter-hire basis.
IOC has already moved out of the SCI fold in the deregulated period by buying its own crude cargo for the current fiscal from the Persian Gulf which would be transported on very large crude carriers, vessel sizes which SCI lacks at the moment.
The short-listed bidders have already conveyed to the government that it should grant all kinds of cargo support for crude movement to SCI for two years post-disinvestment and honour the CCD decision.
The disinvestment ministry feels that the withdrawal of cargo support to SCI in the deregulated era and the non-implementation of the CDC decision will have a major impact on the valuation of the company.
