After its plans to diversify into shipbuilding, state-run Shipping Corporation of India (SCI) is now looking at entering the $60-billion logistics business.
“We are looking to enter door-to-door logistics business. We may join hands with partners who are already in the logistics business,” SCI Director JN Das said.
As a first step, SCI would appoint a consultant to guide it through the process of entering the business. “As we are a public-sector company, we would invite bids for appointment of consultants first,” Das said.
According to industry data, the cost of surface logistics is estimated to be between 9 and 23 per cent of the gross domestic product (GDP). Manufacturing and marketing companies spend about 6 to 36 per cent of sales on logistics.
Besides SCI, Shreyas Shipping and Essar Shipping have ventured into logistics business.
In 2007-end, SCI Chairman SC Hajara had said the shipping major was interested in setting up two shipbuilding yards with a capacity of 300,000 dead weight tonnes with an investment of up to Rs 5,000 crore.
The two yards could be one each in East and West Coast. The shipping company has since submitted expression of interest to government for setting up these yards.
The company is in talks with partners for its shipyard venture and it would take a decision about a partner within 2-3 months.
Further the company said by March-end, SCI would stop container services to the US East Coast because it was incurring losses. This is the second time that SCI is stopping the IDX service. The present IDX service was started from January 2006.
SCI ran the US service named IDX in association with Zim, Emirates Shipping Line and Mac Andrews as partners.
“We are incurring losses in the US sector because of cut-throat competition. Our partners gave a three-month notice saying that they would like to disassociate with IDX service,” Das said.
SCI alone could not carry out its services to the US as it does not have that many vessels to deploy in this sector.
SCI has just three container vessels and four chartered for the IDX service. Incidentally, SCI is the only Indian shipping company in the container business.
The company plans to acquire 12 new vessels at a total outlay of Rs 3,193.68 crore, of which two would be container vessels.
India’s largest shipping company makes only $1,000 per twenty foot equivalent units from India to the US by carrying textiles and dry fruits. While on the return journey it makes just $500 per twenty foot equivalent units for bringing in scrap from the US to India.
However, Das said SCI was looking for partners to continue the IDX service. If it doesn’t get partners, then SCI would redeploy its container ships to cover the Eastern services, Das said.