India’s Shipping Giant Set To Be Privatised

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Shipping Corp. of India operates about a third of all Indian cargo tonnage and a sale could be difficult to pull off, reports The Wall Street Journal.

Privatization efforts

The Indian government is again looking to sell its majority stake in the country’s biggest shipping company.

But it might face the same headwinds that have blocked past privatization efforts.

Heart of country’s industrial economy

The Shipping Corp. of India is at the heart of the country’s industrial economy, with about 70 cargo vessels of all types worth some $1.2 billion. 

That makes it a key target for Prime Minister Narendra Modi’s bid to sell off state assets.

Ministry of shipping official said that a proposal to divest the state’s 63.8% holding has been submitted to the cabinet which will decide later this month. “It’s part of a wider move to privatize a number of state assets.”

SCI operates close to a third of all Indian waterborne tonnage, with

  • five very large crude carriers and
  • 29 smaller crude tankers, product tankers and gas carriers
  • also includes dry bulk carriers, container ships and ferries.

Privatizations remains a complicated process

The government first tried to sell its stake in 2017 but the sale was canceled after pushback by various bodies, including the ministry of shipping. 

Privatizations in India are often complicated and many stand against the sale of what they describe as vital national assets.

Investor friendly reform

Mr. Modi’s government has been pushing to sell government stakes in dozens of Central Public-Sector Enterprises or Undertakings, CPSEs, as part of what it calls “investor-friendly reform” across many parts of the economy including 

  • railways, 
  • shipping, 
  • banking, 
  • mining, 
  • petrochemicals and 
  • airlines.

Oil supplies rattled?

The Mumbai-based Shipping Corp. of India, which is listed on the local bourse, has a market value of around $290 million. Apart from ships it also owns premium property in Mumbai, including its 19-storey headquarters.

Opponents of the sale say a good part of India’s vital oil imports move on SCI ships and selling the carrier could rattle oil supplies.

Biggest hurdle to the sale 

Company executives say the biggest hurdle to the sale will be trying to sell a company with so many ship types, however. Private-sector operators may view such spread across various markets as inefficient.

“There are few shipping operators or other investors that are looking to invest in so many ship types,” the shipping ministry executive said. “It could be broken up and then sold, but this will take years and face a lot of opposition.”

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Source: The Wall Street Journal

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