Privatisation bound Shipping Corporation of India Ltd (SCI) is assessing offers to buy a second-hand very large gas carrier (VLGC) costing about $45-55 million in the current market as the state-owned firm looks to tap potential in a segment that has been growing on the back of India’s demand for cooking gas.

In December, SCI floated a tender to buy one firm and one optional VLGC, each having a capacity of 82,000 cubic metres in the age range of 10-15 years. If the company exercise the option, the acquisition cost will touch $100 million.

But, the possibility of exercising the option is less due to the high price of VLGC’s in the global market, industry sources said.

Keen to add gas carriers

SCI currently has one VLGC on its fleet. It is keen to add more to cater to the demand from state-run oil firms to ship gas into India, a business in which Indian flagged ships get a so-called right of first refusal (RoFR) to match the lowest rate quoted by a foreign flag vessel in a tender and grab the contract.

That aside, the company is looking to utilise ₹133.85 crore left from the funds raised through a follow-on public offer (FPO) in December 2010, the proceeds from which were mainly intended to buy ships.

According to the ministry of ports, shipping and waterways, the government has not placed any restrictions on SCI in terms of functioning and operations despite the privatisation exercise currently underway.

“The government has not given any direction or instruction to SCI not to acquire ships or curtail operations. It’s business as usual,” a government official said.

This is one of the rare instances, particularly in the last five years, where SCI is buying ships from the second-hand market. Historically, the firm has acquired new ships by placing orders at shipyards.

SCI will prefer to lock-in the new VLGC with one of the PSU oil firms on long-term charter of 1-2 years to earn “stable” revenue. VLGC rates are currently hovering in the range of mid-$30,000 a day on a 1-2 year charter.

Amongst other Indian fleet owners, the Great Eastern Shipping Co Ltd and Global United Shipping Company (India) Pvt Ltd also runs gas carriers.

The Department of Investment and Public Asset Management (DIPAM) has initiated the process of privatising Shipping Corporation of India by selling the government’s 63.75 percent stake to a strategic buyer.

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