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You can view full text of the latest Director's Report for the company.

BSE: 523598ISIN: INE109A01011INDUSTRY: Shipping

BSE   ` 34.85   Open: 34.85   Today's Range 34.70
-0.25 ( -0.72 %) Prev Close: 35.10 52 Week Range 34.50
Year End :2016-03 

To the Members,

The Directors have pleasure in presenting the 66th Annual Report on the working of your Company for the financial year ended 31st March, 2016.

Accounting Year

The year under report covers a period of 12 months ended on 31st March, 2016.


The comparative position of the working results for the year under report vis-a-vis earlier year is as under:

(Rs,in Crores



Gross Earnings



Gross Profit (before interest, depreciation, items relating to earlier years, exceptional items & tax)



Less : Interest



Depreciation and Impairment





Profit before items relating to earlier years, exceptional items & tax



Prior year's adjustments



Profit before Extraordinary items & tax



Extraordinary items



Provision for Indian Taxation



Net Profit



Appropriations :

The working results for your company for the year 2015-16 after considering prior period adjustments show a profit of Rs, 377.29 crores.

An amount of Rs,90.0 crores has been transferred to Tonnage Tax Reserve u/s 115VT of the Income Tax Act, 1961.

Your Directors propose to make appropriations of Rs, 1.4 crores for FY 2015-16 Under Staff Welfare Fund.

After adjusting an opening debit balance of Rs, 34.72 crores (being balance profit and loss account brought forward from previous year), there is a credit balance in Profit & Loss A/c of Rs, 251.17 crores.

Brief Analysis of Financial Performance

SCI has reported net profit of Rs,377.29 Crores for financial year 2015-16. The shrinkage in Bulk carriers and Liner freight rates was offset by increase in Tanker freight rates. Due to steep fall in Market Prices and Freight rates of some of the vessels, the company had to make provision for impairment loss of Rs,136 crores. Reduction in depreciation due to change in useful life of Tankers and Offshore vessels coupled with reduction in bunker cost have contributed positively to the current year profit. The consolidated Net Profit of the company for the Financial year 2015 - 16 was Rs, 389.40 Crores.

Performance and Financial positions of joint ventures included in consolidated financial statements:

As on 31.12.2015 Fig (Rs, in lacs)






Total Income










Equity capital





Number of equity shares















Net worth





• ILT 4 is yet to start its operations as the vessel is sti l under construction.

• Net Impact on Consolidated profits is increase of Rs 1211 lacs upon proportionate consolidation of above joint ventures and on Net worth is decline of Rs 203 lacs.


1.0 Fleet Position during the Year:

During the year under report, there has been no addition or deletion of vessels to SCI’s fleet. Thus the overall fleet of SCI remained steady at 69 vessels of 5.89 million DWT at the end of the year.

Fleet Profile during the Year


As on 1.4.2015



As on 31.3.2016










(a) Crude Oil Tanker









(b) Product Tankers









(c) Gas Carriers










Bulk Carriers










Liner Ships










Offshore Supply Vsls.










Passenger-Cum-Cargo Vessels


















2.0 During the period under report, no vessel was inducted in SCI fleet:

2.1 During the same period, the no vessels were disposed off from SCI fleet:

2.2 At the end of the year 2015-16, the Company had NIL vessels on order.

Particulars of Loans, Guarantees and investments.

Details of Loans, Guarantees and Investments are given in the notes to financial statements Extract of Annual Return

In accordance with section 134 (3) (a) and section 92(3) of the companies Act, 2013 read with relevant rules, an extract of annual return in form MGT-9 as on 31st March, 2016 is appended to the Directors’ Report.

Subsidiaries and Associates

Your company has no subsidiary Company and has six Joint Ventures. Pursuant to section 129(3) of the Companies Act, 2013, a statement containing salient features of our associates companies in form AOC-1 is appended to the Director’s Report.

In accordance to section 136 of the Companies Act, 2013 the audited financial statements, of the company are available on our website

Particulars of contracts/arrangements with related parties

Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed form AOC-2, is appended to the Director’s Report. The details are also available in Note 31 to under ‘Notes on Financial Statement’.

Particulars of Employees

In accordance with Ministry of Corporate Affairs notification no. GSR 463(E) dated 5th June, 2015, Government Companies are exempt from Section 197 of the Companies Act, 2013 and its rules thereof.

Risk Management

In accordance with the section 134(3)(n) of the Companies Act, 2013 the Risk Management is forming a part of the Corporate Governance Report.

Conservation of Energy, Technology Absorption,

The information pertaining to conservation of energy, technology absorption is forming a part of the Management Discussion and Analysis Report.

Foreign Exchange Earnings and outgo (Rs, in crores)




Foreign exchange earned and saved including deemed earned and saved Foreign exchange used including deemed used





Expenses on Entertainment, Foreign tours etc. - FY 2015-16

During the year under report your Company spent Rs, 42 lakhs on entertainment, Rs,246 lakhs on publicity & advertisements and Rs,386 lakhs on foreign tours of Company’s executives.


The overall scenario under which the Shipping Industry operated and which impacted the various segments is discussed below;


i) Global Scenario

The year 2015 was marked by subdued economic activity. In terms of a rebound, the global recovery vehicle is still far away from its destination. Although the major chunk (around 70%) of global growth is still attributed to economic growths of developing and emerging nations, their share in global growth appears to be gradually subdued and waning for the fifth consecutive year. The major factors influencing global outlook were Chinese slowdown in the infrastructure, manufacturing & capital investment sectors, marginal tightening of monetary policy by US on the backdrop of their strengthening economy, prices for energy & power commodities continuing to remain lower. Oil prices declined significantly from September 2015 onwards, which benefitted the importers, while straining the economies of exporters. The US economy remained solid with firm housing & labor markets & is expected to hold its position in 2017. Europe, Japan, India and other emerging economies of Asia reaped the benefits of lower oil prices. As per analysts, the Chinese economy is shifting from import-export focus to internal consumption & services. After a stellar performance in the FY15-16, the Indian economy is expected to outperform China again in 16-17 in terms of growth rate.

ii) Global GDP

The world GDP grew by an average of 3.1% in 2015, with growth estimates for 2016 and 2017 at 3.4% and 3.6% respectively. The growth in US is expected to be 2.6% in 2016-17. Meanwhile, Europe & other advanced economies are expected to show moderate to slow recovery. China continues to face slowdown in its import-export & capital-intensive sectors. Though a paradigm shift towards internal consumption & services is expected to balance the Chinese economy to some extent, still many analysts predict a medium-to-sharp slowdown in Chinese economy, which is expected to grow at 6.3% per annum. On the other hand India is expected to again surpass China with a growth rate of 7.5% driven mainly by a stable government & lower oil import costs.

The IMF report forecasts global trade to grow from 2.6% in 2015 to 3.4% and 4.1% in 2016 and 2017 respectively, owing to steady trade volumes of advanced economies, while a significant growth in trade within emerging economies. Emerging economies are riding on the lower energy prices, which should reduce overall business costs, while having the advantage of growing domestic demand. The global GDP growth directly impacts the international trade (export and imports) and a higher GDP in turn would have a positive impact on the shipping industry as about 80% of the international trade by volume is carried by shipping.

iii) Seaborne Trade, Fleet & Market

Globally, the oil trade (i.e. ‘Crude Oil’ and ‘Products’ segments) growth rose by 2.91% compared to 0.5% growth in 2014. In the oil seaborne trade development, the ‘Crude oil’ trade increased by 2.81% at 2,085 million tons in 2015, whereas ‘Products’ trade was 806 million tons in 2015, increasing by 3.20%. The tanker fleet expanded by 16.68% in 2015 as compared to 0.56% during the previous year. Overall for most crude tanker owners, 2015 was a very optimistic year as steady demand growth & lag in plugging of demand-supply gap saw freight rates reaching very healthy levels.

The dry bulk trade stood still with nominal increase of 0.08% in volume over the course of the year 2015, but oversupply of tonnage continued to plague the markets and earnings. Consequently, the time charter rates took a heavy beating, falling in the range of 21% to 30% across all vessel types, with similar sharp declines in spot rates and trip charter rates too. Although there is deceleration in fleet growth, with total fleet growing at about 2.78% from 5.3% in 2014, and the fleet actually shrinking in 2016; the fleet growth is projected at an average 1.5% annually during 2016-18, thus limiting the prospects for a reversal in the supply demand gap. Most of the gains in demand during 2015 came from the coal, and minor bulk trades. China, Japan in iron ore trade & India in coal trade were the key drivers of the demand.

Irregular and extreme circumstances, specifically the sharp decline in commodity and oil prices and the steep devaluation of currencies against the USD, weighed disproportionally on economic growth and import demand of export-oriented emerging markets. They also negatively impacted trade growth in developing Asian economies, while limiting global investment and curtailing trade demand in advanced economies, particularly in Europe. A combination of slow global demand and tumbling commodity prices led to the drastic decline in world trade value. Containerized trade was not immune to the events in commodity markets and the ensuing tightness in financial markets which affected the purchasing power of both emerging and advanced economies. Containerized trade growth 1.7% pace in 2015 is the second lowest-expansion of trade, second only to 2009 when trade contracted during the crisis. Container-capable fleet growth (cellular and non-cellular ships trading in container trades) accelerated to 7.5% in 2015, up from a much more moderate 5.2% annual expansion during the previous two years. Scrapping developments slowed down in 2015 though the activity surged by year end as charter markets collapsed. Newbuilding slippages increased towards the year end due to deteriorating market conditions. Average liner operating profitability, after three long years, had became positive in 2014; however, after showing the best 6 month long operating performance beginning 2015, the freight rates started falling thereafter and collapsed to historical lows in November, bringing liner operating profitability down.


As per Central Statistics Office (CSO), Indian economy grew by a robust 7.6% (estimated) in 2015-16, compared to 7.2% growth in 2014-15 on the backdrop of improvement in both services and manufacturing sector marked by confidence in the markets owing to a pro-reform government & significant decrease in oil import costs. India overtook China in GDP growth this year. According to sources from Ministry of Commerce, India’s exports in value terms fell by 15.57% to US$ 262.03 billion in 2015-16, while imports also fell by 15.04% to US$ 380.67 billion. As per Press Information Bureau & Indian Port Association (IPA), the quantum of Cargo Traffic at India’s 12 major ports rose by 3.13% in first three quarters of 2015-16 i.e. from around 433.5 million tons in April-December 2014 to 447.05 million tons in April-December 2015. The largest commodity group in the total traffic was PO.L. (Petroleum, Oil & Lubricants) with around 32% share, followed by Container traffic and Coal (21.5% each), ‘Other Cargo’ (21%), Fertilizers and Iron Ore 2% each. On the other hand, the existing non-major ports, especially private ports, continue to grow due to factors such as a diversified cargo portfolio, superior operating efficiency and infrastructure, and the presence of captive cargo streams.


Years of experience in Shipping together with diversified fleet across all major segments gives SCI a unique ability to exploit demand growth in any given segment with a quick-mover advantage on the peak of learning curve. New acquisitions have brought down average age from 18 years in 2007 to about 10 years presently. Longstanding COA relationships with major Indian Oil Refineries offer cargo security. A strong presence in the crude and Petroleum sector provided good returns in the year, which featured higher cargo demand on a moderate tonnage growth.


As the prospects for global economy point to improved growth at about 3.4%-3.6% in 2016-17, oil trade demand (both crude and product) will gain support from low oil prices and changing trade patterns are expected to absorb the modest growth in fleet lending support to positive earnings. One of the major shifts in oil tonnage will be due to waning production of crude oil in US, thus increasing imports of the country & shifting a lot of tonnage towards the region. While this would allow the tanker market to remain buoyant over the coming year, but with a marked increase in tanker supply & only marginal increase in demand, rates and prices for both crude and product tankers are estimated to dip downwards, on average compared to 2015. Most indicators are likely to stabilize in 2017 and from 2018-20, product tanker indicators would hold steady over this period, while crude tanker rates and prices may come under some pressure due to increasing demand-supply gap. In the dry bulk segment freight rates are expected to undergo severe volatility over the course of next two years. More specifically, freight rates for Supramax, Panamax, and small bulkers are projected to decrease in 2016 before going up in 2017-19 due to surge in the demand.

In the container segment, all containerized trades suffered lower growth in 2015 with several lanes seeing outright contraction in volumes. Lifting’s to commodity export regions like Russia, Latin America, West and South Africa fell lower than 2014 figures as they were negatively affected by developments in commodity prices. Slowdown in Chinese economy weighed on economic growth of its Asia-Pacific trade partners which depend on China for their exports. Sharp depreciation of several Asian currencies against US Dollar negatively impacted their purchasing power. Containerized trade is however expected to accelerate in 2016 as commodity prices resume positive growth, financial liquidity returns to the markets, investment gains new momentum and economic growth in emerging markets bounces back. Effective liner fleet utilization is expected to average 79% in 2016 up from 78% in 2015. Market fundamentals are expected to improve in 2017. Charter market conditions are expected to become better in 2016. Charter fleet utilization is expected to average 73% in 2016 modestly higher than 72.3% in 2015 and improve to 74% in 2017. The return of Iran to the global markets and a possible lifting of European sanctions on Russia could also help buttress demand for feeder capacity


The developing Asia region is expected to perform better in 2016 as compared to 2015 with India surpassing China for the first time. The low oil prices are expected to improve the economic situations of most of the developing Asian nations supporting the basis for a prosperous economic outlook. The Asia region is expected to grow by 6.3 % in 2016, slightly down from 6.6% growth in 2015 with India poised to grow at 7.5%. The European economy is expected to show modest growth of 1.7% in 2016 with growth coming in primarily from the recovering Euro economies & stronger private consumption due to monetary easing. The Japanese economy is expected to grow at a modest rate of about 1% in 2016.

As far as the container segment is concerned, sharp changes in the factors leading to downsizing of trades in 2015 viz. low oil and commodity prices and consequent subdued commodity demand are expected to abate which in turn would favorably impact the containerized trade. Euro and Europe-Russia transshipments are expected to stabilize with an improving Euro zone economy. A projected strong cyclical economic rebound combined with a revival in global investment, as commodity prices move higher would help propel trade growth. Containerized trade growth is projected to increase from 1.7% pace in 2015 to 4.4% in 2016 and 6.5% in 2017. Container-capable fleet growth is expected to moderate to 5.5% in 2016 and ease further to 4.7% in 2017, a pace considerably lower than the 7.5% annual growth of 2015.


Geopolitical tensions, the US monetary policy tightening, declining industry output and falling demand in China remain the major macro risks. The gradually deteriorating political & economic situation in Brazil is becoming a cause for concern. The low crude oil prices have strained the economies of oil exporting countries both Middle East and Russia who in turn may be forced to cut subsidies and consequently hurt demand. The falling Russian economy is seen as an example of an economy hit directly by falling oil prices in general. Falling oil prices, along with western sanctions continue to keep the Russian economy in recession. The decision of the Chinese Government to increase the percentage of non fossil fuels in its total energy mix could curtail future oil demand from the country. In the event these negative trends strengthen, the crude tankers rates are likely to remain flat during 2015-18.

Similarly, in the dry bulk segment, the rising interest rates in emerging economies could lead to slowing import demand. Additionally, relatively flat steel production in the developing Asia region due to weaker Chinese economy remains a matter of concern. One more solid driver of coal trade, Japan, is also planning to reduce its dependency on coal, thus likely to hamper the corresponding maritime trade.



a) Crude Oil & Product Tankers

The global consumption of Crude Oil registered a marginal increase of 2.7% to 96.30 million barrels per day over the previous year. It is forecasted that the demand growth is expected to come from developing & advanced countries of Asia such as India, Thailand and Korea while demand is forecasted to shrink for OECD-Americas & OECD-Asia Oceania. Due to a dip in US production, US imports of crude oil from Middle East& West Africa are predicted to be on the rise, helping to boost ton-mile demand. However, the net flow of global crude trade is forecasted to shift eastwards, due to ongoing buildup of strategic reserves by China & other Asian countries. These countries are supposed to continue their trend of taking advantage of the low crude prices. This surge in strategic reserves is likely to engage some of the tonnage in floating storage mode, hence straining the supply-side of tanker tonnage. There were deliveries of 7.6 million dwt and

3.0 million dwt of newly built crude oil tanker and product tankers respectively in 2015. For Crude oil tankers, the deliveries expected are 22.2 million dwt and 20.0 million dwt in 2016 and 2017 respectively. For Product tankers, the respective figures are 5.7 million dwt and 5.0 million dwt each. New building prices for tankers largely remained steady in 2015, nominally rising by about 0.1% in 2015 and continuing the stabilization from the early part of 2015. In ton-mile terms, it is estimated that crude trade increased by 3.26% compared to the previous year.

The trade is likely to remain robust on import gains in Asia Pacific and an expected re-start of US imports. The average spot rate of TD3 route of AG/East for VLCC was US$ 68,600/day in 2015. The future market in this segment seems to be in the range of US$ 50,00060,000/day, slightly affected by the supply surge. One Year TC rate for VLCC was about US$ 46,542/day in 2015, with some fixtures done at higher levels during the latter part of the year. The Suezmax rate on Black Sea/Med route was in the range of US$ 48,658/day in 2015 which is expected to decrease by about 20% per year over the next 2 years. For Aframax, the spot rate on AG/Far East route was US$35,650/day which has touched higher levels during the end of the year and is expected to turn volatile owing to fuel oil arbitrage trades. For Product tankers, LR1 Spot rates on AG/East was US$ 21,700/day in 2015 and expected to decrease significantly in 2016. One year TC rate for LR1 was US$ 24,700/day. In MR tankers on Caribs/US route the spot rate was US$ 20,400/day in 2015. One Year TC rate for MR was US$ 18,600/day in 2015 and expected to be around US$ 17,800/day for the next year.

Your company has five VLCCs. 2 of these units were employed under long term time charter business with Indian Oil, with the other three units mainly employed in the spot market on Voyage Charter during FY 2015-16. Your Suezmax tankers were mainly deployed with the Indian oil industry and performed COA voyages, except occasionally performing spot voyages for Indian and foreign charterers. The COA earnings are based on market-linked indices.

Your product tankers in the Swarajya Series were all well employed with Indian charterers and their earnings compare well with the market averages.

The two MR product tankers in the Swarna series were gainfully employed with Indian charterers and their earnings compare well with the market. MT Swarna Mala was deployed with foreign charterers for short periods during the financial year. The MR product tanker MT BC Chatterjee was employed with Indian charterers and the earnings compare well with the market averages.

The two LR-II tankers MT Swarna Jayanti and MT Swarna Kamal gave stable returns on time charter with foreign charterers for a good part of the financial year and are currently employed on spot charter.

Earnings of your coiled / double hull Aframax tankers were in line with the average of benchmark yields under TD8 (Arabian Gulf to Singapore) and TD14 (Indo-Australia) routes mainly on the back of COA voyages under TD8 pricing formula and triangulation voyages due to intermittent fuel oil arbitrage trades which minimized ballast voyages. The Aframaxes mainly performed India centric / Far East / Red Sea voyages.

Out of your company’s six LR-I tankers, five tankers performed coastal movements for transportation of crude oil. One LR-I tanker is deployed under clean trade. The average earnings were in line with the market averages.

i) Opportunities

With US oil production exhibiting downward trend & European economies trudging on their road to recovery showing signs of stabilizing, growth in global oil demand is expected to ride heavily on the Asian nations. It is projected that many Asian economies will show remarkable growth in the next year. Hence there will be a lot of tonnage present in the southern Asian region. Additionally, Middle East is likely to become a major growth hub for the oil trade. Since the company has much of the trade going on in this region, this scenario will be beneficial to our company.

Net global crude trade flow is expected to shift eastwards. Due to increasing floating storage, increase in refinery capacities and policy of building up strategic reserves, China is likely to increase its imports leading to an import spike. Many Asian nations are still keen on building up their strategic reserves. Although this trend is declining, this still presents some useful tonnage in the Asian region.

The constancy in the recent trend of floating oil storage in Asian region is supposed to boost the tonne-miles demand, especially in the south-east Asia & Chinese waters. This, along with increase in the US imports is likely to create a temporary supply vacuum which could positively trigger freight rates in the Middle East region. The above structural supply factors are expected to lead to increased tonne-miles as refiners find it economical to float and ship low cost oil over longer miles. The demand generated by US imports is to be met mostly by OPEC countries. This is expected to increase demand for crude oil tankers majorly in the West Asia Gulf to North America route. The tonnage vacuum thus generated will boost for West Asia Gulf to South East & Far East Asia trades where your tankers mainly operate and are well positioned to exploit the trade opportunities.

Overall expansion in global refinery outputs as well as notable increases in refinery capacities in Middle East on backdrop of lower oil prices, could render support to the oil products trade. Though the rates may face some pressure, these attractive refinery margins are estimated to boost the products trade & expected to ensure moderate clean tanker markets and your clean tankers will stand to get gainful trades.

ii) Risks and Concerns

As per some recent trends, few countries seem to be focusing inwards for economic impetus, which may result in an adverse impact on global trade. Further, with a renewed focus on renewable energy in the emerging economies there may be reduction in use of fossil fuels, which may slow down the global oil trade. One more reasons for this is the fact that most of the countries have accumulated significant inventories & at some point are likely to draw from it, instead of importing oil from abroad, if their economies do not grow substantially. The oil consumption is likely to decline, however the fleet growth of dirty tankers may not follow suit. The increase in fleet in the face of declining consumption is likely to put the pressure on rates. A dwindling political & economic situation of Brazil and parts of South America may make a dent the South American trade. Also, the price of crude oil is linked to the international monetary exchange rates and countries adversely positioned with depreciating currencies would find it difficult to import in larger quantities.

Weakness in oil products demand combined with high oil reserves created by many countries is likely to put pressure on oil products trade. The freight rates may dip in the coming year due to higher tanker supply over possible reduction in demand.

b) Dry Bulk

The benchmark, the Baltic Dry Index (BDI) fell to an average of 655 in 2015-16 from 915 in 2014-15 registering a steep 28% decrease, reaching its lowest level ever by touching 290 points on 10.02.2016 and is now hovering around 600.

The global imports of dry bulk stood at 3798 million tons and grew by only 0.1% over previous year 2015. When compared to 2015, dry bulk trade is estimated to remain fairly constant in 2016, with tonne-mile demand growing by an estimated 1.3%. The dry bulk global trade is expected to grow on an average of 2.4% for subsequent 3 years.

The dry market remains inundated with tonnage supply with very volatile demand. A longer wait for recovery is expected with dry bulk fleet growth projected at 0.5% in 2016 and an average 2.5% over the next 5 years. Steel & Coal, which are the key drivers of dry bulk trade continue to be affected due to slowdowns & changes in consumption patterns. Although the BDI rose somewhat from the abyss in month of March, the recovery is expected to be short lived with market fundamentals still not in place. Hence, medium to long term outlook of the market still remains bleak. Even though there has been a contraction in the dry bulk fleet after a long time, it would take quite a while for the contraction ripples to genuinely impact the markets. The dry bulk segment continues to be bogged down by low profitability due to low earnings causing depressed asset prices caught in a downward spiral.

Subdued cargo demand has added to the existing woes of the dry bulk market. The slowdown in Chinese economy is a major factor likely to weigh down the dry bulk trade. Some of the dry bulk vessels being converted into tankers show desperate attempts by owners to bid adieu to low earnings and to switch to worthier options.

India’s iron ore exports slipped to 13.1 mmt in 2014-15 compared to 15.4 mmt exported in 2013-14. With regard to Thermal Coal, India is set to see a considerable increase in its imports, rising from 161.5 million tons in 2015 up to a forecast of around 167million tons for 2016.

India’s urea imports fell by 3.14% to 84.74 lakh tons last fiscal on stagnant demand. The country, which is among the world’s top three consumers of urea, produces about 22 million tons urea as against the annual domestic demand of 30 MT. India imported 8.47 million mt of urea in fiscal 2015-2016, of this, 4.24million mt came from China and 2.32 million mt from Oman.

Urea movement into India, which is a key cargo for dry bulk vessels and is part of minor dry bulk commodities, has for the last few years been a “supporting trade” for bulkers ranging from Handysize to Panamax.

Grain trade is likely to provide a temporary boost to dry segment during the first quarter of FY15-16. Grain trade is estimated to provide much needed relief to Panamaxes, with exporters of Argentina, Australia, France, Germany, Kazakhstan & Eastern Europe likely to step up the exports.

Global steel production declined by 6.8% in the Q1 of 2016 with reduced demand from Europe and Asia, whereas Chinese steel production, which hit rock-bottom in 2014, projected to slump even lower due to high number of loss making steel companies within the country. Fresh anti-dumping duties have been imposed by US & Europe on Chinese steel, with US levying duties as high as 266%. One more reason for suppressed steel market is policy shift in many countries such as Vietnam, Germany & UK to boost domestic steel production & curtailing imports.

So far, this year, 142 dry bulk ships are sold for demolition as against 407 dry bulkers for the entire last year. So far already 48 Panamax bulkers have been sold for scrapping in 2016 as compared to 83 in the whole of 2015. Additionally, number of ships, are out of play and possibly heading for hot or cold lay-ups. As mentioned above, dry bulk fleet contracted due to three factors:

1) Increase in demolitions/scrapings as companies fight for their survival or to exit the segment while minimizing the losses.

2) Conversion of vessels into tankers by many owners, in quest for a more profitable trade.

3) Drastic increase in lay-ups (almost 250 vessels were laid up, accounting for tonnage of 12 million dwt).

Even so, the dry bulk fleet registered nominal growth in Q1 of 2016, as it increased by a mere 0.29% from the year-end fleet and stood at 778 million dwt. It is obvious that this growth is on the basis of deliveries of vessels ordered previously before the dramatic fall in market fortunes.

It is estimated that demolitions will increase by approximately 5.65% in 2016 from last year because of the weak freight market.

Your Company owns two older Handymax bulk carriers (average age 17 years) of around 45,000 dwt, eight modern Supramax bulk carriers of around 57,000 dwt and seven modern Panamax / Kamsarmax dry carriers of around 80-82,000 dwt as on31st March, 2016. The bulk carriers fleet is very young with an average age of about 5 years. The dismal state of dry bulk charter market in the year was the cause of soft earning levels of our fleet. In order to maintain a healthy cash flow your company preferred fixing the bulk carriers on trip time charter and short-to-medium term time charters and minimize long-term period charters at low charter rates.

i) Opportunities

Poor freight markets and resultant depressed ordering and conversion of dry bulk carriers to tankers is expected to significantly slowdown deliveries and fleet growth over the 2016-2019. The fleet growth is expected to be at an average of just 2% per year over this period as against the average expected trade growth of 2.97% in terms of volume and 3.5% in ton mile terms over the period of 2016-2019.

India is going to be an interesting destination for the dry bulk market. The requirement of coking coal via imports to meet the country’s increase in steel demand derived from focus on investment and infrastructure, plus projected import of thermal coal by167 MMT would boost shipping activity. A robust coastal movement of coal owing to increased domestic production would strongly support tonnage demand.

India’s coal import trade is gradually shifting the focus from Indonesia to South Africa. This is a welcome development for our dry bulk ships, hauling most of the import coal cargoes of India on a longer route, thereby increasing ton-miles. The coking coal markets seem quite favorable for the trade, since shipping costs for the trade have declined & coking coal prices have endured substantial softening. India’s prime source of coking coal is Australia, and hence this route may see handsome dividends, particularly with decrease in tonnage supply.

India is expected to see a capacity addition in power sector of 80,000 MW in the 12th Five-Year Plan (2012-17). It requires around 4.5 million tons (M.T.) of coal to generate 1 MW of thermal power. This means there will be high investments in power sector and the coal requirement to run these power plants will contribute to increased demand for shipping.

By the end of 12th five year plan the country’s coal requirement will reach 1,000 million tons of which approximately 200 million tons 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, Africa and even the USA. With these imports in pipeline, the shipping sector will stand to benefit from increased import cargoes.

ii) Risks & Concerns

The fresh anti-dumping duties imposed on Chinese steel will further fuel the slowdown being experienced by the country. This will create a notable drop in iron ore imports by China. With policies to boost domestic steel production, there may be sharp decline in the steel imports of UK, France & Vietnam. This will free up a lot of tonnage, thereby increasing the oversupply situation.

In parallel, coal trade may show signs of nervousness owing to greater concerns on environmental impact of coal. Both India & China, the top importers of coal worldwide, are introducing policies to reduce the dependence on imported coal. China is shifting focus towards renewable energy, while India has plans set to increase domestic coal production.

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. They are also driven by catastrophic imbalances in weather, which is unpredictable. The global grain trade is likely to be a drag on the dry bulk market through 2016. After growing at a striking 9% pace in 2014, it is expected to grow by just 0.95% in 2016-17, based on the latest forecast from the International Grains Council.

SCI with critical mass in Panamaxes is catering to transportation of two major commodities i.e. Iron ore and coal. In view slowdown in these major trades globally the earnings of Panamaxes may continue to suffer. SCI is exploring options in grain trade basis opportunities opening up in South America and NOPAC region.

The concerns of oversupply may remain strong as due to recent deliveries, the supply of Supramax tonnage increased to 181 million dwt by March 2016, the highest Supramax tonnage ever. This could not come at a worst possible time & even though supply corrections are present in the pipeline, the medium term outlook for the market does not bode well for this sector.

The macro economic factors such as interest rate volatility, subsidies on petroleum products, volatile rupee value vis a-vis the dollar and inflation continue to plague the national demand. Shipping being a derived demand will be negatively affected by these factors.

c) LNG Transportation

The scope for growth of LNG transportation is high considering that LNG annually accounts for 8% of the total energy mix and is projected to grow up to 20% by 2030. India is the 4th largest importer of LNG accounting for 6.06% of the total global trade. India’s LNG demand is projected to soar from 64 million cubic meters (mcm) per day in 2015 to over 306 mcm per day by 2021. The expected compound annual growth rate (CAGR) is at 16.89% for the period between 2015- 2021. The lowering of gas prices has led to a surge in demand for gas in India.

The LNG terminal at Kochi became the 4th operational terminal in India, while new terminals are planned at Mangalore, Mundra, Pipapav, Ennore and Haldia and further capacity additions at Hazira and Dahej. There is optimism about India’s LNG demand, taking into account the drive to increase the share of gas in the power industry.

Pursuant to the MOU signed with GAIL, SCI is working closely with GAIL for the tender to in-charter 9 LNG tankers on a long-term basis. It is expected that LNG tankers would be built in Indian Shipyards in line with the “Make in India” campaign while the further tankers would be built in foreign shipyards. SCI will take up a stake in all the LNG tankers for the project.

The Gorgon LNG plant and Gladstone LNG project (Train 2) in Australia is commissioned and has commenced export of LNG. Your company has acquired 26% stake in LNG tanker M.T “Prachi”, being built in S.Korea, which will be on charter for 19 years with Petronet LNG Ltd. This vessel will ship LNG from Gorgon Terminal to Kochi or Dahej in India.

Your Company has developed a pool of trained and experienced officers to operate LNG tankers. This expertise along with the experience of independent technical operation of LNG tankers has provided the advantage to your company to expand its LNG Ship Management expertise.

d) Ratnagiri Gas Power Pvt Ltd (RGPPL) - Port and Marine Services

Upon successful completion of first 3-yearly contract with RGPPL for providing port and marine services at its Dabhol port, RGPPL has renewed the contract for a further period of 3 years which will earn a revenue of about '116 Crores .

e) LPG Carriers

Your LPG carriers were pre-dominantly deployed under time charter to IOCL at prevailing market rates. The process for replacement of these tankers which are over 25 years has been initiated.


The financial performance of the tanker segment has been largely influenced by good earnings on the VLCC, Suezmax and Aframax segments where SCI has had a mix of cross trade charters, Contracts of Affreightment and Time charter businesses to effectively hedge employment and earnings risks. On the smaller segment product carriers and LR I dirty carriers; the employment was mainly to meet the domestic product and indigenous crude movements on long term contracts and time charter business. The mix of employment types and geographical concentration in niche coastal business segments has ensured returns in line with market trends.

The dry bulk segment was subject to severe tonnage over capacity worldwide and loss of key cargoes such as Iron ore from India resulting in non profitable ballast voyage legs thereby reducing earnings. Although some relief was offered by coal cargoes & minor bulks, earnings remained depressed due to low freight markets. Very few profitable trades emerged during the year under consideration and the situation is expected to remain depressed with earnings remaining under pressure.


i) Global Scenario:

Record-low rates, falling volumes and dismal load factors (vessel utilization), all combined to push down the liner industry operating profitability. For the year as a whole, the liner industry EBIT margins averaged around zero level with several carriers suffering operating losses. Liner freight rates fell to all-time lows and operating losses increased. Containership charter rates also tumbled below 2012-13 levels for medium and large-size vessels with Panamax and over-Panamax ships rates falling below operating costs. Market fundamentals weakened steadily during the course of 2015. Ocean carriers resorted to routine undercutting competition in an effort to lure more business. While falling fuel prices allowed some buffer for freight rates to adjust lower, rate declines were excessive and widespread across all markets. Lackluster trade demand with accelerating fleet growth brought down the liner fleet utilization. Fleet utilization in Asia-Europe WB (west bound), its main arterial lane, collapsed due to contracting trade volumes and a deluge of mega-ship deliveries, despite cascading of the vessels to other markets. It held much better in the Transpacific EB (East bound) the other major arterial lane though it fell during the year end as trade growth weakened with robust capacity expansion. Fleet utilization worsened in other trades outside premier arterial haul-ways as cascading tonnage overpowered demand gains. In all, effective liner utilization fell sharply and averaged 78% in 2015 down from 82% in 2014. Charter rates having surged to new highs in May/June 2015 with the liner operators’ expectations of fast-rising intra-Asia demand tumbled to near all-time lows by year end as the trade growth remained weak in the second half of 2015. Charter fleet utilization fell from 74.8% in 2014 to 72.3% in 2015, an all-time low level seen during the crisis of 2009.

ii) Indian Scenario

The volume of export and import containers handled at major ports in India rose by 2.98% in 2015-16 from the year ago levels and total cargo tonnage inched up 4.31%, according to the tentative estimates of Indian Ports Association. Cumulative yearly traffic totaled nearly 8.2 million TEUs in April 2015 through March 2016 period, up from 7.9 million TEUs in the previous year. Jawaharlal Nehru port, India’s busiest container gateway located near Mumbai, handled 4.49 million TEUs and 64.02 million tons of cargo in the year 2015-16 as compared to 4.46 million TEUs and 63.80 million tons in 2014-15.

iii) Opportunities & Threats

Aggressive monetary easing in Europe, China and Japan are expected to underpin consumer demand in these regions in late 2016 and 2017. Commodity prices are also expected to get a boost and economic recovery in emerging markets and the US is expected to accelerate. These would result in containerized trade volumes enjoying strong gains with trade growth notching 5.6% in 2016 and rising to 7.8% in 2017 and average charter rates climbing up steadily in 2016 and rapidly in 2017 to approach highs last seen during the market peak of 2010 in early 2018. Fleet growth is set to moderate in 2016 and significant gains in trade demand are expected in main trade-lanes. Market conditions are likely to remain weak in the major arterial haul-ways particularly in the Asia-Europe WB trade. Trans-Pacific EB fleet utilization is expected to average to 91.2% in 2016 which in turn is expected to allow for a significant rate restoration, especially to cargoes heading to the US East Coast via the new Panama Canal.

Competition in the industry is expected to subside after the three global alliances commence operations in late March 2017. This, coming at a time of an expected economic and trade rebound and combined with continuous moderation in fleet growth is indicative of a freight rate rebound next year. The liner operators, however, have to survive three challenges this year:

(1) weak trade growth;

(2) the persistent rate undercutting resorted to by shipowners’ which deprives carriers the capacity to sustain rates at higher levels after general rate increases (GRIs) and

(3) the relentless pressure from regulators on the liner industry to refrain from improving their bottom line, rather than on fleet expansion and the accumulation of more debt.


1 Liner Vessels:

Your Company’s owned liner fleet having total container carrying capacity of 14,407 TEU.

As on 31.03.2016, an in-chartered container vessel having total dwt. of 90414 mt. was operated by your Company. In addition to the above owned and in-chartered vessel, your Company also has cargo loading rights on 19 vessels of its partners in various consortia arrangements that your Company has with leading shipping lines such as Mediterranean Shipping Company (MSC), PIL of Singapore, K-Line, Wan Hai of Taiwan and Simatech Shipping,Singapore. Your Company continued to deploy its owned / operated Container vessels in the following sectors.

2 Container Services

i) ISE Service

The UK-C Cellular Container Service commenced in 1994 with SCI as a single operator operating three vessels with 1800 TEU capacity which was later upgraded to a fixed day weekly service with three partners operating seven vessels of same capacity. The service, from May 2009, is being operated in consortia comprising of two partners with eight vessels of which two vessels have been contributed by SCI. Since Feb 2016, the consortia contribution has been changed to one SCI vessel. This strategic reduction has been done to improve profitability of the service. The service is operated on a round voyage of 56 days.

ii) IPAK Service

In a slot swap arrangement between SCI and MSC, SCI has been allotted 200 TEUs slots by MSC which operates IPAK service in exchange for similar slots allotted to MSC on the ISE service.

iii) India / Far East Cellular Service (INDFEX 1)

This service commenced in June, 2001. Presently, it is operated with 5 vessels (1 vessel each by three partners viz. K line, PIL, Simatech and SCI; and 2 vessels by the fourth partner Wan Hai, WHG) and was upgraded in September 2012 by replacing a 3500 TEU vessel by a 4400 TEU vessel. The service is presently operated as a weekly direct service from India’s West Coast to Central China, Hong Kong, Singapore and Malaysia on a round voyage schedule of 42 days. The service also links North Chinese ports through feeder services via Shanghai.

iv) SCI Middle East India Liner Express (SMILE) Service

The new restructured SMILE Service synergizes SCI’s services with Shreyas’s services and seamlessly links up Persian Gulf with East Coast of India and West Coast of India, thereby, strengthening and expanding SCI’s presence in the Coastal Shipping Sector. The joint operation on this route will be a force multiplier for SCI which will provide a high quality of Coastal Services on fixed day fixed window basis with potential for even bigger expansion in Coastal and near Coastal trades with special emphasis on the East Coast of India ports. Two services viz. SMILE and PIX2 with their service rotations makes it feasible to connect pan-Indian ports with an improved transit time. SCI seeks to cooperate with other Indian companies to work out the best transportation solutions for the trading community vis-a-vis commercially, economically viable and environmentally feasible options. SCI is also strengthening their position in the trade by offering services to and from Yangon while connecting all the Indian Sub-continent ports as well as Middle East ports

v) India Myanmar Service (IMS Service)

SCI launched the India Myanmar Service (IMS) in October 2014 in chartering mv “SCI Kamal’ a 1200 teu capacity vessel which linked the East Coast and West Coast of India to Myanmar. The service had been initiated at the instance of the Government of India in line with the Look East Policy and the Ministry of External Affairs had granted a subsidy for operation of this service for 6 months. The service was temporarily suspended on 6th Nov 2015 on expiry of Charter Hire agreement of the vessel deployed then after the subsidy amount was exhausted. An adhoc call was however made during February 2016. SCI was granted additional subsidy for operation of the service for another three months.

vi) Feeder Operations

SCI makes feeder arrangements with ‘Common Carriers’ between various destinations on the Indian subcontinent.

vii) Slot swap arrangements

SCI enters into slot swap arrangements with service providers depending upon trade requirements.

viii)Break-Bulk Services

SCI arranges carriage of break-bulk 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 organizations which includes Shipments of Over Dimensional Cargoes (ODC)/Project cargoes / Heavy Lift cargoes/ IMO Class I Cargoes etc. and also containers.

ix) Coastal Operations

Domestic Passenger-Cum-Cargo Service

In addition to International operations, SCI with its one owned Passenger-cum-Cargo vessel and ten (11) 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.

x) Other Coastal Services

SCI also manages Oceanographic & Coastal Research vessels on behalf of Government agencies/departments viz. three vessels owned by Geological Survey of India under Ministry of Mines and one vessel of National Centre for Antarctic & Ocean Research, one vessel of Centre of Marine Living Resources and Ecology and three vessels of National Institute of Ocean Technology under Ministry of Earth Sciences and one vessel of DGLL.

3 Manned and Managed Vessels

The following table shows the profile of the Passenger-cum-Cargo vessels and other vessels managed by your Company on behalf of the various Governmental Organizations/Departments:

Type of Ships

As on 31.03.2015



Scrap/ Redelivered (Nos.)

As on 31.03.2016


Pax. Cap.

Cargo Cap. (m.t)


Pax. Cap.

Cargo Cap. (m.t)











Cargo barge Other vessels
















The pattern of deployment of these vessels is as follows:

^ Five (5) vessels for carrying Passengers and cargo between the Mainland and Andaman and Nicobar Islands;

^ Five (5) vessels and One (1) Cargo Barge for Inter-Islands run (A&N Islands).

^ One (1) vessel for Fore shore Sector run (A&N Islands).

C. Marketing

SCI’s marketing team continues to make regular customer calls through its own offices and also through agents appointed at various ports in India and abroad in order to market its container and break-bulk services. Meetings with the agents are held periodically, and SCI representatives also participate in various trade meets at important locations in India.

Your Company has obtained Freight Forwarding and Multimodal Transport Operator (MTO) licenses and continues to use its vast experience and large agency network to render 3PL (Third Party Logistics) services to the customers. This helps your Company to retain the clients while generating additional revenue.


The gap between demand and supply of container capable fleet is expected to close in 2016, as global containerized trade volumes resume a 4.4% growth while capacity expansion moderates to 5.5%. Accordingly, liner markets are expected to enjoy a reprieve in the second half of 2016 and would set the stage for a market upturn in 2017 when the trade growth is expected to outpace corresponding fleet expansion. Major arterial trades are expected to see higher fleet utilization climbing to 90% once the market fundamentals improve in the second half of 2016 which will allow for rate improvements. Liner idle capacity is expected to be limited, as liner operators compete for market share ahead of the reshaping of global alliances at the start of 2017. Slow-steaming practices are expected to remain firmly in place with slow-steaming capacity absorbing 10% of the cellular fleet capacity providing a respite to the market. With market fundamentals expected to improve in 2017, liner fleet utilization is projected to climb to about 81% in 2017 and 80% in 2018 prior to moderating to 79% in 2019-2020 as the cyclical upturn in trade growth abates and fleet growth accelerates.


Oil and commodity-exporting economies suffered a big blow in 2015 consequent to the slowdown in the Chinese economy and glut of oil supply and aggressive Saudi pricing policies resulting in tightening of financial markets and stalling of investments. Currencies in Europe and Asia weakened significantly against the US Dollar and the trade value collapsed. Economic uncertainty remains and a lower drift in the commodity prices could result in continuous turmoil in global financial markets leading to several emerging economies sinking deeper into recession. These factors would then lead to muted global containerized trade growth limited to 0.8% in 2016 which would adversely impact the freight rates and charter rates which would average to near 2009 low levels falling just below operating costs level.


Your Company’s liner segment registered a loss of Rs,159 crores in FY 2015-16. The Operating Income reduced in the current year as compared to the previous year. Your Company adopted cost-saving measures to mitigate losses accruing to the liner services viz. saving considerably on feeder and transshipment costs by not carrying the cargo to non-base ports, saving on leasing and incidental cost by off-hiring containers, blanking off voyages on the INDFEX route resulting in less inland movement, changing rotation pattern of ISE service leading to less haulage. Cargo handling expenses, a component of the direct operating expenses, were lower due to lesser number of containers carried. Containers carried to inland locations in Europe were mainly on merchant haulage.


I) Global Scenario

The offshore industry is dependent on utilization of rigs, oil fields and crude oil E&P activities, which in turn depends upon strategic decisions of energy security by oil and gas producers, shifts in Government policies, demand-supply trends in crude oil trade, country’s import - export of crude oil and long term crude oil price trends. The world’s primary energy consumption is projected to grow at an average of 1.4% p.a. with major part of the growth is in non-OECD countries, with Asian countries like China and India accounting for nearly half the growth. During FY 2015-16, Brent crude price fell below US$30/barrel level, for the first time in 13 years. After touching new low, during quarter four of FY 2015-16, oil prices showed some bounce with an upward move towards US$40/barrel level in Q4 of FY2015-16. It is observed from the rig data that out of the total available rigs worldwide only about 60% were contractually operational during FY 2015-16. In line with the same, the worldwide AHTS utilization declined from about 66% at the start of FY 2015-16 to 60% during end of FY 2015-16 and PSV utilization declined from 75% at the start of FY 2015-16 to 60% during end of FY 2015-16.

In absence of rigs in operation and due to oversupply of offshore vessels in world market the freight / charter hire market for offshore vessels has also been under pressure. Further, though there were some signs of recovery in oil prices during last quarter of FY 2015-16, towards a mark of $50/barrel, the improvement on global front on both consumption and storage side, seems too slow to prompt a sustained oil price rally in the near-term. There’s still a risk of downward price adjustment in 2H 2016. The industry estimate is that around 30% of current supply comes with a break-even price above $50/barrel and remaining not much below $50/barrel level. Due to the sudden downward movements in oil prices post Q3 of FY 2015-16, non-operation of rigs and diminishing E&P activities, there was a sudden fall in both asset prices and freight rates for offshore vessels worldwide, the assets prices and freight rates fall roughly around 1/3rd compared with 2 years ago. Considering under utilization of fleet, worldwide many offshore asset owners have reduced their offered rates below breakeven cost or close to breakeven with minimal profit margins in order to avoid loss in terms of DOE and minimize expenses on IOE front.

II) Indian Scenario

Historically, India’s domestic production of oil and gas has fallen short of its burgeoning energy requirements, compelling our country to rely on imports. Further fall in international Crude Oil price during 2015-16, as compared to FY 2014-15, has substantially reduced the burden of importing crude oil by over 43% in terms of value in our country. Taking help of global decline in prices of crude oil, India has imported about 202.1 million tons of crude oil during FY 2015-16 for US$ 64.4 billion as compared to 189.4 million tons during FY 2014-15 for US$112.7 billion. Over the years, average per barrel rate of Indian crude oil import has fallen from US$ 105.52 per barrel in 2013-14 to US$ 84.16 per barrel in 2014-15 to US$ 46.17 per barrel in 2015-16. This has not only resulted in savings on import bill but the quantity imported was increased over the years and hence the fall in Indigenous crude oil production. Indigenous crude oil production during end of Fy 2015-16 was lower by 5.1 per cent (3.1 million tonnes) than in the previous year.

During 2014-15, though there was global decline in prices of crude oil, however the same had not significantly impacted the performance of Indian E&P industry and the activities of this sector during 2014-15 were more or less similar to that of the previous year. However, FY 2015-16, has seen the drastic fall in freight rates for the offshore vessels, one major reason being that average per barrel import rate for crude oil during 2015-16 of US$ 46.17 is at par with cost of production. Taking benefit of low assets prices worldwide, many Indian players are going for asset acquisitions at low prices and so as to secure firm business they are breaking earlier lows of freight rates in almost all categories of offshore vessels.

III) Strengths and Opportunities:

SCI has always focused and succeeded in employing its vessels on long term basis with ONGC, which is the largest E&P company in India. Your company also has experience in successfully offering its offshore services to reputed private sector companies in India and abroad. SCI is now concentrating on expansion of its clientele with various other national and international offshore operators.

IV) Weaknesses and Threats:

Long term charters of two offshore vessels of SCI with ONGC has already come to an end in 2016. Although SCI is confident to deploy these vessels on long term basis, in the mean time your company will have to face the volatility of the spot market. All offshore vessels were employed on long term charter with ONGC during the current year. Hence, there was no risk of idling / un-employment for these vessels. However, by the end of the year, two vessels had already completed their long term charter. Hence re-employment of them on long term charter is a concern.


a) Global Outlook:

The crude oil prices are showing downward trend and are expected to remain under pressure during FY 2016-17. Though there was some upward movement in first quarter of FY 2016-17, but same is not sustainable. Further, with end of Iran’s sanctions, global oil oversupply is expected to be there for at least next 1-2 years and hence the pressure on global oil prices is expected to remain during FY 2016-17 also. Though the sustained level of $60/barrel is not looking possible in FY 2016-17, but with the present energy scenario, industry experts expect sustained $60/barrel level anytime during FY 2017-18. Industry expectations are that the exploration and production activity worldwide will pick up once the oil prices rebound towards $60/barrel.

However, considering the sluggish demand and the present over supply of offshore supply vessels, the exploration activities are not expected to pick up during 2016-17 and hence the international freight / charter hire market for offshore vessels is expected to be under pressure during 2016-17 also. Further, the low asset prices have created opportunities for established players to buy new assets and employ them initially with lower freight rates but with gainful returns from balance life of these vessels.

b) Indian Outlook

India’s domestic production of hydrocarbon products falls far short of meeting the ever-rising energy demand and thus India would continue to import crude oil to bridge the demand and supply gap. Although the reduction of global crude oil prices would have positive impact on growing Indian economy, self reliance on crude oil production is necessary to insulate India against unforeseen market volatility as well as from energy security point of view. With entry of many low priced assets in Indian market, your company expects that during 2016-17, the domestic fixtures for offshore vessels would be on lower side at tight margins. .

The competitive market environment has however provided an opportunity to invest into the offshore fleet as the new building / secondhand prices of vessels have softened. The situation is also favorable for venturing into specialized segments like well stimulation which command higher charter rates by acquiring/ converting suitable offshore vessels. Your company has been closely monitoring the developments in the offshore segment and plans to take advantage of suitable opportunities for increasing its market share as well as to diversify its activities in this segment


i. SCI owned Offshore vessels:

SCI’s owned offshore fleet comprises of 3 nos. 80T AHTSVs, 4 nos. 120T AHTSVs and 2 nos. PSVs. All these 9 vessels were on long term charter with M/s OnGc during the year. Out of these 9 vessels, two of the 80T AHTSVs viz, SCI Panna and SCI Mukta completed their long term charter by the end of the year, i.e. SCI Panna on 18.03.2016 and SCI Mukta on 29.02.2016. Thereafter, both the vessels were offered in Spot market to various clients, for gainful employment opportunities.

ii. O&M of ONGC owned vessels:

Samaria series OSVs:

Your company has continued to Operate, Man & Manage ONGC owned Samudrika series OSVs. At the beginning of the year, 8 nos. Samudrika series vessels were under O&M contract with SCI, after disposal of 3 vessels during the previous year. Thereafter during the year 2015-16, 4 more vessels have been disposed off by ONGC. The O&M contract of remaining 4 vessels is valid till their disposal, which is due in 2016.

iii. Specialized vessels:

Your Company has continued the Operation & Maintenance management (O&M) of ONGC’s 2 Multi Support Vessels (MSVs) (“Samudra Sevak” & “Samudra Prabha”) and one Geotechnical Vessel (GTV) (“Samudra Sarvekshak”) on nomination basis under ‘Cost plus’ arrangement. The contracts for O&M of MSVs have now been extended upto 31.12.2016. The O&M contract for GTV is valid till 31.03.2018.

Your Company has also continued the Operation & Maintenance management (O&M) of ONGC owned Well Stimulation Vessel (WSV) “Samudra Nidhi” on ‘cost plus basis’ since the vessels delivery in year 1986. The present contract is valid till 31.03.2017.

iv. ONGC owned Offshore vessels built at M/s. PDOEC shipyard:

ONGC had placed orders for 12 new built OSVs at M/s Pipavav Defence and Offshore Engineering Company Ltd (PDOEC). The O&M of these 12 vessels have contracted to SCI. Your company has successfully included seven ONGC owned vessels under its fleet of managed vessels till date of which two were taken over in FY 2015-16. Pipavav shipyard. Balance 5 vessels will also be handed over to SCI under O&M contract as per their respective construction & delivery schedule.

v. Emergency Towing Vessel (ETV) 2014:

On request of Directorate General of Shipping (DGS), your company had arranged for services of Emergency Towing Vessel (ETV) during the monsoon period of year 2015.

The vessel “ETV Nand Krishna” was in-chartered by SCI on behalf of DGS for providing emergency services in the monsoon period on West Coast of India for about 31 days from 15.08.2015 to 15.09.2015.

vi. DRDO Project:

The Defense Research & Development Organization (DRDO), Government of India (GOI), Ministry of Defense (MOD) had requested your company for hiring of three support vessels as a platform for ship-borne tracking stations for flight trials over the Bay of Bengal and Indian Ocean. Your company had in-chartered two suitable vessels w.e.f. 27.03.2012 and 05.04.2012. The contract for these vessels has now come to an end. The contract for 1st vessel expired on 18.03.2016 and 2nd vessel on 25.03.2016.

Your company is now in the process of acquisition of suitable offshore vessels which would be provided on long term charter to DRDO, for their above requirement of national importance.


The Offshore segment recorded revenue of Rs, 339.55 crores in 2015-16 as against Rs,348.91 crores in 2014-15. The profit before tax stood at Rs, 104.01 crores in 2015-16 as against Rs, 113.10 crores in 2014-15.

Your company had 9 offshore vessels at the start of the year 2015-16 as against 11 vessels (9 new 2 old) at the start of 2014-15. However, there was no significant impact on revenue due to better operational efficiency of new vessels during FY 2015-16. Capacity utilization of offshore vessels for FY 2015-16 was at 89.38% as against 87.92% during fY 2014-15.

VIII) Technical Services:

i. Technical Consultancy Services:

During the year under report the Company continued to provide technical consultancy services to A&N Administration, UTL Administration, Directorate General of Light Houses & Light ships, Geological Survey of India, Andaman Lakshadweep Harbour Works (ALHW), Union Territory of Daman and Diu Administration (UTDD) and other Government Departments for their various ship acquisition/retrofit projects.

ii. Tonnage Acquisition Programme:

The year under report is the fourth year of the country’s 12th Five Year Plan. SCI had indicated an outlay availability of '5,686 crores during the 12th Five Year Plan period, which has been approved by the Government.

During the year under report, your company had proposed an outlay of Rs,711.54 crore towards acquisition of vessels and investment in JVs. Your company had envisaged acquisition of secondhand / resale offshore vessels and LPG carriers and also investment in LNG JV. Tenders were floated for acquisition of these vessels and by the end of the year, these tenders are in various stages of processing. However, pending finalization of the tenders, the outlay for the year could not be utilized and the same has been carried forward to the year 2016-17.

Presently, the asset prices are comparatively at low levels, hence looking at the favorable market for secondhand / resale vessels, your company is endeavoring to buy secondhand / resale vessels to increase the Indian/SCI tonnage and for immediate deployment in the market. Your company is optimistic to acquire offshore vessels and oil tankers/gas carriers at this opportune time, with low asset prices so as to expand its fleet size.

iii. Eco-Friendly and Conservation of Energy :

As a policy, your Company remained committed to environmental protection as per International Convention for the Prevention of Pollution from Ships. Necessary steps have been taken to minimize air pollution and oil pollution from ships.

For the existing vessels, your company had developed a Ship Specific energy efficiency management plan to further improve and monitor energy efficiency in ship operations. Your company has decided to implement turbocharger cut out device on some of the Container vessels for optimizing fuel consumption and improved low load propulsion engine efficiency. Further trim optimization has been implemented on some of the Aframax tankers to reduce fuel consumption and improve operational efficiency.

Your company had used combustion catalyst in the fuel oil system for fuel savings on one of the Container vessels.

All engines being fitted on board are meeting latest requirement of NOx compliance, Installation of Ballast Water Treatment plants, Silt Water Management, usage of eco-friendly refrigerants, usage of TBT free paints, ship recycling plan, etc are some of the measures showing your company’s commitment to Eco-friendly policies and conservation of energy.

iv. Technology Absorption, Adoption and Innovation :

The SCI has taken all steps to comply with requirements of The International Maritime Organization’s MARPOL Annex-VI aimed at Controlling Air Pollution and setting limits on Emissions to the Atmosphere from Ships. On the new vessels SCI has voluntarily accepted higher than mandatory requirements on emission standards.

Your company has taken the lead in ordering vessels with electronically controlled main propulsion engines and also equipped with ballast water treatment plants.

The main engines and auxiliaries on board existing vessels in the fleet are being modified and equipped to handle low sulphur distillate fuels in order to comply with regulatory fuel sulphur limits in IMO emission control areas, ports in the European Union and ports in the State of California.

Various technological solutions such as turbocharger cut out devices, trim optimization and use of combustion catalyst in the fuel oil system are being adopted to reduce the fuel consumption of the vessels thereby savings on fuel cost and total emissions from the vessels.

v. Situation in Coastal operation and Offshore areas:

The international crude oil prices remained softened during the period under review. The North Sea region had witnessed softening of rates in 2014-15. Similarly, Indian offshore market also experienced slight softening of rates in year 2015-16.

The downturn in foreign offshore markets is expected to result in many foreign flag vessels eyeing for Indian business. With these additional vessels vying for gainful opportunities in India, the charter hire rates for offshore vessels are expected to remain stable to soft during the next 1-2 years.

In the ONGC’s ongoing tender for in-chartering offshore vessels of various categories, substantial number of foreign flag vessels have shown interest. To sustain the competition, your company is planning to acquire additional assets at low prices through the secondhand/ resale market, which can immediately be deployed and leading to increase in revenue for your company.

vi. Measures taken to improve services and operations :

Most of the offshore vessels of your company have utilized their compensable downtime in such an effective manner, so as to have minimum chargeable off-hire during most of the months of FY 2015-16. The experience gained in dealing with numerous new customers/E&P operators is giving us the confidence to expand further in the challenging offshore sector beyond the Indian coast. Further, your Company is in advance stage of taking over ONGC owned two Mobile Offshore Drilling Units (MODUs) under marine man management and maintenance contract. The addition of these MODUs will boost earnings and also meet Company’s larger technical and commercial objective.

4. International Safety Management Cell

The SCI has introduced the Safety Management System by setting up a dedicated International Safety Management (ISM) Cell, which has developed, structured and documented procedures in compliance with the International Management Code for Safe Operation of Ships and for Pollution Prevention (ISM Code), in accordance with the resolution A.788(9) of the International Maritime Organization (IMO) and SOLAS, Chapter IX.

The SCI has laid the foundation of the Safety Management System (SMS) by recognizing that the cornerstone of good Safety Management is a commitment from the top management, coupled with the competence, attitude and motivation of individuals at all levels, that determines the expectations of a good Safety Management System.

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.

5. Implementation of ISM Code for Phase-I and Phase-II Vessels

Presently SCI holds separate Document of Compliance Certificates (DOC) for individual ship-types as under:

^ Bulk Carriers ^ Oil Tankers & Gas Carriers ^ Passenger Ships ^ Other Cargo Ships

Under Phase I (Bulk Carriers, Oil Tankers, Gas Carriers & Passenger Ships), the DOC was endorsed on 21.01.2016 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 renewed and issued new DOC on 07.03.2016 and is valid till 14.03.2021.

LNG Ships DOC endorsed by BV on 18.08.2015 and is valid till 26.05.2019.

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.

Also, the requirements of various amendments to ISM Code and Statutory regulations from IMO/Flag are also complied with.

6. ISPS Cell

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.

The SCI has complied with ISPS Code on all its coastal ships including small passenger ships less than 500 GT (M S notice 19 of 2011), which are registered in India.

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 fulfill 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.

7. Integrated Management System (IMS)

Compliance with Integrated Management System (IMS) (ISO 9001:2008 - Quality Management System, ISO 14001:2004 - Environmental Management System and OHSAS 18001: 2007 - Occupational Health and Safety Management System) Certification

The SCI had set a target for compliance of IMS (QMS 9001:2008, EMS 14001:2004 and OHSAS 18001: 2007) in SCI for all establishments and ships by way of IMS Certification audit before 25th February, 2016. SCI implemented the same and was awarded the IMS certification on 23rd December, 2015, well before the deadline.


i) 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 400 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. On ratings side except for mismatch in some isolated cases, there is no shortage.

To promote and encourage the culture of safety on your ships, your company continued to felicitate your ships with “Fleet Safety Awards”. The award function for the year 2015 was organized on 08th July, 2016 at our institute, Maritime Training Institute, Powai. The awards were conferred under eleven categories evaluated on various criteria of safety and performance wherein the safest ships from amongst the company’s varied fleet of vessels were felicitated.

ii) Maritime Training Institute

Your Company’s Training Centre at the Maritime Training Institute at Powai, Mumbai has conducted 429 Courses for 9288 participants and the total man-days trained during this year is 94499. These included 81247 man-days for SCI’s personnel and 13253 man-days for personnel from other companies. In addition to this, 134 of SCI’s personnel were trained outside MTI and the additional man-days of training are 602. Every Endeavour is made to ensure that our training institute is self sustaining.

Regular seminars, professional development programs and skill enhancement programs are being conducted for all ranks of officers, petty officers and ratings to enhance their competence and build a sense of belonging in them towards the company. Your company, in order to enhance capacity building in maritime education, has increased the intake in its Graduate Marine Engineers (GME) Course from 40 to 80 and in its Diploma in Nautical Science (DNS) Course from 200 to 280. Your company also commenced training of seafaring officers in Electronic Chart Display and Information System (ECDIS), a geographic information system used for nautical navigation.

iii) Shore Personnel

The total manpower as on 01.07.2016 is 778 excluding CMD, Four Functional Directors and CVO, out of which 672 are officers and 106 are staff members.

Various training programmes, both in-house and outside, including General Management Training programme have been imparted to employees for development of skill sets and knowledge.

iv) Women Representation

Your company is committed to the principle of equal employment opportunity and strives to provide employees with a work free of discrimination and harassment which is applied in all Personnel activities including but not limited to recruitment, hiring, placement, promotion, transfer, separation, compensation, benefits and training and have ensured equal opportunities for skill enhancement and career progression.

Your company’s efforts are reflected in the representation of women across various grades in the hierarchy. At present women constitute around 21% of total workforce at shore establishments of your company. Your company is the only Shipping company in India which has been recruiting women in its fleet. Presently, two Masters, seven Chief Officers, 23 second/third officers and one Fourth Engineer are women serving on the fleet of ships of your company which is among the highest in the marine workforce world-wide.

Your company encourages active involvement in the activities of the Forum of Women in Public Sector (WIPS) since its inception. WIPS, Western Region, under the aegis of SCOPE has appreciated your company’s efforts by conferring the “Best Enterprise Award (Consolation)” under Mahanavratna - Navratna Category.

v) Implementation of Official Language Policy

Your Company constantly made all-out efforts during the year towards the spread of Official Language Hindi in its offices. Your Company not only complied with the Hindi implementation guidelines issued by the Government of India, but also organized Hindi competitions, viz. Noting & Drafting, Extempore Speech, Sulekhan, Crossword competitions at a regular interval to create a conducive ambience. A half-day Hindi Unicode computer workshops on a monthly basis were also conducted to give confidence to the employees to work progressively in Hindi.

With a view to promote and popularize the Hindi language amongst employees, two issues of a bi-annual Hindi e-magazine, viz. “E-Jagriti” were circulated in soft copy via email and also placed on SCI Employees web portal during the year. Out of these, one issue was fully dedicated to the cleanliness drives conducted by your Company pursuing the “Swachh Bharat Mission” of the country. Your Company has already introduced a Quarterly Incentive Scheme for doing Hindi correspondence for its employees so as to achieve the target set for the purpose.

Your Company also organized a Hindi Seminar on “Commercialization of Languages in the wake of Globalization” for the employees of Town Official Language Implementation Committee (TOLIC) member organizations in Mumbai. On the occasion of “Hindi Day”, a Linguistic Harmony Cultural Programme was also staged. Your Company also participated in TOLIC meetings during the year under report.

vi) Reservation Policy

Your company is complying with all government guidelines as applicable from time to time in respect of reservation policy.


Annual Statement showing the representation of SCs, STs and OBCs as on 31 st March 2016 and number of appointments made during the preceding calendar year:

Name of the Public Enterprise: The Shipping Corporation of India Ltd.


Representation of SCs/STs/OBCs (As on 31.3.2016)

Number of appointments made during the ca

endar year 2015

By Direct Recruitment

By Promotion

By Deputation/ Absorption

Total no. of employees













































Non Executives B













































Total (Executives in Grade ‘A’ plus Non - executives)















viii)Corporate Social Responsibility

The Corporate Social Responsibility vision of your company articulates its aim to be a corporate with its strategies, policies and actions aligned with wider social concerns, through initiatives in education, public health, environment and other areas of social up liftmen.

Your company has aligned its CSR policy with the Companies Act 2013 and Companies (CSR Policy) Rules, 2014 notified therein”. However, your company could not constitute CSR Committee required under section 135 of Companies Act 2013 due to unavailability of Independent Directors. Since your Company made profit of Rs.200.9 Crores only in 2014-15 of the last three preceding financial years, contribution towards CSR could not be made within the meaning of the Companies Act.

The CSR Policy is available on our website:


Your company is happy to report that its efforts have been recognized at various National and International Levels. Your company has been awarded with following prestigious awards during the year for its initiatives, commitment and pioneering work.

1. Special Jury Award presented to SCI on 21st August 2015 at The Gateway Awards 2015 in recognition of the efforts in evacuation of Indian from strife torn Yemen.

2. Winner of ‘Shipowner of the Year - Indian’ presented to SCI at the 6th All India Maritime and Logistics Awards 2015 on 04th September 2015.

3. ‘Most Compassionate Employer of Indian Seafarers’ Award presented to SCI at National Maritime Day Celebrations on 05th April 2016.

4. ‘The Indian Shipping Company with Highest Growth of Indian Flag vessels’ Award presented to SCI at National Maritime Day Celebrations on 05th April 2016.

5. Award by Ministry of Shipping presented to SCI for Outstanding work in the implementation of Official language, 2016.

6. ‘Organization with Innovative HR practices’ Award presented to SCI by Asia Pacific HRM Congress Awards.


A suitable mechanism has been put in place for dealing with the requests and appeals under RTI Act 2005. The RTI manual is posted on the Company’s website. Your Company has been complying with the provisions of the Act within the stipulated time limit provided under the Act. As on 31.03.2016, your Company has disposed off most of the applications and appeals received from the parties.

10. Policy to Prevent Sexual Harassment in Workplace.

SCI endeavors’ to promote gender equality and has been taking proactive measures to prevent any Sexual Harassment in workplace.

A committee has been constituted comprising senior women executives of SCI and a lady representative from the NGO Pratham to prevent any Sexual Harassment in the workplace.

Your directors are happy to state that no cases of sexual harassment have been reported during the year ended 31st March 2016.


i) India LNG Transport Companies:

India LNG Transport Companies No.1 & 2 Ltd are two Joint Venture Companies promoted by the Corporation and three Japanese companies viz. M/s Mitsui O.S.K lines Ltd (MOL), Nippon Yusen Kabushiki Kaisha Ltd (NYK Lines) and M/s Kawasaki Kisen Kaisha Ltd (K Line) along with M/s Qatar Shipping Company (Q Ship), Qatar. SCI and MOL are the largest shareholders, each holding 29.08% share. The shares held by all the shareholders, including that by the Corporation are held in the two companies are pledged against loans provided by the lenders to these Companies. Each of the two Companies own and operate one LNG tanker named as SS Disha and SS Raahi respectively. SCI is managing the entire operation of the two ships from 2009.

India LNG Transport Company No. 3 Ltd is the 3rd Joint Venture Company which owns and operates one LNG tanker MT Aseem. The Company is promoted by the Corporation and its three Japanese partners viz. MOL, NYK lines, K Line along with Qatar Gas Transport Company (QGtC) and M/s Petronet LNG Limited (PLL) who are the other partners. SCI and MOL are the largest shareholders with 26% share each. The shares held by the Corporation and other partners have been pledged against loans by lenders to these companies. SCI is managing the entire operation of the ship from April 2013.

India LNG Transport Company No. 4 Pvt. Ltd is a Company incorporated in Singapore in November 2013 and is promoted by the Corporation with its three Japanese Partners viz. MOL, NYK Line and K Line. SCI, MOL and nYk hold 26% share each. The Company is constructing one LNG tanker of 173,000 CBM which it would own and operate under a 19 year Time Charter Agreement with charterers M/s PLL The Tanker is expected to be delivered in November 2016 and is likely to be operated to transport LNG from Gorgon Terminal Australia to Kochi & Dahej in India on account of PLL. Keel laying of the fourth LNG JV Tanker LNGC “Prachi” was held at Hyundai Heavy Industries, South Korea on 20.07.2015. The launching of the vessel was held on 27 November, 2015. The vessel is planned to conduct sea and gas trials from end June to 1st week of September, 2016.

ii) SAIL SCI Shipping Co. Pvt. Ltd.

SAIL SCI Shipping Co. Pvt. Ltd (SSSPL), a JVC between SCI and SAIL was incorporated with the 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.

Owing to the depressed bulk carrier freight levels, the JVC is unable to acquire vessels. Further view is being taken with regard to voluntary dissolution of the Joint Venture Company.

iii) Sethusamudram Corporation Ltd.

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 Project). As per the Government directive, this project is to be funded by way of equity contributions from various PSUs including the SCI. As on FY 2015-16,

SCI had invested Rs. 50 crore in the project. Work suspended since 17.9.2007 consequent to an interim stay by the Hon’ble Supreme Court for carrying out dredging operations in Adam’s bridge area. Pending a final decision on alternative alignment, all the dredgers were withdrawn since 27.07.2009. SSCP case was posted for hearing on 26.11.2015 but the case was adjourned. The argument on both sides is yet to be commenced. The next hearing date on the above cases is yet to be announced.

iv) Irano Hind Shipping Co.:

With the lifting of UN sanctions imposed on Iran, the feasibility & revival of JVC is being considered based on viable operations of the vessels owned by the company

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 “Very Good” for the year 2014-15. SCI has finalized the MOU for FY 2016-17 as per the guidelines issued by the Department of Public Enterprise (DPE) incorporating performance targets in sync with the changing dynamics of the shipping scenario and signed the MOU for FY 2016-17 with the Ministry of Shipping on 2nd August 2016.

12. Details of shares lying unclaimed

The details of the shares issued pursuant to FPO remaining unclaimed and lying in the escrow account, the voting rights of which shall remain frozen till the rightful owner of such shares claims the shares, are given as under:




No. of Shareholders

No. of Shares


Aggregate number of shareholders and the outstanding shares in the suspense account lying as on 01.04.2015




Number of shareholders who approached for transfer of shares from suspense account till 31.03.2016




Number of shareholders to whom shares were transferred from suspense account till 31.03.2016




Aggregate number of shareholders and the outstanding shares in the suspense account lying as on 31.03.2016




Aggregate number of shareholders and the outstanding shares in the suspense account lying as on 30.06.2016



An Amount of Rs,15,56,634/-w.r.t.53 applicants has been lying unclaimed in the Refund Account. The details of the same have been placec on SCI website.

13. Utilization of FPO Proceeds

During the year 2010-11, your Company had come out with a “Further Public Offer”, (FPO), comprising of a ‘fresh issue’ of 42,345,365 equity shares in your company and an ‘offer for sale’ of 42,345,365 equity shares by the President of India. The FPO proceeds of Rs, 58245 lakhs were fully utilized in the financial year 2011-12 as per object of the issue for part financing of capital expenditure on nine shipbuilding projects specified for utilization. However, due to delays in the projects resulting in default by the shipyards, during the period January 2014 to May 2014, your Company rescinded contracts for four shipbuilding projects and also, re- negotiated the installments paid for two projects in order to compress the same against a single project. The investment in the rescinded contracts out of the FPO Proceeds was Rs, 330.65 crores. Your Company has till date received back Rs, 330.65 crores of these funds from the shipyards. The shareholders vide the resolution passed through postal ballot process on 14.01.2015 approved the proposal to re-deploy they said Rs, 330.65 crores received/ to be received as refund from Shipyards, towards various shipbuilding projects including offshore assets (including but not limited to anchor handling tug supply vessels (AHTSVs), platform supply vessels (PSVs), rigs, etc) and liquid petroleum gas (LPG) vessels. Your Company proposes to invest the proceeds judiciously at the appropriate juncture during FY 2016-17.

14. Segment-wise Performance

A report on performance of the various operating segments of the Company (audited) is included at Note No. 34 of Notes on Financial Statements (Standalone) for the year ended 31st March 2016 , which is forming part of the Annual Accounts.

15. Internal Control System

“Internal Control Systems in your Company are being monitored and continuously improved to meet the challenges that arise from time-to-time with the nature and size of the operations. Annual Audit Plan is approved by Audit Committee / Finance Committee of the Board. Internal Audits are carried out by an independent firm of Chartered Accountants, viz., M/s. T.R. Chadha & Co. LLP on concurrent basis. The Internal Audit Reports are submitted on quarterly basis together with comments, recommendations and its compliance, which are being constantly reviewed and deliberated by a Finance Committee appointed by the Board in the absence of Audit Committee.”

16. Dividend Distribution Policy

The Dividend Distribution Policy of SCI seeks to reward its shareholders for their trust & investment in Company’s business objectives. The declaration and payment of dividend will be regulated by the Companies Act 2013 & Govt. of India’s guidelines as amended from time to time. The quantum of dividend payments will depend on annual consolidated Profits, fund requirement for company’s expansion plans, present and anticipated future business environment with special reference to Shipping Industry and various other factors impacting company’s performance. The dividend distribution will also be subjected to restrictions / conditions if any, imposed by lenders, orders of Courts and / or statutory bodies.


During the year under review, the Chief Vigilance Officer continued to ensure the integration of preventive vigilance initiatives in the business process thus striving towards higher ethical standards and improved corporate governance standards towards achieving the stated objective of making your Company corruption-free. Vigilance Division achieved a proper balance between preventive and punitive vigilance and simultaneously ensured good and ethical corporate governance.

Technology has been leveraged for achieving greater transparency and for eliminating systemic weaknesses through implemented and ongoing initiatives such as e-payments, promoting online registration of complaints via the Vigilance Webpage contained in the SCI website; migration to Supplier Relationship Management platform for all procurements; dissemination of important circulars/guidelines on the webpage etc. This was the first year in which the employees submitted their Annual Property Return online.

Vigilance Division has been propagating the culture of lodging of complaints under the Public Interest Disclosure and Protection of Informers’ Resolutions (PIDPR- popularly known as Whistle Blowers Resolution) whereby the identity of the complainant would be kept secret and he/ she would be protected from victimization.

Vigilance Division continued to interact with various employees of SCI as well as various stake holders including Suppliers, Ship Repair Workshops, Vendors, Contractors etc. which has helped in understanding the issues from their perspective as well.

i) Activities of the Vigilance Division carried out in 2015-16:

The important activities that were carried out in 2015-16 by the Vigilance Division were as follows:-

• Investigations into complaints of corruption/malpractice were conducted.

• Random scrutiny of Annual Property Returns (APRs)

• Active monitoring of the implementation of Integrity Pact in SCI with the scope expanded from coverage of domestic procurement and

services contracts to coverage of procurement of goods and services from foreign vendors and foreign dry-docks.

• Acted as a catalyst in the implementation of preventive vigilance measures by your Management such as e-payments, bill tracking

systems, phased transfers of employees posted in sensitive areas etc.

• Conducting surprise and periodic inspections, CTE type inspections, conducting Systems Studies and recommending systemic


• Selective scrutiny of Voyage Repairs Bills, major works, dry-docking bills, various accounts.

• Ensuring training of Vigilance Officers both on vigilance related subjects as well as general management.

• Imparting training to fresh recruits on vigilance issues.

• For the annual Vigilance Awareness Programme, apart from in-house programmes, major emphasis was placed on reaching out to youth through various programmes in schools and colleges as desired by the Central Vigilance Commission.

• An annual Newsletter titled “SCI Voyager” is also brought out on the occasion of Vigilance Awareness Week. This is being done with a

view to spreading vigilance awareness amongst employees.

ii) Vigilance Study Circle Mumbai Chapter:

The Vigilance Study Circle Mumbai Chapter was started on the initiative of SCI Vigilance Division on 16-08-2010. It continues to spread Vigilance awareness and develop the knowledge and skills of Vigilance Professionals and provides an ideal platform for the Chief Vigilance Officers of Mumbai based PSUs, Banks etc. to meet and exchange their views/ experiences, etc. on a regular basis.

iii) IMS Certification for Vigilance Division of SCI as a part of corporate IMS:

Your company decided to implement Integrated Management System in 2015. As a part of SCI’s corporate assessment for IMS, the Vigilance Division was also audited by IRQS. Vigilance Division is thus a part of the corporate Integrated Management System for the Quality standard ISO 9001:2008, for the Environmental standard ISO 14001:2004 and Occupational Health and Safety standard OHSAS 18001:2007.

iv) Integrity Pact in The Shipping Corporation of India Ltd.:

SCI has signed a Memorandum of Understanding (MoU) with Transparency International India 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. Thus, any goods/services contract of Rs, 1 crore and above will be having Integrity Pact thereby assuring the concerned parties of the transparent and ethical practices in SCI. During the year under review, the Integrity Pact was monitored by a panel of 2 eminent Independent External Monitors (IEM)s. Meetings were held periodically with the IEMs to review the progress of implementation of Integrity Pact in SCI.

18. UNGC compliance

Your company is a signatory to UN Global Compact initiative which signifies our commitment to uphold the ten principles of Global Compact on protection of human rights, prevention of child labour, protection of environment & anti corruption initiatives. Your company is an equal opportunity employer and does not discriminate on grounds of sex, religion, caste, creed, color etc. The freedom of association is recognized and various FORAs are encouraged to effectively participate on issues pertaining to welfare of employees. Fair labour practices are followed and it is ensured that no child labor is directly/indirectly employed. Your company is committed to do business consciously and responsibly setting sustainable systems to protect the environment. Your company ensures transparency, equity and competitiveness in public procurement through various inbuilt mechanism and anti corruption initiatives.

19. Remuneration Policy

The remuneration to the senior management and other shore employees of your company is governed by the Presidential Directives and directives of the Ministry of Shipping issued from time to time, which form the remuneration policy of your company.

20. 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.

21. Board of Directors

Dr. (Ms.)T. Kumar, Special Secretary and Financial Advisor (Ministry of Shipping) ceased to be a Director on the Board of SCI due to superannuation with effect from 31.08.2015 and Shri Sanjeev Ranjan, Additional Secretary & Financial Advisor (Shipping) was appointed as Director on the Board of SCI with effect from 21.09.2015.

Capt. Sunil Thapar, Director (Bulk Carrier and Tanker) ceased to be a Director on the Board of SCI due to superannuation on 30.09.2015, subsequent to which Shri S.V.Kher was appointed as Director (Bulk Carrier and Tanker), on 01.10.2015.

Shri A.K.Gupta ceased to be the Chairman & Managing Director on the Board of The Shipping Corporation of India Ltd on 31.12.2015 due to his superannuation. Capt.B.B.Sinha, Director (P&A) holds additional charge of Chairman and Managing Director w.e.f 01.01.2016.

Shri Arun Balakrishnan and Shri Sukamal Chandra Basu were appointed as Non Official Part Time Directors (Independent Directors) on 30.03.2016 and 26.05.2016 respectively.

22. Declaration of Independence

The Company has received Declaration from Independent Directors conforming that they meet the criteria of Independence as prescribed under Companies Act 2013, the SEBI (listing Obligations and Disclosure Requirements), Regulations 2015 & DPE guidelines.

23. Auditors Report

1. The auditors in their audit report for the year ended 31st March 2016 have brought out that;

a) The direct access of overseas foreign agents to fund collected on account of freight and other charges in the absence of adequate bank guarantees in comparison to net outstanding, any policy on fixation of credit limits based on various parameters & factors and regular monitoring mechanism is prone to risk of non / short payment, the consequential effect of which on the statement of profit and loss remains unascertainable.

b) Vessel Desh Shobha acquired in the year 2012-13 was undercapitalized by 3.50 million USD and the provision for interest @2.5% pa on this amount has not been made in the accounts from the year 2012-13. This has resulted in understatement of fixed assets by Rs, 20.28 crores, overstatement of profits by Rs, 4.98 crores and understatement of liability of Rs, 25.25 Cr.

The management’s views on the above observations are as below:

a) The Bank Guarantees (BG) are taken from the Agents as per the defined Company Norms in order to mitigate risks in case of delays/ default in non-payment of freight beyond stipulated period. BGs cannot cover entire business risk. These BGs are reviewed on annual basis to ensure their adequacy in terms of the company policy. SCI is a commercial organization engaged in transportation of cargo and credit period given to the Agents for freight collections is as per local trade practices prevailing in respective countries. Further creditworthiness of the agents is reviewed every three years based on their audited financial statements. There is an online system for monitoring of the outstanding from the agents which provide system reports. These reports are used for regular follow up with the agents.

b) Since the accounts for FY 2012-13 have already been audited by the statutory auditors as well as by the C & AG and approved by the Board; the issue of undercapitalization of Desh Shobha in 2012-13 is being referred to Board for its consideration. Depending on the Board decision, necessary accounting entries, if required, will be passed in the books in FY 2016-17. Pending Board decision, interest @2.5% pa till 31.03.2016 on USD 3.5 million amounting to ' 2 crores is shown as contingent liability. In view of foregoing, there is no impact on the profit, net worth, total assets and EPS of Company in the FY 2015-16 as the necessary accounting treatment, if required, will be given in the next financial year.

24. Secretrial Audit

Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial personnel) Rules,

2014, the Board has appointed Mr. Upendra Shukla, Practicing Company Secretary to conduct the Secretarial Audit for the Company for Financial Years 2015-16 and 2016-17. The Secretarial Audit report for the FY 2015-16 is appended to the Director’s Report. The secretarial auditor in his report for the year ended 31st March, 2016 has bought out that:

^ The Corporation has complied with the requirements of Corporate Governance as provided under Clause 49 of the Listing Agreement,

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and DPE Guidelines on Corporate Governance, with the exception of appointment of Independent Directors to the extent of 50% of the total strength of the Board. It is clarified by the Corporation that the matter is being pursued with the Administrative Ministry for appointing required number of Independent Directors on the Board and hence, Audit Committee, Nomination & Remuneration Committee, Stakeholders’ Relationship Committee and CSR Committee could not be validly constituted.”

^ The Board of Directors of the Company is constituted as per the Clause 49 of the Listing Agreement and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with balance of Executive Director and Non-Executive Directors with the exception of appointment of Independent Directors to the extent of 50% of the total strength of the Board. It is clarified by the Corporation that the matter is being pursued with the Administrative Ministry for appointing required number of Independent Directors on the Board. The changes in the composition of the Board of Directors that took place during the year under review were carried out in compliance with the provisions of the Act.

The management views on the above observation are as follows:

^ Pursuant to letter dated 21.03.2016 from The Ministry of Shipping Shri Arun Balakrishnan and Shri Sukamal Chandra Basu were appointed as Independent Directors on Board of SCI on 30.03.2016 and 26.05.2016, respectively. On appointment of Independent Directors, the statutory committees viz. Audit Committee, Nomination & Remuneration Committee, Stakeholders’ Relationship Committee and CSR Committee were constituted by the Board of Directors on 26.05.2016.

25. Corporate Governance

Pursuant to the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, report on Corporate Governance is attached to this Report.

26. Directors’ Responsibility Statement

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to Directors’ Responsibility Statement, it is hereby confirmed:

^ That in the preparation of the annual accounts for the financial year ended 31st March 2016, the applicable accounting standards had been followed along with proper explanation relating to material disclosures;

^ That the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are 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 that period.

^ 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, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

^ That the Directors had prepared the accounts for the financial year ended 31st March 2016 on a “going concern” basis.

^ That the Directors, in case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

^ Explanation- For the purposes of this clause, the term “internal financial controls” means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detention of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

^ That the Directors, had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

27. Acknowledgements

Your Directors extend their gratitude to Shri Nitin Gadkari, Union Minister of Shipping, and Shri Pon Radhakrishnan, Minister of State for Shipping and Shri Mansukhlal Mandaviya, Minister of State for Shipping and look forward to their support and guidance in managing the affairs of the Company. Your Directors also extend their gratitude to Shri Rajive Kumar, Secretary to the Government of India, Ministry of Shipping for his guidance.

Your Directors also wish to express their thanks to the officials in the Ministry of Shipping, Road Transport & Highways 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, and 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 loyal 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

Place : Mumbai Capt. B.B. Sinha

Dated : 18th August, 2016 Chairman & Managing Director