SCI Annual Report 2013-27717f
SCI Annual Report 2013-27717f
SCI Annual Report 2013-27717f
The Shipping Corporation of India was established on October 2nd, 1961. For the last fifty one years, Shipping Corporation
of India has been providing yeoman service to the country’s economy by meeting its ocean transport requirements.
Starting out as a Marginal Liner Shipping Company with just 19 vessels, the SCI has today emerged as the undisputed
leader in India’s shipping industry. The SCI continues to be the only Indian mainline carrier providing liner services from
India to the major global destinations.
SCI’s owned fleet includes Bulk carriers, Crude oil tankers, Product tankers, Container vessels, Passenger-cum-Cargo
vessels, Phosphoric Acid / Chemical carriers, LPG / Ammonia carriers and Offshore Supply Vessels. Sailing through for
nearly five decades, the SCI today has a significant presence on the global maritime map.
As the country’s premier shipping line, the SCI owns and operates around 38% of the Indian tonnage, and has operating
interests in practically all areas of the shipping business; servicing both national and international trades.
With a highly diversified fleet and a network, covering several major sea routes, SCI reaffirms its commitment to remain
highly responsive and efficient in terms of its services, thus keeping abreast of latest development in shipping industry
and maintaining itself as largest and most diversified shipping company.
Contents
Corporate Information .................................................................................................. 01
Chairman’s Statement to Shareholders ................................................................. 02
Board of Directors ........................................................................................................... 07
Senior Management Team .......................................................................................... 09
Notice of Meeting ........................................................................................................... 10
Annexure to the Notice ............................................................................................... 11
Salient Statistics ................................................................................................................ 13
Decade at a Glance ......................................................................................................... 14
Graphs ................................................................................................................................... 15
Directors’ Report .............................................................................................................. 17
Report of the Directors on Corporate Governance .......................................... 36
Auditors’ Certificate on Corporate Governance ................................................ 50
Auditors’ Report ................................................................................................................ 51
Annexure to the Auditors’ Report ............................................................................ 53
Comments of the Comptroller and Auditor General of India ...................... 55
Annual Accounts .............................................................................................................. 56
Cash Flow Statement ..................................................................................................... 87
Glossary ................................................................................................................................ 88
Corporate Information
BOARD OF DIRECTORS AUDITORS
Shri B. K. Mandal Messrs. P.S.D. & Associates, Jaipur
Chairman & Managing Director & Messrs. Sarda & Pareek, Mumbai
Director (Finance)
REGISTERED OFFICE
Dr. (Ms.) T. Kumar
Government Director Shipping House, 245,
Madame Cama Road,
Shri M. C. Jauhari Mumbai 400 021.
Government Director
REGISTRAR & TRANSFER AGENTS
Shri J. N. Das M/s. Sharepro Services (India) Pvt. Ltd.,
Director Samhita Warehousing Complex,
Gala No-52 to 56, Bldg No.13 A - B,
Shri Arun Kumar Gupta Near Sakinaka Telephone Exchange,
Director Andheri-Kurla Road, Sakinaka,
Mumbai - 400072.
Shri S. K. Roongta
Director INVESTOR RELATION CENTRE
912, Raheja Centre,
Capt. B. B. Sinha
Free Press Journal Road,
Director
Nariman Point,
Mumbai -400 021.
Capt. Sunil Thapar
Director
Name of Directors (other than S/Shri B.K. Mandal, Dr.(Ms.) T. Kumar and M. C. Jauhari) appear in alphabetical order of Surnames
Dear Members,
On behalf of the Board of Directors and on my personal behalf, I extend a very warm welcome to all of you at the
63rd Annual General Meeting. It is my great privilege to address you for the first time in the capacity of CMD of SCI. As you
know, the shipping industry in general is going through a very challenging time and facing one of the longest ever
downturn in the shipping Industry. Shipping being a global industry depends heavily on global economic growth, supply
and demand mismatch of goods in countries as well as interplay of supply and demand of available ships globally.
On the global economic front, it is a grim picture as major economies across the globe have underperformed and
GDP growth has been just 3% in 2012 compared to 3.8% of 2011 and it is expected to prevail at 3% level in the 2013.
India has also recorded a GDP growth rate of 10 year low at 5% in 2012.
The Directors’ Report describes, in detail, the working of your Company for the last financial year. I would like to
summarise some salient features of your Company’s performance during the last financial year.
Globally, all the shipping segments in general, have suffered with abysmally low freight levels which have affected the
Top and Bottom line of the shipping companies. Although the fresh ship ordering has come down and scrapping has
also gone up, it will still take some time to recover from the present dismal condition in the shipping industry. The global
Crude Oil imports remained at previous year level of 2 billion tonnes. If US lift its ban on Crude Oil exports there is a
possibility of shift in the global trade pattern as US domestic production is also on rise. Taking into account Crude Oil and
Product tanker segments collectively, the year on year growth of tanker fleet which was 9.9% and 3.9% in 2011 and
2012 is expected to grow moderately at 2.9% and 1.6% in 2013 and 2014 respectively.
The benchmark BDI for dry bulk trade which averaged 1424 during
2011-12 has gone down to 900 levels in 2012-13. The dry bulk
fleet size is expected to cross mark of 700 mn dwt by this year end
with average year to year growth of 7% which is expected to
further go down to 3.8% and 2.2% in 2014 and 2015 respectively.
FINANCIALS
OPERATIONS
For the first time, SCI’s Offshore vessels were tested on foreign
waters. During the year SCI’s Offshore vessels were involved in
various rig tow operations. Specifically, two of SCI’s AHTSVs sailed
to Port Hamariyah in UAE and towed a rig to West Coast of India in
early 2013. In addition to the above, SCI’s two AHTSVs were involved
in FPSO hook up operations for M/s Bumi Armada in West Coast of
India from December 2012 to April 2013.
The year under report is the first year of the Country’s Twelfth Five
Year Plan. During the year under report, your company had not
proposed any new acquisition due to the prevailing downturn in
the shipping markets. However, SCI has been able to acquire one
Suezmax tanker on resale basis during the year. The vessel
has joined the SCI fleet during October 2012 and is named as
M.T. Desh Shobha.
• Best Shipping Line of the Year on 27.09.12 at 6th Express, Logistics & Supply Chain Awards
• Dun & Bradstreet : PSU Awards 2012 - in “Transport & Logistics Sector” on 28.05.2012
• “Tanker Operator of the Year” on 19.01.2012 at Gateway Awards of Excellence Port & Shipping 2012
• Appreciation letter dated 18.11.2012 received from ONGC, congratulating all members involved in the capping
stack lowering operation on well G-1-9. They have also mentioned that this operation has been done first time in the
oil industry in world and all the personnel of MSV “Samudra Sevak” & M.V. “SCI Kundan” are part of this success.
• The Government of India had decided to rehabilitate Kankesanturai (KKS) port located on northern coast of
Sri Lanka as an aid. Your Company took up the project as “Project Managers” and successfully completed the project
in 2012. Later, your Company earned appreciation in the excellent execution of this project.
WAY FORWARD
Though the present recession in the shipping has been quite a long one, I am confident we will come out of it soon.
But even in the good days we have to remember that the next recession is near our door and be prepared for another
recession or downturn - and that will be the real takeaway from our present experience.
Going beyond the various short term strategies to overcome the recession, as a going concern we need to go beyond
the darkness and find ways to grow in the mid and long term. Our Company is in search of areas which can be added
to the portfolio of business which will provide stability in the revenue. One such area is LNG transportation. We are the
only Indian shipping company having experience in the LNG transportation. To capitalize further on this strength, our
Company has signed a broad based MOU with GAIL to facilitate transportation of gas from USA to India. As per the plan,
the transportation will start from 2016-17 onwards. Our Company is also exploring the possibility of entering into the
area of dredging where there is enormous scope in the country and which can provide long term secured returns.
With the existing ship acquisition programme getting implemented, I am hopeful that we will achieve the 6 mn dwt
mark in the near future with younger tonnage to augment the growth of the Indian shipping industry.
ACKNOWLEDGEMENT
I would like to express my gratitude to the Government of India for its support to your Company. I wish to thank the
Hon’ble Union Minister of Shipping Shri G.K. Vasan for leading the growth of India’s maritime sector and for providing his
kind support to your company. I would also like to thank the Hon’ble Minister of State for Shipping, Shri Milind Deora for
his encouragement to your Company. I wish to also express my indebtedness towards Shri P.K. Sinha, former Secretary
(Shipping) and Shri. Vishwapati Trivedi, present Secretary (Shipping) for their guidance provided to your Company.
My sincere thanks are also due to other officials of the Administrative Ministry, other Ministries and Departments of the
Government of India. I would also like to express my sincere appreciation towards Directorate General of Shipping for
its support and kind understanding of various problems being faced by the Indian shipping industry and specifically by
your Company. Finally, I wish to express my deep sense of gratitude towards all the shareholders, stakeholders, my
colleagues on the Board of Directors and all the floating and shore employees for their continued support extended
towards the corporation over the years and particularly during the present turbulent period.
01 02
03 04
01 Shri B. K. Mandal Chairman & Managing Director / Director (Finance)
Shri B. K. Mandal has been entrusted with the additional charge of C&MD of SCI w.e.f 1.1.2013
consequent to the superannuation of Mr. S. Hajara, ex-CMD. Shri B. K. Mandal is Director (Finance)
since November 2005 and is a post graduate in Management from the Indian Institute of Management,
Ahmedabad, and also a Fellow member of the Institute of Cost & Works Accountants of India.
Shri Mandal was working in NTPC Ltd., Delhi, as General Manager (Finance) and has also worked with
BHEL in the initial years of his career. Besides being on board of other Joint Venture companies,
he is also a member in Investors’ Grievance Committee.
0 2 Dr. (Ms) T. Kumar Government Director
Dr. (Ms) T. Kumar, Additional Secretary and Financial Advisor, Ministry of Shipping, and ex-officio
part-time Director of the Company was appointed on the Board of Directors in November, 2012.
Dr. (Ms) T. Kumar, an I.A.S. Officer of the West Bengal Cadre, holds a Ph.D in Ancient Indian History
from the Delhi University. Before joining the I.A.S., she served Delhi University as a Lecturer for a brief
stint. She has worked in the State Government of West Bengal in various senior positions in the
Districts and the State Capital, including that of Labour Commissioner and Advisor, Industry. Dr.
Kumar has also been on deputation with Government of India in Constitutional Organisations and
Ministries such as the Union Public Service Commission, Ministry of Human Resource Development,
Ministry for Development of the North East Region and Ministry of Culture. She was the Principal
Secretary to the Speaker, Lok Sabha (Parliament of India) in the 14th Lok Sabha, between 2004-2009.
Before her present posting with Government of India in November, 2012, Dr. Kumar was Additional
Chief Secretary with the Government of West Bengal.
0 3 Shri M. C. Jauhari, Government Director
Shri M. C. Jauhari, Joint Secretary (Shipping), Ministry of Shipping, an ex-officio part-time Director of
the Company, was appointed on the Board of Directors in January 2012. Shri Jauhari, an IAS Officer,
is a post graduate in Physics from Allahabad University. He has worked in the State Government of
Assam in various capacities and also as Joint DG / Director in DGFT in Commerce & Industry Ministry,
Govt. of India, New Delhi. He has also worked as Advisor in Indian Mission to European Union. He has
vast knowledge in different areas like land revenue administration, Labour & Employment, Town and
Country Planning, Science & Technology, Foreign Trade, Agriculture & Cooperation, Personnel &
General Administration, Planning & Programme Implementation, etc. He is also a Government Director
on the Boards of Cochin Shipyard Ltd. and Chennai Port Trust.
04 Shri J. N. Das Director
Shri J. N. Das is Director (Liner & Passenger Services) since December 2007. He is a Marine Engineer
from Marine Engineering Training College (DMET), Kolkata and possesses First Class Engineer (MOTOR)
Certificate of Competency from MOT. He is a member of the Institute of Engineers (MIE India) and a
fellow of Institute of Marine Engineers (FIME) India. He has vast experience in shipping management,
bulk carriers, tankers, chemicals, LPG & LNG operations, new building and offshore services.
Shri J.N. Das is also on board of other Joint Venture companies.
05 06
07 08
0 5 Shri Arun Kumar Gupta Director
Arun Kumar Gupta is the Director of Technical & Offshore Services Division since October 25, 2010.
He holds a bachelors degree in Marine Engineering from Marine Engineering Training College, Kolkata
and possesses First Class Engineer (MOTOR) Certificate of Competency from Ministry of Transport.
He is a member of the Institute of Engineers, a Fellow Member of Institute of Marine Engineers &
Narottam Morarjee Institute of Shipping. He has also served Irano-Hind Shipping Co., Tehran as
Director Administration for a period of over three years. He has been a Trustee of Kandla Port and also
the Vice President of Institute of Marine Engineers (India). He has been on the Governing Council of
both, Institute of Marine Engineers as well as Narottam Morarjee Institute of Shipping. In this context he
has chaired sessions and also presented papers in several technical meets. He has almost 34 years
experience in all aspects of shipping management. Shri Arun Kumar Gupta is also on board of other
Joint Venture companies.
0 6 Shri Sushil Kumar Roongta Director
Shri Sushil Kumar Roongta is a non-official part-time (Independent) Director inducted on the Board
in October, 2010. He is a member of the Strategy Committee of our Company. He holds a Bachelor of
Engineering (Honours) degree in Electrical Engineering from the Birla Institute of Technology &
Sciences and has a Post Graduate Diploma in Business Management-International Trade from the
Indian Institute of Foreign Trade. He is also a fellow member of the All India Management Association.
He has expertise in marketing, strategy and turnaround management. He was the executive Chairman
of the Steel Authority of India Limited (“SAIL”) from August 2006 to May 2010. He was also the first
chairman of the International Coal Ventures Limited, a joint venture of five leading Public Sector
units. He is presently the Chairman of the Panel of Experts on PSU reforms, constituted by the
Planning Commission, Government of India. Presently, he is on the Board of Axis Bank Limited since
July 2010 and Neyveli Lignite Corporation Limited since September 2010. He has also been appointed as
Managing Director of Vedanta Aluminium from June 2011.
0 7 Capt. B.B. Sinha Director
Capt. B.B. Sinha is the Director of Personnel and Administration since 1st January, 2013. Capt. Sinha has
served over 33 years at responsible executive level in Shipping Industry consisting of 16 years of sea
service and 17 years of shore service at SCI in shipping management, bulk carriers, tankers, chemicals,
LPG & LNG operations. Capt. Sinha is a Master Mariner (Foreign Going) and holds a diploma in Shipping
Management. He has also served as Member of THC Committee (India, Pakistan, Bangladesh) Ceylon
Conference, as member of BIS - Technical Committee on Cordage (Ministry of Textiles) and as member
of 11th Plan Sub-Committee on Multi-modal Transport and has represented SCI & Indian national
Shipowners on TAMP (Tariff Authority for major ports). He has also served as SCI’s representative in
New Jersey (USA).
0 8 Capt. Sunil Thapar Director
Capt. Sunil Thapar is the Director of Bulk Carriers and Tanker Division since January, 2011. He holds a
Masters’ degree in Shipping Management from the World Maritime University. He also holds Master
(FG) Certificate of Competency. He has sailed on many ships including Bulk Carriers, Passenger
vessels and Break-bulk ships in various capacities. He has served in various capacities in the Offshore,
Liner & Passenger and Bulk Carrier & Tanker Divisions. In April 2005, he was posted to Shanghai as the
Company’s Chief Representative in China to look after the container services and other interests in
the region including China and other Far East regions. Since December 2007, he has been in charge
of the Bulk Carrier & Tanker Division of the Company. Capt. Sunil Thapar is also on board of other
Joint Venture companies
Registered Office:
Shipping House,
245, Madame Cama Road,
Mumbai - 400 021.
Number 79
Number 15
Decade at a Glance
OPERATIONAL STATISTICS
(Figures in Crores of `)
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11* 2011-12 2012-13
Operating Earnings 3100.3 3396.1 3531.0 3703.4 3726.9 4166.6 3463.1 3543.4 3820.8 4152.5
Interest Income 60.7 80.2 172.1 219.7 227.7 272.7 218.2 191.4 183.4 107.3
Other Income 74.5 249.7 59.0 287.2 129.8 125.2 215.0 285.0 495.9 236.4
Total Earnings 3235.5 3726.0 3762.1 4210.3 4084.4 4564.5 3896.3 4019.8 4500.1 4496.2
Operating Expenses 2019.8 2033.7 2119.3 2567.7 2594.4 2815.7 2771.0 2254.5 3328.4 3273.7
Other Expenses 166.5 183.7 145.3 149.4 221.3 266.5 216.7 576.7 515.7 668.4
Interest Expenses 55.7 64.3 79.1 80.1 61.6 64.7 52.5 66.9 387.3 161.8
Depreciation 280.0 297.1 303.5 303.1 303.2 323.9 380.1 465.1 608.7 760.5
Exceptional items 0.0 0.0 0.0 0.0 0.0 39.1 0.0 0.0 0.0 0.0
Extraordinary items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -299.7
Tax Liability 86.5 22.8 72.8 95.5 90.0 113.9 99.1 89.3 88.2 45.8
Deffered Tax Provision
written back 0.0 -295.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Expenses 2608.5 2306.1 2720.0 3195.8 3270.5 3623.8 3519.4 3452.5 4928.3 4610.5
Profit after Tax 627.0 1420.0 1042.2 1014.5 813.9 940.7 376.9 567.3 -428.2 -114.3
FINANCIAL HIGHLIGHTS:
(Figures in Crores of `)
31-03-04 31-03-05 31-03-06 31-03-07 31-03-08 31-03-09 31-03-10 31-03-11* 31-03-12 31-03-13
WHAT THE COMPANY OWNED
Fixed Assets
Gross Block 6073.8 6506.1 6818.9 6705.4 6737.1 8161.9 8893.2 11841.3 13334.4 16556.8
Less: Depreciation(Cum) 3092.0 3270.3 3559.4 3744.2 4047.2 4333.9 4386.4 4472.1 4421.6 5017.0
Net Block 2981.8 3235.8 3259.5 2961.2 2689.9 3828.0 4506.8 7369.2 8912.8 11539.8
Assets under Construction 385.7 122.5 237.3 762.5 2007.2 2099.9 1854.7 1790.4 1833.3 1572.5
Asset Retired from Operation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5
Working Capital 667.6 1618.6 2224.1 2596.7 2347.7 2640.9 2505.7 2431.0 2036.6 1550.1
Investments 0.5 1.5 8.9 24.0 41.5 111.5 166.7 292.7 274.6 117.7
4035.6 4978.4 5729.8 6344.4 7086.3 8680.2 9033.9 11883.3 13057.3 14780.6
WHAT THE COMPANY OWED
Long Term Funds:
Bank Loans 1371.3 1402.7 1374.4 1244.7 1454.2 2471.7 2696.9 4715.2 6323.0 7707.4
Unsecured Loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 457.0
1371.3 1402.7 1374.4 1244.7 1454.2 2471.7 2696.9 4715.2 6323.0 8164.4
Deferred Tax Liability 295.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Appropriations :
The working results for your company for the year 2012-13 after considering prior period adjustments & extraordinary
items show a loss of ` 114.31 crores.
After adding a sum of ` 161.71 crores (being balance profit and loss account brought forward from previous year), the
amount available for disposal works out to 47.4 crores.
Your directors propose to make the following appropriations from this amount:
Staff Welfare Fund 1.2 crores
Total 1.2 crores
After the proposed appropriation, the sum available is ` 46.20 crores which is being carried forward to next year’s
accounts.
Brief Analysis of Financial Performance:
The financial performance of your Company was impacted by the adverse freight markets during the year. There has
been an increase in the operating earnings due to induction of twelve new vessels during the year though freight rates
were depressed. The Company also had extraordinary income of ` 300 crs being the reversal of borrowing cost (arising
on account of exchange loss arising out of revaluation of the foreign currency loans) of earlier years. However, the same
has been offset primarily by increase in depreciation, creation of provision for diminution in value of investments and
higher interest cost due to the new vessels inducted.
Fleet Position during the Year:
During the year under report, 8 vessels aggregating to 287,460 DWT were phased out from the SCI fleet whereas 12
vessels comprising of six newbuilding bulk carriers, one resale Crude oil tanker and five new building offshore vessels
aggregating to 630,172 DWT were added to SCI fleet. Thus, the overall fleet position, which was 76 ships at the
beginning of the year, improved to 80 ships at the end of the year as shown in the following table:
FLEET PROFILE
Particulars As on 1.4.2012 Additions Deletions As on 31.3.2013
No. DWT No. DWT No. DWT No. DWT
1. a) Crude Oil Tanker 24 3,632,297 1 158,034 2 162,438 23 3,627,893
b) Product Tankers 15 952,728 - - - - 15 952,728
c) Chemical Tankers 1 33,058 - - - - 1 33,058
d) Gas Carriers 2 35,202 - - - - 2 35,202
2. Bulk Carriers 14 681,554 6 459,931 3 121,272 17 1,020,214
3. Liner Ships 5 202,413 - - - - 5 202,413
4. Offshore Supply Vsls. 13 24,031 5 12,207 2 3,587 16 32,650
5. Passenger-Cum-Cargo Vessels 2 5,303 - - 1 163 1 5,140
Total 76 5,566,587 12 630,172 8 287,460 80 5,909,298
NEWBUILDING VESSELS DELIVERED DURING THE YEAR
Vessel Name Type Yard Built DWT
SCI KUNDAN AHTSV (120T Bollard Pull) Cochin Shipyard 2,011
m.v. Vishva Diksha Dry Bulk carrier STX (Dalian) yard 57,132
m.v. Vishva Anand Dry Bulk carrier STX (Dalian) yard 80,204
m.v. Vishva Vinay Dry Bulk carrier STX (Dalian) yard 80,139
SCI Ahimsa AHTSV (120T Bollard Pull) Cochin Shipyard 2,005
SCI Nalanda Platform Supply Vessel Cochin Shipyard 3,093
m.t. Desh Shobha Crude Oil Tanker Hyundai Samho Heavy Industries 158,034
m.v. Vishva Vijay Dry Bulk carrier STX (Dalian) yard 80,312
m.v. Vishva Preeti Dry Bulk Carrier STX (Dalian) yard 80,250
SCI Yamuna Platform Supply Vessel Cochin Shipyard 3,095
m.v. Vishva Jyoti Dry Bulk carrier Jiangsu Eastern Heavy Industries 81,894
SCI Urja AHTSV (120T Bollard Pull) Cochin Shipyard 2,003
Total 630,172
VESSELS DISPOSED OF DURING THE YEAR
Vessel Name Type Year Built DWT
m.v. Ramanujam Passenger 1987 163
m.v. Dakshineshwar Dry Bulk carrier 1987 47,277
m.v. Gangasagar Dry Bulk carrier 1987 47,281
m.t. Maharshi Karve Crude Oil Tanker 1978 122,109
m.t. C.V. Raman Crude Oil Tanker 1981 40,329
m.v. Lok Prem Dry Bulk carrier 1990 26,714
SCI-01 AHTSV 1984 1,775
SCI-04 AHTSV 1984 1,812
is likely to continue with emphasizing import gains in European, Chinese and Asia Pacific offsetting decline of North
American and Japanese imports. The Spot rate of TD3 route of AG/East for VLCC was US$22,000/day in 2012. The future
market in this segment seems to be in the range of US$10,000 to US$15,000/day. One Year TC rate for VLCC was about
US$ 20,000/day in 2012 which is also not likely to change much in next 2 years. The Suezmax rate on West Africa/US
route was in the range of $ 13,000/day in 2012 which is not expected to improve in next 2 years. One year TC rate for
Suezmax was $16,300/day and seems to remain at same level for next 2 years. For Aframax, the spot rate on Caribs/US
route was US$ 12,600/day which is expected to remain around the same level in 2013. Taking a look on Product tankers,
LR1 Spot rates on AG/East was US$ 10,900/day in 2012 and expected to be US$15,300/day in 2013. One year TC rate for
LR1 was $ 13,500/day and expected to be $14,500/day in 2013 and 2014. In MR tankers on Caribs/US route the spot rate
was also in tandem from US$ 10,800/day to US$ 11,800/day. One Year TC rate for MR was 13,000/day and expected to
be around $ 13,500/day for next 2 years.
Your VLCCs were mainly employed on Voyage Charter during FY 2012-13 and had been performing spot voyages,
except MT Desh Ujaala which was on time charter with Indian Oil (IOCL) for about 2 months of the financial year and
thereafter on Voyage Charter. Your Suezmax tankers were deployed with Indian oil industry and performed COA
voyages, except occasionally performing spot voyages for Indian and foreign charterers. The COA earnings are based on
AFRA which has been low. Your company also acquired a new Suezmax tanker MT Desh Shobha during this period.
Your LR-II tankers, M.T. Motilal Nehru and M.T. Jawaharlal Nehru are single hull and non-coiled tankers suitable for coastal
crude oil movement only. There is no market average available for single hull tankers. The earnings compare well for this
financial year compared to last year. Your tankers in the Swaraj Series & Tagore Series were all well employed with Indian
charterers and their earnings compare well with the market average.
Your tankers in the Swarna series, i.e., 2 MR and 2 LR-II tankers were gainfully deployed in pool and their earnings
compare well with the market. MT Swarna Pushp was employed with Indian charterers for the last quarter.
Earnings of your coiled / double hull Aframax tankers compares well with the market mainly on the back of triangulation
voyages which minimize ballast voyages. The Aframaxes mainly performed India centric / Far East / Red Sea voyages.
Out of your six LR-I tankers, four tankers performed coastal movements for transportation of crude oil. One LR-I tanker
was deployed under clean trade and another LR-I was deployed in spot market. The average earnings have been
marginally higher on y-o-y basis, and also were higher compared with the market average.
Your MR tanker, M.T. C V Raman was deployed solely under coastal trade during the 1st quarter and there was a decrease
in earnings y-o-y basis, and the vessel was scrapped during July 2012.
Your tanker, M.T. Maharshi Karve which was an old tanker of more than 30 years was deployed on time charter to ONGC
for storage duties at the same levels of earning as last year. This tanker was scrapped during July 2012.
LPG Carriers
Your LPG carriers were pre-dominantly deployed under time charter to IOCL at prevailing market rate and are expected
to continue to be with them for this year.
Acid Carrier
No market estimates are available for tankers with tanks of rubber line coating. Your lone Acid carrier, MT Palanimalai
was deployed on spot voyages and performed a few voyages on COA during the 4th quarter. The earnings have been
marginally higher as compared to last financial year due to a buoyant market.
LNG Transportation
With India gearing up to build pipeline and delivery infrastructure of LNG, this sector could revolutionize the future of
Indian energy needs. Your company is the first and only Indian shipping line engaged in transportation of LNG. SCI is a
major shareholder in 3 LNG tankers through joint venture partnership on a long-term charter. SCI is also keen to
participate in transportation of LNG of various upcoming new projects for securing the shipping requirements through
past experience of operating and managing LNG vessels.
Your company has signed an MOU with Gas Authority of India Limited (GAIL) to cooperate for transportation of about
5.8 million metric tons of LNG from Sabine Pass, USA and Cove Point LNG liquification project at Lusby in the state of
Maryland, USA. As per the MOU, SCI will assist GAIL in the process of tendering and post fixture management of 8 to 10
LNG tankers and will have a step-in-right for participating in the shipping project with up to 26% equity stake.
GAIL is India’s leading company in the natural gas segment with an extensive infrastructure in the entire natural gas
value chain and is the key market player in natural gas in India, with a pipeline network of over 7,500 km. Your company
is the only Indian shipping Company with expertise in LNG Shipping and provides complete range of services including
ship management, crew management and marine operation. Your Company has identified LNG shipping as a key
growth area and with the participation in the shipping requirement for GAIL’s project, it will have a sizeable stake
holding in shipping of LNG which is projected to be an environmentally friendly source of energy.
RGPPL TERMINAL MANAGEMENT :
Your company has been awarded a 3 years Ports and Marine Services Contract on cost plus basis by Ratnagiri Gas and
Power Private Ltd. (RGPPL) on 01.02.2012 for operating their LNG Jetty at Dabhol. The contract value is approximately
` 150 crores. RGPPL was incorporated under the Companies Act, 1956 on 8th July, 2005 and is promoted by NTPC Ltd
and GAIL (India) Ltd., each of them holding 32.86 percent equity. RGPPL owns an Integrated Power generation of about
1970 MW and re-gasified LNG facility of 5 million MT per annum at Dabhol.
The commissioning of the plant was completed on 10.01.2013 with LNGC “Pioneer”. Four more spot cargoes were
received till 30.04.2013. The berthing and unberthing operations for all the vessels called at Dabhol were carried out
safely and satisfactorily by your company.
b) Dry Bulk
The benchmark BDI has been on a steep fall from 1424 during 2011-12 to 900 in 2012-13. The global imports of
Dry bulk stood at 4.25 billion tonnes and grew by 5.6% over previous year. The dry bulk global import is expected to
grow on an average at the same rate for next 3 years. The Steam Coal imports at 1,394 mn tonnes and Iron Ore imports
at 1,121 mn tonnes have taken lead followed by Met coal and Grain imports at 255mn tonnes and 358 mn tonnes
respectively. The other minor bulks have contributed towards the rest. Due to high International iron ore prices from
September, 2012, Chinese iron ore import has been on a continuous fall till 2013 first quarter. In tonne-mile terms, the
imports have risen slightly over the previous year as short-haul Indian supplies continue to fall. Chinese Met coal imports
increased during 1st quarter of 2013 and Australia and Canada were leading suppliers to China in this segment. In the
period ahead, steam coal holds the brightest outlook as new demand from coal fired power plants in India and China
will increasingly source imported coal from Australia and Indonesia. India was the 2nd largest importer of steam coal in
2012 after Japan and is expected to overtake Japan in 2013 with about 12% increase in imports from 106 million tonnes
in 2012 to 120 million tonnes in 2013. It is expected that all of the major coal-exporting countries such as Indonesia,
Australia, Colombia, South Africa, Russia and US will increase their supplies in next 5 years and Australian supplies will
further strengthen. The deliveries of dry bulk ships during 2012 were 98.4 mn dwt and fleet size jumped from 591.3 mn
dwt mark to 665.3mn dwt crossing 600 mn dwt mark. It is also expected that at y-o-y growth rate of
7%, the fleet will also surpass 700mn dwt mark in this year itself taking into account scrapping and new orderbooking
during this period. Thereafter, it is expected that y-o-y growth rate would be close to 4%. Over the year, the popular
post-Panamax segment (80-110,000 dwt) saw the steepest increase, where the fleet grew by a whopping 28% to
71 million dwt, owing the huge delivery schedule in this modern class, while the smaller and increasingly out-dated
Panamax class (60- 80,000 dwt) saw a small increase of about 2%, and the Handymax and Capesize fleets grew by about
18% and 8% respectively. There was no change in Handysize fleet over the year, with the high number of demolitions
almost matching the deliveries.
Your Company owns 3 older Handymax bulk carriers (average age 15 yrs) of around 45,000 dwt, 8 modern Supramax
dry carriers of around 57,000 dwt (which includes 1 newly delivered unit in FY12-13) and 5 modern Panamax /
Kamsarmax dry carriers of around 80-82,000 dwt as on 31st March, 2013. During the financial year your company
scrapped 2 older Handymax dry carriers (Daewoo Series). This has resulted in a significant improvement in the average
age of dry bulk carriers in the fleet.
The dry bulk market endured the worst earnings in a 25 year period in 2012. Your company too continued to face tough
times to fix profitable voyages for the bulk carriers owing to the market conditions. The newer vessels could be
employed all round the year, but could not contribute to the bottom line owing to low freight earnings. Added to
worsening macro conditions, the completion of our COA with SAIL in the year deprived us of the comfort of captive
cargoes. SAIL is more interested in spot market deals rather than long term COA arrangements. This meant the newer
vessels had to be employed in the spot market which exposed us to the falling spot market rates. Normally, the
charterers favour spot charter when charter market remains very low.
vessels of which three vessels have been contributed by your Company. The service is operated on a round voyage of
56 days. The IMED service which had commenced in 2010 has been merged into the ISE service and Mediterranean
ports are being catered to through transshipment at Gio Tauro by ISE vessels.
IPak Service
In a slot swap arrangement between SCI and MSC, SCI has been allotted 400 TEUs slots by MSC which operates IPak
Service in exchange for similar slot allotted to MSC on the ISE service.
Far Eastern Sector
India / Far East Cellular Service (INDFEX 1)
This service commenced in June, 2001 with 5 vessels and was upgraded in September 2012 by replacing a 3500 TEU
vessel by a 4400 TEU vessel and the additional capacity has been slot swapped with Zim Line and STX Line in exchange
for an increased capacity in the China-India service operated by them. The service is presently operated as a weekly
direct service from India’s West Coast to Central China, Korea, Hong Kong, Singapore and Malaysia on a round voyage
schedule of 35 days. The service also links North Chinese ports through feeder service from the Korean port (Busan).
India / Far East Cellular Service-2 (INDFEX 2)
This service which had commenced in June 2002, connecting East coast of India to Shanghai in Central China, Korea,
Hong Kong, Singapore and also linked North Chinese ports through feeder service from Korea was operated as a weekly
direct service with 5 vessels having round voyage duration of 35 days. The service was suspended due to adverse
market condition.
SCI Middle East India Liner Express (SMILE) Service
Your Company commenced this independent weekly service in March 2008 to the Gulf with its 3 owned vessels on a
round voyage schedule of 21 days. The service is presently being operated with 2 owned vessels and also caters to the
coastal trade between Mundra to Cochin and Tuticorin.
Asia - East Africa Service (AEF service)
In view of the developments taking place in the East Africa region (Kenya, Tanzania) where trade potential is very high,
your Company commenced the AEF Service with 5 vessels w.e.f. 18th April, 2012 deploying 1 owned vessel in consortium
with Evergreen Lines deploying 3 vessels and Xpress Lines (Seacon) 1 vessel. The service has a sailing frequency of
7 days with a round voyage duration of 35 days. The East Africa Service from the Indian Sub-Continent to East Africa
(ISEAFR SERVICE) which was being operated on a Slot-Swap basis with MSC was suspended.
Feeder Operations
Your Company makes feeder arrangements with ‘Common Carriers’ between various destinations on the Indian
subcontinent.
Slot swap arrangements
Your Company has entered into slot swap arrangements with ZimLine and STX Line on their China-India service to have
more extensive coverage of China market.
Break-Bulk Services
Your Company arranges carriage of breakbulk cargoes on space charter basis from various regions across the globe
including USA and Far East for imports on account of the Government departments / PSUs and other commercial
organisations which includes Shipments of Over-Dimensional Cargoes (ODC) / Project cargoes / Heavy Lift cargoes /
IMO Class I Cargoes etc. and also containers.
Coastal Operations
Domestic Passenger-Cum-Cargo Service
In addition to International operations, your Company with its one owned Passenger-cum-Cargo vessel and 10 managed
vessels operates domestic passenger and cargo transportation services between the Mainland and the Andaman &
Nicobar (A&N) group of islands and inter-island, on behalf of the Government of India.
on nomination basis under ‘cost plus’ arrangement. The existing contract was valid till 15.05.2013 and thereafter it was
proposed to extend till the disposal of the vessels
Specialized vessels:
Your Company has continued the Operation & Maintenance management (O&M) of ONGC’s two Multi Support Vessels
(MSVs) (“Samudra Sevak” and “ Samudra Prabha”) and one Geotechnical Vessel (“Samudra Sarvekshak”) on nomination
basis under ‘Cost plus’ arrangement. The existing contracts expired on 23.03.2013, which are now extended upto
23.03.2014 and 31.03.2014 respectively.
Your Company has also continued the Operation & Maintenance management (O&M) of ONGC’s Well Stimulation
Vessel (WSV) “Samudra Nidhi” on ‘cost plus basis’ since the vessels delivery. The present contract is expiring on 31.03.2014.
Emergency Towing Vessel (ETV) 2012:
On request of Directorate General of Shipping (DGS), this year also your Company had In-Chartered one Emergency
Towing Vessel (ETV) for safety and security on the Indian Coast for about 210 days. During this period the ETV had
offered its services to “M.V. Nahide M.” (vessel was disabled due to failure of engines), “M.V. Amsterdam Bridge”
(a container vessel, met with fire accident), “M.T. Pratibha Cauvery” (vessel grounded off at Chennai in cyclone).
TECHNICAL CONSULTANCY SERVICES
During the year under report the Company continued to provide technical consultancy services to A&N Administration,
UTL Administration, UTL Tourism Dept., Directorate of Light Houses & Light ships, Geological Survey of India, National
Institute of Oceanography, National Centre for Antarctic & Ocean Research and other Government Departments for
their various ship acquisition / retrofit projects.
Opportunities
Growth in long haul volumes from Caribbean to China and India, West African crude finding markets in India and China
to compensate for the drop in demand in USA, recommencement of shipments from North Sudan coupled with the
refinery growth in India and China have the potential of adding vital tonne-miles to the trade.
The scope of LNG transportation is very high considering that LNG accounts for 8% total energy mix and is expected to
grow up by 20% by 2030. LNG has the unique flexibility to serve both retail (CNG) and industrial demand. India was the
6th largest importer of LNG in 2011 and clocked a growth of 7.7% in 2012. Domestic natural gas supply is expected to
grow at 5.6% over FY 13-15 while gas demand is expected to grow at 18% thereby causing a demand-supply mismatch.
India has 43.80 trillion cubic feet of proven natural gas reserves with 70% in off-shore locations. India has already
embarked upon building strategic storage reserves for LNG in select on shore locations. The LNG terminal at Kochi
became the 4th operational terminal in India, while new terminals are planned at Mangalore, Kochi, Mundra, Pipapav,
Ennore and Haldia and capacity additions at Hazira and Dahej.
India is expected to see a capacity addition in power sector of 80,000 MW in the 12 th Five-Year Plan (2012-17).
It requires around 4.5 million tonnes (M.T.) of coal to generate 1 MW of thermal power. This means there will be huge
investments in power sector and the coal requirement to run these power plants will also be huge, including in-transit
inventory owing to long distance between ports and major power plants.
By the end of 12th five year plan the country’s coal requirement will reach 1,000 million tonnes of which approximately
200 million tonnes of coal will be required to be imported.
Indian companies are making huge investments to secure raw materials like coal for their power plants with acquisitions
in East Asia and Africa. With these imports in pipeline, the shipping sector will stand to benefit from increased import
cargoes.
The breakbulk sector continues to have good potential in respect of imports of Over-Dimensional Cargoes (ODC),
Project cargoes, Heavy Lift cargoes etc. on account of the Government departments / PSUs and other commercial
organisations as the Infrastructure sector in India continues to remain buoyant.
With more and more explorations projects coming up, the Offshore segment will flourish within India and provide a
huge opportunity.
Threats
With Japan going in for a massive monetary restructuring of the currency with unprecedented consequences for capital
flow and trade, Chinese growth fast slipping away from double digits and the Americas and Europe far from a definitive
escape from financial and demand challenges, the demand for tankers will hinge on the direction the above factors
take in the next 1-2 years.
Government policies, taxation regimes and currency fluctuations of different countries remain biggest challenges for
coal importers in India as they go shopping for foreign coal mines. Recent experience of Indonesia has not been good,
where the Govt. has put curbs / restrictions on coal exports. This sudden policy change has caught the Indian owners off
guard and has resulted in huge financial implications. Changing Government Regulations and Duty structures in India
can affect imports and exports of dry cargoes to a great extent, especially the export of Iron ore, and grain and fertilizer
imports.
Indian iron ore exports to China, a trade in which SCI has been an active participant has been practically dead since the
mining ban on iron ore in Goa / Karnataka. Further the increase of duty on Iron ore export from 20% to 30% has reduced
the Indian iron ore’s competitiveness globally, reducing the demand for export shipments.
Liner freight rates are expected to remain flat throughout the year and a recovery can only be expected by 2014
depending upon successful rate restoration, strong market fundamentals and restrained capacity expansions.
Strengths
• Years of vast experience in Shipping.
• Diversified presence in segments viz, Bulk Carriers, Tankers, Liner & Offshore etc.
• Younger age of Fleet with new acquisitions which has brought down average age from 18 years in 2007 to
10 years presently.
Risks & Concerns
Financial sector reforms in US and Europe, falling consumer demand amongst developed and emerging markets and
falling economic growth has spilled over to emerging markets. The result is that the Chinese and Asian production hubs
are witnessing decreased demand for export goods and also local demand which will negatively affect global trade and
in turn the demand for shipping.
The macro economic factors such as prevailing high interest rates, subsidies on petroleum products, free falling rupee
value vis-à-vis the dollar and high inflation continue to plague the demand. This may reduce the growth prospects of Oil
refining companies on the back of high subsidies, and falling rupee. Consumers may reduce consumption on the back
of high inflation and interest rates. Shipping being a derived demand will be negatively affected by these factors.
Domestic factors such as ban on iron ore mining in Goa / Karnataka, lengthy legal process involved in clearing the
procedures to re-start the mines, high export duty on iron ore, in India will negatively affect the growth of dry bulk
demand on India centric trades. Slowing down of infrastructure growth, real estate growth and automobile industries
negatively hamper demand for bulk steel and cement trade thereby reducing tonnage demand.
Grain and fertilizer trades are seasonal and short term in nature with uncertain parcel sizes which require timely
positioning of tonnage to exploit the trade.
Structural factors within the shipping industry such as high tonnage supply, high fuel and insurance costs, along with
threat of piracy negatively distort the voyage economics.
Evolution of new markets in the Offshore Shipping Sector has led to entry of new players in the industry including
foreign operators, some of which are equipped with modern technologies. In order to survive the onslaught of these
operators your Company would require adequate resources in the form of modern vessels and expertise. Accordingly
your Company has acquired new tonnage and present average age of SCI’s Offshore fleet is about 13 years and
expected to go down further with new acquisition and scrapping of old vessels.
DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
Your Company’s operational performance was severely impacted by the depressed world economic conditions coupled
with the oversupply of tonnage. The bulk carriers’ freight rates saw huge erosion due to low BDI during the year, where
the BDI touched a new low (in the last 25 years). Similarly the tankers were also impacted due to sluggish demand
condition. The product tankers although a little insulated from world sluggish market conditions due to their focus on
coastal business, suffered less but were not insulated totally. The performances of LPG vessels have been at par with
market and were employed on time charter throughout the year. Although your company was able to register increase
in the operating income over last year’s level primarily due to delivery of new vessels, the profitability was much below
expectation due to increase in depreciation due to the delivery of new vessels and bunker cost due to more vessels
being on voyage charter. Also in the current year, the income from sale of ships was much lower, which further impacted
the profitability.
For the year under review, in the Container services segment, the SMILE service registered a slightly positive result on
account of the coastal leg. However, in line with the performance of major international container lines, SCI’s container
services in other sectors such as Europe and Far East could not achieve positive results due to extremely adverse market
conditions with decline in freight rates. As a corrective measure, your Company discontinued two services, the INDFEX2
Service and the IMED Container Service to reduce losses and streamline the other services; however, the ports of call
catered to by these discontinued services continue to be catered to through slot swap arrangement in the INDFEX1
service and through merger of the IMED service into the ISE service, respectively. The East Africa Container Service
performed satisfactorily. In the Breakbulk sector, your Company continued to achieve positive results during the year
under review. Coastal and Passenger services sector also earned good remuneration, thereby mitigating the loss
incurred by the Company. Direct operating expenses were curtailed by suspension of services which were not lucrative
and this in turn led to an increase in the gross operating profit of the liner segment.
Offshore has improved its profitability substantially due to the addition of new vessels.
Compliance with Industry Requirements
The SCI has complied with all the functional requirements of the ISM Code, which includes the Safety, Occupational
Health & Environment Protection Policy and Drug & Alcohol Policy.
The SCI is a certified ISO 9001:2008 Company (for Quality Standards - Quality Management Systems) by the Indian
Register of Quality Services. SCI first acquired the then prevailing ISO Quality Standard viz. ISO 9001:2000 in May 2007.
The Quality Management System of SCI has been successfully maintained since last 5 years. The renewal audit of
ISO 9001:2008 has been successfully completed in the month of February 2013 and is valid till 7th May, 2016.
Presently SCI holds separate Document of Compliance Certificates (DOC) for individual ship-types as under:
Bulk Carriers
Oil Tankers, Chemical Tankers & Gas Carriers
Passenger Ships
Other Cargo Ships
Under Phase I (Bulk Carriers, Oil Tankers, Chemical Tankers, Gas Carriers & Passenger Ships), the DOC was renewed in
November 2012 and is valid till 18.11.2017 subject to periodical verification by the Administration.
Under Phase II (Other Cargo Ships - Liner and Offshore Vessels), the DOC was endorsed on 12.02.2013 and is valid till
14.03.2016.
As regards, Safety Management Certificate (SMC) for SCI fleet, all ships are put up for periodical / renewal SMC audits
within time frame and respective SMCs are accordingly endorsed.
The ISPS Code (International Ship & Port Facility Security Code) was adopted by the IMO in December 2002 and became
mandatory from 1st July, 2004.
The SCI has successfully implemented the ISPS Code on all vessels on international voyages and the vessels, which
interface with the vessels on international voyages, well ahead of the deadline of 1st July, 2004.
Implementing limited compliance of the ISPS Code for coastal ships as required by the Director General of Shipping,
Mumbai, has been completed by 30th June, 2005.
As a proactive measure, the SCI has plans in hand to implement full compliance of the ISPS Code on all its coastal ships,
which are more than 3000 GT.
On an SCI ship, the Chief Officer is the designated Ship Security Officer but all Deck Officers, have been imparted
approved Ship Security Officer’s training. Additionally, engineer Officers, as and when available, are also being put
through the above course.
SCI is committed to the following objectives to fulfil the requirements of its security policy:
Security of its ships and their crew, passengers and cargo
Support to its ships in implementing and maintaining the Ship Security Plan.
The Integrated Management System (IMS) is in force across our entire Tanker Fleet since 2006. Key Performance
Indicators (KPIs) as stated in TMSA (Tanker Management and Self Assessment) guidelines are being continuously
monitored and the status is regularly updated on the website. Accordingly, the tankers are maintained to the highest
standards and remain competitive and marketable.
TMSA compliance is the Oil Majors’ requirement under OCIMF (Oil Companies International Marine Forum), without
which the tankers are not accepted by Oil Terminals around the world. TMSA offers a standard of “Best Practice”
framework for assessment of Ship Operators’ Management system. M/s Exxon Mobil carried out the TMSA Review of SCI
on 18/01/2011 and found our systems and standards meeting their requirements. The validity of this review is 3 years.
Indian Register Quality System, IRQS (IRS) audited the Integrated Management System in January 2012 and certified
that the Tankers manned and operated by SCI continue to be compliant with ISO 9001 - 2008, EMS 14001 - 2004 and
OHSAS 18001- 2007.
Personnel & Administration
Industrial Relations
Your company continued to enjoy harmonious industrial relations.
Fleet Personnel
During the year, your Company, like other shipping companies all over the world, has been facing shortage of fleet
officers mainly in the senior ranks for manning of our vessels. In order to attract good officers, the company has
constantly aligned the salary of Seafarers with the market besides taking other welfare measures. As a long term
solution, your Company has continued its thrust in training to increase the supply of the officers. Your company has
trained over 350 nautical and engineering cadets during the year. The company foresees the supply of senior Navigating
and Engineering Officers to be gradually improving in coming years but the situation will continue to remain critical in
short term.
Wage Agreement for petty officers and ratings, has been concluded under the aegis of NMB on 24.02.2012 for a period
of five years from 01.04.2010 - 31.03.2015. However, one of the Crew unions, which were not happy with the agreement,
has moved the High Court at Mumbai. The Court has directed the Central government to constitute a tribunal under
Merchant Shipping Act, which has been constituted on 04.01.2013. However, the proceedings of the tribunal have
been stayed by the Supreme Court on 15.03.2013 until the SLP filed by INSA are disposed. Industrial Relations are
envisaged to be generally healthy.
Your company received NMDC Award for Most Compassionate Employer of Indian Seafarers Award on 05.04.2013.
Maritime Training Institute
Your Company’s Training Centre at the Maritime Training Institute at Powai, Mumbai has conducted 302 Courses for
6503 participants and the total man-days trained during this year is 70019. These included 63091 man-days for SCI’s
personnel and 6928 man-days for personnel from other shipping companies. In addition to this, 114 of SCI’s personnel
were trained outside MTI and the additional man-days of training are 417. Every endeavour is made to ensure that our
training institute is self sustaining.
Shore Personnel
The total manpower as on 01.05.2013 is 849 including CMD, five Functional Directors and CVO, out of which 703 are
officers and 146 are staff members.
Various training programmes including General Management Training programme, 3 Tier Middle Management
Programme and Stress Management Programme have been arranged for officers and staff during the year.
Your company had extended Shareholders’ loan to the two companies and during the year 2012-13 the joint venture
company has repaid an amount of US$ 0.15 million towards Shareholders loan and US$ 0.62 million as interest on
Shareholders’ loan, to your company. As per provisions under the Loan Agreement, the distribution of Shareholders Loan
and interest to the shareholders is withheld until re-financing of the syndicate loan to the lenders. The process of
re-financing the syndicate loan has been initiated and would be completed before March 2014. The outstanding
amount of Shareholders’ loan as on 31 st March, 2013 is US$ 25.23 million. Your company is managing these
2 LNG tankers independently from 24.12.08 for SS Raahi and 29.12.08 for SS Disha. Your company has been paid
US$ 1.31 million towards Management Fee & Accounting fee during the year 2012-13 by the joint venture company.
India LNG Transport Company No 3 Ltd.
The third JVC, India LNG Transport Company No. 3 Ltd, set up to service the Dahej Expansion Project was formed on
21.02.2006. The vessel has delivered 37 cargoes in the financial year 2012-13. As on 31st March, 2013, M.T. Aseem has
carried about 123 cargoes of LNG from the inception. During the year 2012-13, the Joint venture company has repaid
an amount of US $ 0.65 million towards interest during the year 2012-13. AS on 31st March, 2013, the outstanding
Shareholders’ loan with the JVC is US$ 23.49 million. Your company has taken over the management of Aseem from
27 th March, 2013, 2 years ahead of the period provided in the Time charter Agreement. This would be the third
LNG Tanker managed by your company and SCI will receive a management fee of US $ 600,000/- per year for this vessel.
Joint Venture Company (M/s. SCI Forbes Ltd.):
SCI Forbes Ltd. is a Joint Venture Company (JVC) between SCI and Forbes & Co. Ltd / Sterling Investments Pvt. Ltd.
SCI Forbes Ltd. owns and operates four chemical tankers of about 13000 dwt which were delivered in August 2009,
October 2009, March 2010 and May 2010 respectively. The global economic downturn has impacted the shipping
industry. SCI Forbes operations too were hampered as the charter rates and value of vessels steeply decreased. Your
company has made provision for diminutions in Investment in the Joint Venture to the tune of Rs 45 Crores. SCI Board
during its meeting held on 14.02.2013 reviewed various options available to SCI and decided to exit from the JVC.
Joint Venture Company (M/s. SAIL SCI Shipping Co. Pvt. Ltd.):
SAIL SCI Shipping Pvt. Ltd (SSSPL) is a JVC between SCI and SAIL. The JVC was incorporated with primary objective of
providing various shipping related services to SAIL for importing coking coal and other bulk material from various
countries to feed its steel plants located in India. The JVC was incorporated on 19th May, 2010. Currently, SSSPL is
deliberating on acquisition of a suitable bulk carrier, which will cater to SAIL’s cargo. Acquisition of Capesize Bulk carrier
is under consideration.
SCI’s participation in the Sethusamudram Ship Channel Project
The Government of India had constituted “Sethusamudram Corporation Limited” (SCL) to raise finance and to undertake
activities to facilitate operation of a navigable channel from Gulf of Mannar to Bay of Bengal through Palk Bay
(Sethusamudram Ship Channel). As per the Government directive, this Project is to be funded by way of equity
contributions from various PSUs including SCI. SCI had invested ` 50 crore in the Project. In view of uncertainties in the
project implementation provision has been made in the accounts for the diminutions of full amount of investment.
Memorandum of Understanding (MOU) with the Ministry of Shipping
Your Company’s performance based on audited results under the MOU system has been rated as “Good” for the year
2011-12. SCI has signed the MOU for the financial year 2013-14 as per the guidelines issued by the Department of
Public Enterprise (DPE) incorporating challenging targets despite the slowing down of growth in global economy and
trade and adverse market conditions. In addition to Financial Parameters, the MOU continues to accord due emphasis to
several other important areas / activities such as Quality Management, Customer Satisfaction, Modernization of fleet in
terms of compliances with regulations ensuring energy efficiency, Corporate Social Responsibility, etc. Moreover, activities
under other parameters viz. ‘Human Resource Management’, ‘Sustainable Development’, ‘Corporate Governance’ and
certain additional parameters as per the DPE requirements have also been incorporated in the MOU for achieving
sustained overall growth.
Sustainable Development
Sustainable Development is defined as development that meets the needs of the present without compromising the
ability of future generations to meet their own needs and it involves an enduring and balanced approach to economic
activity, social progress and environmental Responsibility. A Committee comprising of four members had been constituted
on 28.9.2012, as required under the Sustainable Development Guidelines, to oversee the projects chosen by SCI from
among the activities specified therein. SCI had identified 3 projects for 2012-13 viz. (i) Revival, Maintenance and
Upkeep of the Pond (Natural Water Body) at Maritime Training Institute, (ii) Project for heating / lighting using solar
energy under renewable / Cleaner / Alternative Energy Use and (iii) Installation of ‘Optimum Trim’ software / facility on
board SCI’s existing container ships of 4400 TEU capacity as an initiative for emission reduction of Green House Gases
(GHG). Two meetings of the Committee were held during 2012-13 where the progress of the projects was evaluated.
Segment-wise Performance
A report on performance of the various operating segments of the Company (audited) is included at Note No. 35 of
Notes on Financial Statements for the year ended 31st March, 2013, which is forming part of the Annual Accounts.
Internal Control Systems and their adequacy
Internal Control systems in your company are adequate and commensurate with the nature and size of the operations.
For constant testing of these controls, extensive internal audits are carried out by a firm of Chartered Accountants, viz.,
M/s. P.C. Ghadiali & Co. through an annual Audit Plan. The audits are conducted on quarterly basis and audit
recommendations and compliances thereof are frequently reviewed by the Audit Committee of the Board.
Cautionary Statement
The statements made in the Management Discussion & Analysis describing Company’s objectives, projections, estimates
and expectations may be “forward-looking statements” within the meaning of applicable laws and regulations.
Actual results might differ materially from those expressed or implied.
SET - IT Project
SCI has gone live with a large scale integrated SAP ERP implementation project to bring Enterprise wide transformation
using state of the art technology and the same is stabilized. e- Tendering module of SAP has also been implemented to
enable on line tendering process. SCI also has initiated a project on building a Disaster recovery site at Kolkata office to
ensure business continuity during any emergency.
Role of Vigilance Division in SCI
Various initiatives have been taken by the Vigilance Division for seamless integration with the SCI mainstream,
encouraging a participative role in the organization, building up meaningful rapport between the Government, Company,
its Board and sub-Committees and ensuring a paradigm shift towards the stated objective of making your Company
totally corruption-free.
During the year under review, the Vigilance Division continued its normal activities viz. Preventive vigilance, Punitive
vigilance, Surveillance & detection, Proactive vigilance and Predictive vigilance.
The Vigilance Study Circle, Mumbai Chapter was installed to spread Vigilance awareness and develop the knowledge
and skills of Vigilance Professionals and providing an ideal platform for the Chief Vigilance Officers to meet and
exchange their views / experiences, etc. on a regular basis. On 16-8-2012 Mumbai Chapter of Vigilance Study Circle
successfully completed its 2nd year as a forum for meaningful interaction between the CVOs of the Mumbai region.
Informatively one of the Vigilance Officers was awarded the Vigilance Excellence Award on the basis of papers sent to
the VSC, Mumbai Chapter by an internal committee of VSC, Mumbai Chapter.
ISO 9001:2008 Certification for Vigilance Division of SCI
SCI’s Vigilance Division is one among the first few Vigilance Divisions in the PSUs and in Shipping Ministry to get
ISO 9001:2008 Certification for its processes. The renewal audit of the Vigilance Division was conducted in March 2013
and the ISO 9001:2008 certification has been renewed for three years.
Integrity Pact in the Shipping Corporation of India Ltd.
SCI has signed a Memorandum of Understanding (MoU) with Transparency International India (TII) for the adoption of
Integrity Pact. By signing the MoU, your Company is committed to have most ethical and corruption free business
dealings with the counterparties whether they are bidders, contractors or suppliers. The ‘threshold value’ for
implementation of Integrity Pact in domestic goods and service contracts is Rs 1 crore and above. The implementation
of the Integrity Pact is monitored by a panel of 3 eminent Independent External Monitors (IEM)s. The tenure of the three
empanelled IEMs was for a period of three years only. The tenure of IEMs has been extended for a period of two more
years after the same was approved by the CVC.
Vigilance Division also organized on the behalf of TII, a National Conference on “Making Integrity Work for Business” on
19th December, 2012. About 160 participants from the Government, Public Sector, Private Sector and NGOs participated.
UNGC compliance
Your Company is a life time member of UN Global Compact since 2001. It is a strategic policy initiative for businesses
that are committed to aligning their operations with ten universally accepted principles in the areas of Human Rights,
Labour, Environment and Anti-corruption.
Human Rights
We, in SCI, believe that company can play a positive role in contributing to safeguard human rights, their protection and
promotion. Guided by values, your Company has put in place Redressal machinery. During the year, no case of human
right violation is reported in the company.
Labour
Shipping Corporation of India believes in freedom of association and collective bargaining through constructive forums.
In accordance with national law, employees are free to join trade union of their choice without fear of intimidation or
reprisal. The Company, while recruiting employees, follows the relevant rules and regulations laid down by the Government
of India. This ensures that no unfair labour practices are followed. The minimum age for employment in SCI is 18 years.
During direct employment in the company, criterion of minimum age is applied. For promoting gender equality, SCI has
given employment to approximately 20% women.
Environment
Your company has taken environmental challenges seriously and it is demonstrated through its’ day-to-day operations.
Right at the time of construction of ships, it is ensured that the new ships comply with strict environmental regulations.
The company is also committed to safe guard against air pollution by way of exhaust gases, pollution by oil or sewage
and pollution by garbage toxic, plastics etc. into sea water. Some of the measures taken by your Company in this
direction are:
The vessel shall have green passport upon delivery i.e. list of all hazardous materials will be kept onboard which will be
of great help during recycling / handling of hazardous materials during in-service repairs.
Paint applied on the underwater portion of the hull is tin free.
Fuel oil tanks are protected on the sides to avoid direct contact in case of accident.
Vessels engines are being designed to burn very low sulphur fuel to minimize pollution.
The refrigerant used by AC plants is environment friendly which if leaked out doesn’t contribute to Ozone depletion.
Ethical Practices
Your Company has introduced preventive actions to ensure corruption free business environment.
The vigilance function in SCI keeps watchful eye on the functioning of the organization by conducting regular checks
to ensure that the employees while discharging their duties maintain high integrity and honesty. The Company has
adopted Code of Conduct for Board Level Members and Senior Management Personnel.
SCI has appointed a firm of Internal Auditors for extensive audit of systems and procedures.
The company has adopted integrity pact of Transparency International India with the primary objective of safe-guarding
public procurement from corruption.
Independent External Monitors (IEMs) are appointed to monitor implementation of Integrity Pact.
The Company has adopted a whistle blower policy based on the guidelines from Central Vigilance Commission (CVC).
Financial and commercial transactions are fully computerized on network and the working is transparent and least
susceptible to fraud.
The audited accounts has been reviewed by the Comptroller & Auditor General of India (CAG) and the certificate of CAG
is also annexed to this report.
Corporate Governance
Pursuant to Clause 49 of the Listing Agreement, Report on Corporate Governance is attached to this Report.
Directors’ Responsibility Statement
Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors’ Responsibility
Statement, it is hereby confirmed:
• That in the preparation of the accounts for the financial year ended 31st March, 2013, the applicable accounting
standards have been followed along with proper explanation relating to material disclosures;
• That the Directors have selected such accounting policies and applied them consistently and made judgements
and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the Company for the year under review;
• That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in
accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.
• That the Directors have prepared the accounts for the financial year ended 31st March, 2013 on a “going concern”
basis.
Acknowledgements
Your Directors extend their gratitude to Shri G. K. Vasan, Hon’ble Minister for Shipping, and look forward to his continued
support and guidance. Your Directors also welcome Shri Milind Deora, Minister of State for Shipping and Shri Vishwapati
Trivedi, Secretary to the Government of India, Ministry of Shipping, and look forward to their support and guidance in
managing the affairs of the Company.
Your Directors also take this opportunity to express their gratitude and thanks to Shri Pradeep K. Sinha, former Secretary
to the Government of India, Ministry of Shipping for the support and guidance extended to your Company during his
tenure. Your Directors also wish to express their thanks to the officials in the Ministry of Shipping, for the unstinted
support given by them in various matters concerning the Company. Your Directors would also like to convey their thanks
to other Ministries, Trade Organizations, Shippers’ Councils, who have played a vital role in the continued success of your
Company.
The Directors thank the shareholders and valued customers for the continued patronage extended by them to your
Company.
Last but not the least, your Directors wish to record their deep appreciation for the dedicated and unstinted service of
your Company’s employees, both afloat and ashore, without whose co-operation and efforts the achievements made
by your Company would not have been possible.
For and on behalf of the
Board of Directors
The Company Secretary acts as Secretary to the Committee. The Director (Finance) and the Directors in charge of
operations attend the meetings as invitees. The Statutory Auditors and Internal Auditors also attend meetings at which
the audit reports / Company’s financial statements are reviewed by the Committee.
The terms of reference of Audit Committee include all matters specified in Clause 49(II) of the Listing Agreement with
Stock Exchanges and the DPE guidelines 2010 and covers, inter-alia, overseeing Company’s financial reporting process,
adequacy of internal control systems, reviewing financial risks’ management policies, compliance with Accounting
Standards, etc.
The Audit Committee held 10 meetings during the year. Apart from reviewing the quarterly / annual financial results of
the Company, the Committee devoted these meetings inter alia for detailed review of the systems and procedures,
accounting practices, internal control measures, status of risk management and process review of statutory and regulatory
compliances. The attendance of each member of the Committee is given below:
Name of the Directors No. of meetings held No. of meetings attended
Shri Arun Ramanathan 10 08
Shri S.C. Tripathi 10 08
Shri Arun K. Verma 10 10
Shri U. Sundararajan 10 01
The Chairman of Audit Committee was present at the Annual General Meeting of the Company held on 24.09.2012.
Share Transfer Committee
This Committee of the Board comprising of Chairman & Managing Director and an Executive Director, regularly approves
the transfer and transmission of shares and other related matters. As and when the shareholders made lodgements for
transfer/ rematerialisation, the Share Transfer Committee held their meetings promptly to effect the transfers.
Shareholders’ / Investors’ Grievance Committee
The Shareholders’ / Investors’ Grievance Committee of the Board met four times during the financial year 2012-13 i.e.
on, 28.05.2012, 09.08.2012, 08.11.2012 and 28.01.2013. The Committee consists of Shri Arun Ramanathan as Chairman,
and Shri Arun K. Verma and Shri B. K. Mandal as its members. Shri Arun Ramanathan and Shri Arun K. Verma are
independent directors. The meetings were attended by all its members except the meeting held on 08.11.2012
wherein Shri Arun Ramanathan was not present.
• Grievances & their redressals : During the year under review, 10 complaints were received. All the complaints
have been replied / sorted out within average period of 7 days of receipt of each complaint as against the stipulated
time of 15 days as per SEBI norms. No share transfers were pending at the end of the financial year. The sources of
complaints received and other details are given below:
Source(s) of Complaints Received Redressed Pending
SEBI 06 06 NIL
Stock Exchanges 04 04 NIL
Other than SEBI - - NIL
Total 10 10 NIL
Compliance Officer : The Compliance Officer for monitoring the share transfer process and for carrying out other
related functions as per Listing Agreement, is Shri Dipankar Haldar, Executive Director (Legal Affairs) & Company
Secretary, and can be contacted at:
“Shipping House” Tel: 2277 2213 (D)
245, Madame Cama Road, 2202 4572 (D)
Nariman Point, Fax: 2202 2906
Mumbai - 400 021 E-mail: [email protected]
Investors can lodge their complaints, if any, on [email protected] by providing their folio number,
contact number, e-mail ID and the address for correspondence which would enable us to respond to them promptly.
As per the provisions of Section 205A read with Section 205C of the Companies Act, 1956, the Company is required to
transfer the unpaid dividends remaining unclaimed and unpaid for a period of 7 years from the due date to the Investor
Education and Protection Fund (IEPF) set up by the Central Government. Details of shareholders who have not encashed
their dividend warrants in spite of the same being sent to them, has been uploaded on the Company’s website.
Given below are the due dates for transfer of unclaimed and unpaid dividend to the IEPF by the Company:
Financial Year Date of declaration Proposed date for transfer to IEPF
2006-07 (Interim) 17.03.2007 14.04.2014
2007-08 (Interim) 22.02.2008 21.03.2015
2007-08 (Final) 29.09.2008 28.10.2015
2008-09 (Final) 30.09.2009 29.10.2016
2009-10 (Final) 29.09.2010 28.10.2017
2010-11 (Interim) 03.03.2011 02.04.2018
2010-11 (Final) 23.09.2011 22.10.2018
Unpaid / unclaimed balance of the Final Dividend 2004-05 and Interim Dividend 2005-06 accounts was due for transfer
to IEPF as per Section 205A of the Companies Act, 1956 and the same has been transferred accordingly.
General Body Meetings
The date, time and venue of the last three Annual General Meetings of the Company held are given below:
General Meetings Date Time Venue
th
60 AGM (FY 2009-10) 29.09.2010 1630 hrs. Registered Office of the Company, Mumbai
st
61 AGM (FY 2010-11) 23.09.2011 1530 hrs. Y. B. Chavan Auditorium, Jagannath Bhosale
nd
62 AGM (FY 2011-12) 24.09.2012 1530 hrs. Marg, Near Mantralaya, Mumbai - 400 021
th
60 Annual General Meeting: At this meeting, one special resolution was proposed viz. for issue of fresh equity
shares to the persons other than shareholders of the Company.
61st Annual General Meeting: At this meeting, two special resolutions were proposed for (i) Amendment in Articles
of Association and (ii) Grant of ESOPs.
62nd Annual General Meeting: At this meeting, no special resolution was proposed.
Means of Communication
Half-yearly Report sent to No, as the unaudited financial results of the Company are published in the
each household of newspapers every quarter and are also made available on the Company’s
shareholders website.
Quarterly Results published Yes, the newspapers being:
in newspapers For Quarter ended June 2012
a. Business Standard - Mumbai, Ahmedabad, New Delhi, Kolkata,
Hyderabad, Chennai, Bangalore, Pune, Chandigarh, Lucknow, Kochi,
Bhubaneshwar
b. Pudhari - Mumbai
For Quarter ended September 2012
a. Business Standard - Mumbai, Ahmedabad, New Delhi, Kolkata,
Hyderabad, Chennai, Bangalore, Pune, Chandigarh, Lucknow, Kochi,
Bhubaneshwar
b. Pudhari - Mumbai
ANNEXURE - ‘C’
st
Distribution of Shareholding as on 31 March, 2013*
DEMAT PHYSICAL TOTAL %TO
FOLIOS SHARES FOLIOS SHARES FOLIO SHARES FOLIOS SHARES
1 - 500 191559 24324383 142 23713 191701 24348096 93.23 5.23
501 - 1000 7385 5685831 8 6450 7393 5692281 3.60 1.22
1001 - 2000 3447 5073624 1 1200 3448 5074824 1.68 1.09
2001 - 3000 1117 2810657 1 2400 1118 2813057 0.54 0.60
3001 - 4000 485 1734674 0 0 485 1734674 0.24 0.37
4001 - 5000 363 1698368 0 0 363 1698368 0.18 0.36
5001 - 10000 538 3877074 1 6000 539 3883074 0.26 0.83
10000 & above 561 420149786 6 404850 567 420554636 0.28 90.29
TOTAL 205455 465354397 159 444613 205614 465799010 100.00 100.00
*The figures are rounded off, wherever necessary.
Distribution of Shareholding by percentage of ownership as on 31st March 2013
Directors’ Remuneration
The details of the remuneration paid to the whole-time Directors and sitting fees paid to the Independent Directors
during the year under review are set out below:-
Name of the Director Consolidated Perquisites, Performance Sitting Fees Total
Salary Allowances & Linked
(Note No. 1) Other Benefits Incentives
(Note No. 2)
Executive Directors (Whole time)
Shri B. K. Mandal 2,235,928/- 503,531/- 1,524,179/- - 4,263,638/-
Shri J. N. Das 1,824,645/- 420,073/- 1,380,064/- - 3,624,782/-
Shri A. K. Gupta 1,853,204/- 415,557/- 851,914/- - 3,120,675/-
Capt. Sunil Thapar 1,959,345/- 507,403/- 715,737/- - 3,182,485/-
Disclosures
During the year under review, the Company has not entered into financial or other transactions of material nature
with its Promoters, the Directors, and senior management that may have potential conflict with the interests of the
Company at large.
The number of shares held by the Directors in the Company is given below :-
1 Shri Vijay Chhibber * 1515
2 Shri S. Hajara * 1507
3 Shri Rajeev Gupta * 30
4 Shri B. K. Mandal 1
5 Capt. Sunil Thapar 1
6 Shri J. N. Das 1
7 Shri Kailash Gupta * 1
8 Shri A. K. Gupta 1
* The shares held by Shri S Hajara, Shri Rajeev Gupta, Shri Vijay Chhibber and Shri Kailash Gupta, erstwhile Director, are in
the process of being transferred in the name of Shri B. K. Mandal, Shri M. C. Jauhari, Dr. (Ms.) T. Kumar and Capt B. B. Sinha,
respectively.
No penalties / strictures have been imposed on the Company by the Stock Exchanges or SEBI or any statutory authority
on any matter related to capital market during the last three years.
Code of Conduct for Prevention of Insider Trading
SCI has its code of conduct for prevention of insider trading in accordance with the SEBI (Prohibition of Insider Trading)
Regulations, 1992. The Code lays down guidelines which advise the management and the staff on procedures to be
followed and disclosures to be made while dealing with the shares of Company, and cautions them of the consequences
of violations.
Related Party Transactions
The details of all the transactions with related parties which are entered into in the ordinary course of business are
placed before the audit committee on quarterly basis. The related party disclosures as required under Accounting
Standard 18 “Related Party Disclosures” are given in the Notes on Accounts of the Balance Sheet (Refer Note 32 to the
financial statements). There were no material individual transactions with related parties which are not in normal course
of business required to be placed before the Audit Committee that may have potential conflict with the interest of the
company at large. All individual transactions with related parties were on “arm’s length” basis.
Accounting Treatment
In preparation of financial statements, the Company has followed the Accounting Standards issued by the Institute of
Chartered Accountants of India and the relevant provisions of the Companies Act, 1956.
Risk Management
The Company had appointed M/s. Ernst & Young (E&Y) to undertake an analysis of risk assessment and minimization
procedures. M/s. E&Y had reviewed the mechanism and submitted their report to the Audit Committee and the Board,
which was thereafter adopted by the Board in the year 2007. The Company has appointed Chief Risk Officer and
Divisional Risk Officers. As per the procedure, the reports are to be discussed internally and thereafter in the Management
Committee Meetings and later presented to the Audit Committee and the Board. M/s. T.R. Chadha & Co., Chartered
Accountants, have been appointed to undertake an independent review of the risk management activity in the SCI.
Proceeds from public issues, right issues, preferential issues etc.
In the Financial Year 2012-2013, there was no Public Issue, Rights Issue, Preferential Issue, etc.
Management Discussions and Analysis Report
The report forms a part of the Directors’ Report to the Shareholders and it includes discussions on matters, as required
under the provisions of Clause 49 of the Listing Agreement with the Stock Exchanges.
2. There is no item of expenditure debited in the books of accounts which are not for the purposes of the business.
3. There are no expenses incurred which are personal in nature and incurred for the Board of Directors and Top
Management.
4. The office and administration expenses as a percentage of total expenses are 4.47% in FY 2012-13 as against 4.12%
in FY 2011-12. The finance expenses as a percentage of total expenses is 3.33% in FY 2012-13 as against 8% in
FY 2011-12.
For the Shipping Corporation of India Ltd.
B. K. Mandal
Place : Mumbai Chairman & Managing Director
Dated : 8th August, 2013
The Company has adopted a Code of Conduct for the Board Members and Senior Management of the Company, which
has been posted on the website of the Company.
It is hereby affirmed that all the Directors & Senior Management personnel have complied with the Code of Conduct for
the financial year 2012-13 and a confirmation to this effect has been obtained from the Directors & Senior Management
personnel.
For the Shipping Corporation of India Ltd.
B. K. Mandal
Place : Mumbai Chairman & Managing Director
th
Dated : 16 May, 2013
To,
The Members.
The Shipping Corporation of India Ltd,
Mumbai
We have examined the compliance of conditions of Corporate Governance by THE SHIPPING CORPORATION OF INDIA
LIMITED for the year ended 31st March, 2013 as stipulated in Clause 49 of the Listing Agreement of the said Company
with Stock Exchanges and as stipulated in the Guidelines on Corporate Governance for Central Public Sector Enterprises
issued by Department of Public Enterprises, Government of India.
The Compliance of conditions of Corporate Governance is the responsibility of the management. Our examination has
been limited to a review of the procedures and implementations thereof, adopted by the Company, for ensuring
compliance with the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the
financial statements of the Company.
In our opinion and to the best of our information and according to the explanations given to us, and the representations
made by the Directors and the Management, we certify that the Company has complied with the conditions
of Corporate Governance as stipulated in Clause 49 of the above mentioned Listing Agreement and in the Guidelines
on Corporate Governance for Central Public Sector Enterprises issued by Department of Public Enterprises,
Government of India.
As required by the Guidance Note issued by the Chartered Accountants of India, we have to state that based
on the report given by the Registrar and Share Transfer Agent of the Company to the Shareholders / Investors
Grievances Committee, as at 31st March, 2013 there were no investor grievance matters against the Company remaining
unattended / pending for more than 30 days.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the
efficiency or effectiveness with which the management has conducted the affairs of the Company.
For For
SARDA & PAREEK PSD & ASSOCIATES
Chartered Accountants Chartered Accountants
FRN 109262W FRN 004501C
Place : Mumbai
Date : 8th August, 2013
Auditors’ Report
To
The Members of
The Shipping Corporation of India Limited,
Report on the Financial Statements
We have audited the accompanying Financial Statements of THE SHIPPING CORPORATION OF INDIA LIMITED, which
comprise the Balance Sheet as at March 31, 2013, the Statement of Profit and Loss Account and Cash Flow Statement
for the year ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of these financial statements that give a true and fair view of the
financial position, financial performance in accordance with the Accounting standards referred to in sub section (3C) of
section 211 of the Companies Act, 1956 ( The Act). This responsibility includes the design, implementation and
maintenance of internal control relevant to the preparation of the financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements
in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified
audit opinion.
Basis for Qualified - Opinion
The company has not complied with the requirements of AS 28 - Impairment of Assets, issued by ICAI the effect
of which is unascertainable.
The Accuracy of Exchange Gain / Loss in respect of Customer reconciliation / Advance received from
Customers / Trade Payable recognized on revaluation as per AS 11 - The Effects of Changes In Foreign Exchange
Rates remains unverifiable and unascertainable.
The Company is unable to provide confirmation for accounts receivable, accounts of agents. In absence of the
reasonable audit evidence, the effect of the same remains unascertainable / unverifiable on the Statement of Profit
and Loss and Balance Sheet.
We draw attention toward the direct access of the Accounting Software provided to the Agents for accounting of
the expenses relating to the port and 83% of the same are yet to be verified by the Company, the consequential
effect of the same on the Statement of Profit and Loss remains unascertainable.
Opinion
In our opinion and to the best of our information and according to explanation given to us, except in the Basis for
Qualified-opinion paragraph, the financial statements give the information required by the Companies Act, 1956
in the manner so required and give true and fair view in conformity with the accounting principles generally accepted
in India:
(a) In case of Balance sheet, of the state of affairs of the company as at March 31, 2013;
(b) In case of Statement of Profit & Loss, of the loss for the year ended on that date.
(c) In case of the Cash Flow Statement, of the cash flows for the year ended on that date.
Emphasis of Matter
We draw attention to the non-adjustment of the debits and credit transactions related to the customers and vendors that
might require adjustment to the Statement of Profit and Loss and Balance Sheet.
We draw attention to the failures to correct significant weaknesses in the internal control system built in the Softwares of the
Corporation for timely recording of the transactions of income / expenses.
Our opinion is not qualified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor’s Report) Order 2003 (as Amended) issued by the Central Government in
terms of sub-section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks as we
considered appropriate and according to the information and explanation given to us during the course of audit,
we set out in the Annexure, a statement on the matters specified in paragraph 4 & 5 of the order.
2. As required by section 227(3) of the Companies Act, 1956, we report that:
a. We have obtained all the information and explanation, which to the best of our knowledge and belief were
necessary for the purpose of our audit.
b. In our opinion, proper books of accounts as required by the law have been kept by the company so far as it
appears from our examination of the books.
c. The Balance Sheet and Statement of Profit & Loss dealt with by this Report are in agreement with the books
of accounts.
d. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this
report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies
Act, 1956;
e. Disclosure in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 is not required
for Government Companies as per Notification No. GSR 829(E) dated October 21, 2003 issued by the
Department Of Company Affairs.
Place : Mumbai
Date : May 28th 2013
B) The details of dues of Sales Tax, Service Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess,
which have not been deposited on account of any dispute, are given as under:
Sr. Name of Statute Nature Forum where the Financial Year ` In Lakhs
No. of dues dispute is pending to which it pertains (Net of deposits)
1. Income Tax Act,1961 U/s. 195 ITAT Mumbai 2003 - 04 to 2005 - 06 417
2. Income Tax Act,1961 Tax u/s.143(3) ITAT Mumbai 2005 - 06 to 2006 - 07 2500
& 147
3. Income Tax Act,1961 Tax u/s.143(3) ITAT Mumbai 2007 - 08 717
4. Income Tax Act,1961 Tax u/s.143(3) ITAT Mumbai 2008 - 09 521
5. Finance Act,1994 Service Tax CIT(A) Mumbai 2002 - 03 to 2007 - 08 5539
Total 9694
st
x) The Company neither has any accumulated losses as on 31 March, 2013, nor it has incurred any cash loss during
the financial year ended on that date or in the immediately preceding financial year.
xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in
repayment of dues to a financial institution, bank or debenture holders.
xii) The company has not granted any loans and advances on the basis of security by way of pledge of shares,
debentures and other securities.
xiii) The company is not a chit fund or a Nidhi / Mutual benefit fund / society.
xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investments.
xv) In our opinion, in respect of the guarantee given by the company for the loans taken by others from a bank, the
terms and conditions thereof are not, prima facie, prejudicial to the interest of the company.
xvi) On the basis of review of utilization of funds pertaining to term loans on overall basis and related information as
made available to us, the term loans taken by the Company have been utilized for the purposes for which they are
obtained.
xvii) On the basis of review of utilization of funds, which is based on overall examination of the balance sheet of the
company, related information as made available to us and as represented to us by the management, funds raised
on short-term basis have not been used for long-term investments.
xviii) The Company has not made any preferential allotment of shares during the year.
xix) The company did not have any outstanding debentures during the year.
xx) The Company has not raised any money by way of public issue during the financial year.
xxi) As represented to us by the management and based on our examination of the books and records of the company
in accordance with the generally accepted auditing practices in India, we have neither come across any material
fraud on or by the Company noticed or reported during the year nor we have been informed of any such case by
the management that causes the financial statements to be materially misstated.
Place : Mumbai
31 March 2013 in accordance with the financial reporting framework prescribed under the Companies Act, 1956 is the
responsibility of the management of the company. The Statutory Auditors appointed by the Comptroller and Auditor
General of India under Section 619(2) of the Companies Act, 1956 are responsible for expressing opinion on these
financial statements under Section 227 of the Companies Act, 1956 based on independent audit in accordance with
the Auditing and Assurance Standards prescribed by their professional body, the Institute of Chartered Accountants of
India. This is stated to have been done by them vide their Audit Report dated 28 May 2013.
I, on the behalf of the Comptroller and Auditor General of India, have conducted a Supplementary audit under
Section 619(3)(b) of the Companies Act, 1956 of the financial statements of The Shipping Corporation of India Limited
for the year ended 31 March 2013. This supplementary audit has been carried out independently without access to the
working papers of the Statutory Auditors and is limited primarily to the inquiries of the Statutory Auditors and company
personnel and a selective examination of some of the accounting records. On the basis of my audit nothing significant
has come to my knowledge which would give rise to any comment upon or supplement to Statutory Auditors’ Report
Balance Sheet as at 31 st
March, 2013
As at As at
Particulars Note No. 31.03.2013 31.03.2012
(` in lakhs) (` in lakhs)
DURGA DUTT DADHICH GAURAV SARDA DIPANKAR HALDAR B. K. MANDAL J.N. DAS
Partner Partner ED (LA) & Chairman & Director
Membership No. 071909 Membership No. 110208 Company Secretary Managing Director/ (Liner & PS)
Director (Finance)
Mumbai, Mumbai,
Dated the 28th May, 2013. Dated the 28th May, 2013.
Notes:
A. Special Reserve under section 33AC of Income Tax Act, 1961 (Utilised):
Special reserve [Statutory Reserve, as per requirement of section 33AC of the Income tax Act, 1961] which has
been utilised but awaiting transfer to General Reserve.
B. Tonnage Tax Reserve (Utilised)
Tonnage tax reserve [Statutory Reserve, as per requirement of section 115VT of the Income tax Act, 1961] which
has been utilised but awaiting transfer to General Reserve.
C. Tonnage Tax Reserve
This reserve is a statutory reserve as per requirement of section 115VT of the Income Tax Act, 1961 for the
purpose of complying with the conditions for applicability of tonnage tax scheme.
D. Corporate Social Responsibility Reserve
Reserve created as per the corporate social responsibilty policy of the company. It is created for contribution to
betterment of society and environment.
E. Allocated Corporate Social Responsibility Reserve
Of the corporate social responsibilty reserve, this amount has been allocated to specific schemes for the welfare
of the society.
F. Staff Welfare Fund
This is a fund created for the welfare activities of the employees.
A. Secured by Fleet having Net block of ` 126504 lakhs (Prev. Yr. ` 28974 lakhs)
Pending creation of security for loan of ` 44100 lakhs (Prev. Yr. ` 28000 lakhs)
B. Secured by Fleet having Net block of ` 134149 lakhs (Prev. Yr. ` 55093 lakhs)
Secured by Vessel under construction ` 14962 lakhs (Prev. Yr. Nil)
C. Secured by Fleet having Net block of ` 853582 lakhs (Prev. Yr. ` 732459 lakhs)
Secured by Vessel under construction ` 34782 lakhs (Prev. Yr. ` 35863 lakhs)
Pending creation of security for loan Nil (Prev. Yr. ` 10893 lakhs)
D. Maturity Profile
1-2 years 2-3 years 3-4 years Beyond 4 years
Secured Loans 99547 108295 108295 366128
* Represents current maturities of Long term Borrowings included in “other current liabilities”
1. Trade Payables
- other than Micro Enterprises and Small Enterprises 787 970
2. Security Deposits 54 32
TOTAL 841 1002
Unsecured
Loans from Banks Repayable on demand 45704 0
Total Unsecured Loans 45704 0
4. Buildings include cost of Shipping House at Bombay ` 134 lakhs (Prev. Yr. ` 134 lakhs) which is on leasehold land
where in the value of lease is considered at ` Nil.
5. Ownership Flats and Residential Buildings include:
Cost of shares and bonds in Cooperative Societies / Company of face value ` 0.73 lakhs (Prev. Yr. ` 0.73 lakhs).
6. During the year, the Company has reviewed its fixed assets for impairment loss as required by Accounting Standards
28 - “Impairment of Assets” In the opinion of management no provision for impairment is considered necessary.
NOTE 17 : INVENTORIES
(As per inventory taken, valued &
certified by the management)
Fuel Oil 18080 17621
Stores, Spares etc. 266 163
18346 17784
Less : Adjustment made towards consumption - 39
TOTAL 18346 17745
Income:
Currency Exchange Difference (1) 4049
Bunker Recovery (619) 523
Charter Hire (787) (101)
Course Fees 56 181
Freight (802) (1402)
Port Claims & Bunker - (373)
Demurrage (419) (282)
Recovery of container related cost 11082 (71)
Remuneration from managed vessels 70 -
Depreciation - 13
Others 22 235
Total Income 8602 2772
Expenditure:
Stevedoring charges 4245 652
Brokerage & commission 69 25
Agency fees 336 114
Fuel oil 12 0
Wages, bonus & other exp on floating staff - 109
Charter hire payments 16 0
Sundry steamer charges - 12
Currency Exchange Difference (81) (1452)
Bank Guarantee Fees - (66)
Stores, Repairs and Maintenance (275) 140
Marine, light & canal dues 366 402
Interest on Loan 0 49
Insurance & P&I (47) 84
Demurrage - 25
Service Tax (1965) (613)
Provision for doubtful advances (250) -
Others (22) (9)
Total Expenses 2404 (528)
NET INCOME / (EXPENDITURE) 6198 3300
The Company does not have any outstanding diluted potential equity shares. Consequently, the basic and diluted
earnings per share of the Company remain the same.
Notes:
1. Segment definitions - Liner segment includes break bulk and container transport. Bulk segment includes tankers
(both crude and product), dry bulk carriers, gas carriers and phosphoric acid carriers. Others include offshore
vessels, passenger vessels and services and ships managed on behalf of other organisations. Unallocable items and
interest income / expenses are disclosed separately.
2. All assets / liabilities and revenue items are allocated vessel wise wherever possible. Assets / liabilities and revenue
items that cannot be allocated vessel wise are allocated on the basis of unit cum GRT method i.e. 50% allocated on
the basis of units and balance 50% on the basis of adjusted GRT. GRT is adjusted to one third of GRT or 20000 GRT,
whichever is more in case of vessels which are bigger than 20000 GRT.
3. The components of capital employed that cannot be directly identified are allocated on the basis of GRT method.
B Movement in the net liability recognized in the balance sheet are as follows:
(` In lakhs)
Particulars Gratuity Leave Encashment Post Retirement
Medical Benefit Scheme
As at 2012- 13 2011- 12 2012- 13 2011- 12 2012- 13 2011- 12
Status Funded Funded Unfunded Unfunded Unfunded Unfunded
At the beginning of the period 11088 11780 5007 5307 3494 3108
Current service cost 1342 1400 952 829 266 214
Interest Cost 914 954 399 402 303 272
Actuarial (gains) and losses
(including for prior years) (435) (1048) (46) (326) 295 88
Curtailment Period (189)
Benefits Paid (1857) (1998) (1088) (1015) (196) (188)
At the end of the period 11052 11088 5224 5007 4162 3494
E Reconciliation of the present value of defined obligation and fair value to the assets and liabilities recognized in
the balance sheet:
(` In lakhs)
Particulars Gratuity Leave Encashment Post Retirement
Medical Benefit Scheme
For the period ended on 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
Present value of obligations
at the end of the period 11052 11088 5224 5007 4162 3494
Less: fair value of assets as
the balance sheet date 16081 16419 NIL NIL NIL NIL
Net Liability / (Asset) disclosed
in the balance sheet (5029) (5331) 5224 5007 4162 3494
H. None of the financial assets of SCI have been considered in the fair value of plan assets.
I. The expected rate of return on plan assets has been estimated on the basis of actual returns of the trust in the past
years. The assets of the trust are in the nature of investments in securities, fixed deposits, Interest accrued, and
balances in current accounts with Bank. The securities of trust have an effect on the fair value of plan assets as the
value of the securities vary with the changes in the market interest rates.
J. Actual Return on plan assets ` 1519 lakh. (Prev. period ` 993 lakhs)
K. Principal actuarial assumptions at the balance sheet date:
Particulars Gratuity Leave Encashment Post Retirement
Medical Benefit Scheme
For the period ended on 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
Discount rate at the end
of the period 8.14% 8.81% 8.14% 8.81% 8.14% 8.81%
Expected return on plan
assets at the end of the period 8.00% 9.00% NIL NIL NIL NIL
Future salary increases 7.50% 7.50% 7.50% 7.50% NA NA
Mortality Rate LIC LIC LIC LIC LIC LIC
1994-96 1994-96 1994-96 1994-96 1994-96 1994-96
Medical cost incremental
trend rates 16% 16%
Normal Retirement Age 60 Years 60 Years 60 Years 60 Years 60 Years 60 Years
O. The estimates of future salary increases, considered in the actuarial valuation, takes into account inflation, security,
promotion and other relevant factors.
P. The Company’s Provident Fund is exempted under section 17 of Employees’ Provident Fund and Miscellaneous
Provisions Act, 1952. Conditions for grant of exemption stipulate that the employer shall make good deficiency, if
any, in the interest rate declared by the trust vis-a-vis statutory rate.
NOTE 37
(i) The Company has been exempted from complying with Para 5 (viii) (a), (b), (c) & (e) of Part II of Schedule VI of the
Companies Act, 1956 vide notification no. F. No 51/12/2007-CL.III dated 08.02.2011 issued by Ministry of Corporate
Affairs, Government of India.
(ii) Remittance of dividends in foreign currency ` NIL (Previous year ` Nil).
NOTE 38
Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to confirmation and reconciliation. During the
year, letters for confirmation of balances have been sent to various parties by the Company and the same are under
reconciliation wherever replies have been received. The management, however, does not expect any material changes.
NOTE 39
The figures of previous year have been regrouped or rearranged wherever necessary / practicable to conform to
current year’s presentation based on new Schedule VI notified by the Ministry of Corporate Affairs. Further, the figures
are rounded off to the nearest lakh rupees.
(d) The Company maintain godowns for keeping certain limited items of stores pending issue to the ships.
Store / Spares including paints, etc. are charged to revenue as consumed when delivered to ships.
The valuation of items of Store / Spares is done as mentioned 7 (a) above.
8. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS
(a) All foreign currency transactions are recorded at the exchange rate of the second last Friday of the preceding
month published in Financial Times, London.
(b) Liner freight is booked at rates referred to in (a) above relevant to the months in which the dates of sailing
fall.
(c) The foreign currency balances other than in US Dollars appearing in the books of account are translated into
US Dollars at the closing exchange rate of the last Friday of March published in the Financial Times, London
and thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated
into rupees at SBI Mean Rate prevailing at the end of the period.
(d) Exchange difference arising on repayment of liabilities and conversion of closing foreign currency balances
pertaining to long term loans for acquiring ships / containers / other depreciable assets and asset under
construction is adjusted in the carrying cost of respective assets.
(e) The exchange difference in translation arising on other monetary assets and liabilities are recognised in
profit and loss account.
9. EMPLOYEE BENEFITS
(a) Defined Contribution Plan - Provident fund contribution are accounted for on accrual basis.
(b) Defined Benefit Plans - In case of shore staff, officers afloat, and crew on Company’s roster, the cost of
Gratuity, Leave encashment, & post retirement medical benefit is determined using the projected unit credit
method, with actuarial valuations being carried out at each reporting date.
Actuarial gains and losses are recognised in full in the profit and loss account for the period in which they
occur.
The retirement benefit obligation recognised in the financial statement represents the present value of
defined benefit obligation net of past service cost and reduced by the fair value of the plan assets. Any asset
resulting from this calculation is limited to the present value in the form of refunds or reduction in the future
contribution to the plan.
(c) In case of crew on the general roster, gratuity, which is insignificant in value, is accounted on cash basis.
10. INSURANCE, P&I AND OTHER CLAIMS
(a) Provision in respect of claims against the Company and covered by Insurance and P&I risks is made as
under:-
(i) In respect of claims falling under Hull & Machinery Insurance, which are estimated to be above the
deductible limit, to the extent of deductible limit.
(ii) In case of Cargo claims, on the basis of the actual claims registered and / or paid pertaining to the
relevant year’s voyages as ascertained at the year-end as reduced by the amounts recoverable from the
insurers.
(b) All types of claims settled and paid above the deductible limits are shown as recoverable from Hull
Underwriters / P&I Clubs until these are finally accepted by them as per the conditions of insurance policy
and / or P&I cover. Adjustments, if any of revenue nature are made after statement of claims are received
from the Average Adjusters.
(c) Claims made by the Company against other parties including ship repair yards, ship-owners, ship charterers,
customs and others, etc. are accounted for on realisation, due to uncertainty in the amounts of their ultimate
recovery.
11. INVESTMENTS
(a) Long Term Investments are stated at cost. Provision for diminution is made to recognize a decline, other than
temporary, in the value of such investments.
(b) Current Investments are stated at lower of cost and fair value.
12. TAXES ON INCOME
Provision for income tax liability is made as per special provisions relating to income of shipping companies
under the Income Tax Act, 1961 on the basis of deemed tonnage income of the Company.
13. LEASES
In respect of assets acquired on lease prior to 1st April, 2001, lease rentals are accounted on accrual basis over the
period of the lease and in respect of assets acquired on or after 1st April, 2001, lease rentals are accounted in
accordance with AS-19 “Accounting for Leases”.
14. PROVISIONS
Provisions are recognised when the company has a present obligation as a result of past events, for which it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and
a reliable estimate of the amount can be made.