The Directors have pleasure in presenting the 73^rd Annual Report on the working of your Company for the Financial Year ended 31^st March, 2023.

FINANCIAL PERFORMANCE

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

The above figures have been extracted from the standalone financial statements as per Indian Accounting Standards (Ind-AS). Appropriations:

The working results for your company for the year 2022-23 shows a net profit of ' 800.12 crore. A sum of ' 141.39 crore has been transferred to Tonnage Tax Reserve. Retained Earnings has been further adjusted for dividend payment of ' 20.50 Crores during the financial year 2022-23.

Dividend:

The Board of Directors at their meeting held on 09.05.2023 had recommended a dividend @ 4.40% on the paid up Capital out of free Reserves of the Company. The Dividend will become payable once approved by the shareholders at the ensuing AGM. The said dividend will be paid within 30 days of its declaration at the AGM.

The dividend, subject to approval of the Members at the Annual General Meeting scheduled to be held on 13/09/2023 will be payable to those Shareholders, whose names appear in the Register of Members/ list of beneficial owners as on the Book Closure / Record Date. The payment of dividend will be subject to deduction of tax at source. The dividend pay-out is in accordance with the company’s dividend distribution policy which is available on the Company’s website http://shipindia.com/upload/policies/SCI_Dividend_Distribution_Policv1.pdf and also as per the prevalent provisions of laws, rules and regulations.

Share Capital:

The Company has not issued any Equity Shares with differential voting rights. Hence, no information as required under Section 43(a) (ii) of the Companies Act, 2013 read with Rule 4(4) of the Companies (Share Capital and Debentures) Rules, 2014 is furnished. The Company has only one class of Equity Shares having face value of ' 10/- each.

Brief Analysis of Financial Performance:

SCI has reported a net profit after tax of ' 800.12 crores for the financial year 2022-23. Tanker market has done exceedingly well during FY 2022-23 reporting profit of ' 822.45 Crore whereas Bulk Segment has recorded profit of ' 203.80 Crores during the financial year 2022-23. Liner segment has reported loss of ' 31.19 Crores during current year due to substantial reduction in volume of TEUs carried.

The consolidated net profit for the company for Financial Year 2022-23 is ' 870.16 crores.

A SUBSIDIARY

Inland and Coastal Shipping Limited

Inland and Coastal Shipping Limited (ICSL), incorporated on 29.09.2016, is a wholly owned subsidiary of your Company. As per Ministry of Ports, Shipping and Waterways (MoPSW), Inland Waterways Transport (IWT) Division letter dated 27.10.2020, approval was accorded to IWAI for handing over three vessels i.e. (i) M.V Rabindra Nath Tagore, (ii) M.V Lal Bahadur Shastri and (iii) M.V Homi Bhabha to ICSL. M/s. Inland & Coastal Shipping Limited (ICSL) signed a MOU on 22.01.2021 with Inland Waterways Authority of India (IWAI) for operation and management of above mentioned cargo vessels and subsequently took delivery of M.V. R N Tagore on 22.01.2021 and M.V. Lal Bahadur Shastri on 26.02.2021. Third vessel M.V. Homi Bhabha would be taken over by ICSL in due course after completion of required certifications & formalities. M.V. R N Tagore and M.V. Lal Bahadur Shastri are presently operating on NW1 & NW2 respectively.

ICSL and IWAI also signed an MOU on 11.03.2022 for takeover of two RO-RO vessels viz, M.V. Gopinath Bordoloi & M.V. Sankar Dev, to promote Inland Waterway transportation with ultimate objective to decongest roads & railways. Take-over of M.V. Gopinath Bordoloi by ICSL is under process which is expected to be completed shortly and M.V. Sankar Dev would be taken-over by ICSL after completion of dry docking by IWAI, tentatively by mid October 2023.

B. JOINT VENTURES

(i)    India LNG Transport Co. (No.1), (No.2) and (No.3) Ltd

SCI has entered into three JVCs, registered in Malta, with three Japanese Companies viz. Mitsui O.S.K.Lines (MOL), Nippon Yusen Kabushiki Kaisha (NYK) and Kawasaki Kisen Kaisha Ltd (K Line) along with Qatar Shipping Company (Q Ship) in case of ILT No. 1 & 2 and Qatar Gas Transport Company (QGTC) in case of ILT No. 3, each owning and operating an LNG tanker deployed in the import of a total of 7.5 million metric ton per annum of LNG for the Dahej Terminal of M/s Petronet LNG Ltd (PLL). SCI is the first and only Indian company to enter into the high-technology oriented & sunrise sector of LNG. SCI is the manager for these three companies, managing the techno-commercial operations of 3 LNG tankers.

(ii)    India LNG Transport Co. No. 4 Pvt Ltd

SCI has entered into 4^th JV registered in Singapore, with the same three Japanese companies viz. Mitsui O.S.K.Lines (MOL), Nippon Yusen Kabushiki Kaisha (NYK) and Kawasaki Kisen Kaisha Ltd (K Line) and Petronet LNG Ltd to own and operate one 173,000 CBM LNG Tanker for transporting LNG primarily from Gorgon, Australia to India and Far East region for charterers Exxon Mobil LNG Services B.V SCI is the manager for this company and is managing the techno-commercial operations of the tanker.

Fleet position during the year:

During the year under report, there has been NIL additions or deletions to the SCI owned fleet. Thus, the overall fleet position of SCI stood at 59 vessels of 5.311 million DWT at the end of the year.

Fleet Profile during the Year:

During the end of the year, the Company had no new building vessels on order.

Particulars of Loans, Guarantees and Investments.

Details of Loans, Guarantees and Investments are given in the notes to financial statements.

Annual Return

The Annual Return referred to in Section 134(3)(a) of the Companies Act, 2013 is available on the website of the Company: www.shipindia.com. Particulars of contracts/arrangements with related parties

Particulars of contracts/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 29 under ‘Notes to Financial statements’

Particulars of Employees

Your Company, being a Govt. Company, is exempted to furnish information under Section 197c of Companies Act, 2013 vide Ministry of Corporate Affairs (MCA) Notification dated 05.06.2015.

Employees Stock Option Scheme

The Company does not have any Employee Stock Option Scheme.

Company’s Policy on Directors appointment and remuneration

The terms of Directors appointment and remuneration are fixed by the Government of India.

Receipt of Remuneration by Managing Director from Subsidiary Companies.

Capt. B.K Tyagi, CMD has not received any remuneration from the Company’s Subsidiary.

Smt. H.K. Joshi, erstwhile CMD superannuated on 31.05.2022 has not received any remuneration from Company’s Subsidiary.

Risk Management.

SCI has approved Risk Management framework and risk registers to build up a strong Risk Management Culture within SCI in achieving company’s goals and objectives. The entity level Risk Assessment includes;

i)    Strategic Risk

ii)    Operational Risk

iii)    Financial Risk

iv)    Compliance Risk

In specific SCI has identified risks which includes volatility in freight rates, bunker procurement exposure, delay in revenue transfer etc. In SCI, concerted efforts are made for mitigating / containing and controlling risks. The top priority in the present situation includes the implications arising from pandemic circumstance and continuing with the business as per the business continuity model by identifying the critical functions. The meetings of the Risk Management Committee were held on 06.05.2022, 03.11.2022, 02.02.2023 and 08.05.2023 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.

Public Deposit

During the financial year 2022-23, your Company has not accepted any deposit within the meaning of Section 73 and 76 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 and as such no amount of principal or interest was outstanding as on the date of the Balance Sheet.

Proposed Strategic Disinvestment and Demerger of SCI

The proposed strategic disinvestment of SCI is being handled by Department of Investment and Public Asset Management (DIPAM) with the engagement of necessary Advisors. In this regard, Preliminary Information Memorandum (PIM) for inviting expression of interest was released on 22.12.2020. The Virtual Data Room is open and is being managed by the Transaction Advisor for the process of due diligence by the Qualified Interested Parties.

The Demerger Scheme (‘the Scheme’) for hiving off the identified Non-Core assets had been approved by the SCI Board on 03.08.2021. Pursuant to the instructions of Ministry of Ports, Shipping and Waterways (MoPSW), the Company incorporated a 100 % subsidiary viz. Shipping Corporation of India Land and Assets Limited (SCILAL) on 10.11.2021 for the demerger of Non-Core assets in terms of the Scheme. The Board of SCILAL approved the Scheme on 16.11.2021. The Scheme had been approved by the stock exchange vide approval dated 02.03.2022.

The Board of Directors of the Company in its meeting held on 06.05.2022, had approved certain modifications in the Scheme of Arrangement for Demerger of Non-Core Assets. Revised Demerger Scheme was approved by Department of Investment and Public Asset Management (DIPAM), MoPSW and by the SCILAL Board at its meeting held on 25.05.2022 and thereafter it was filed with the stock exchanges and Ministry of Corporate Affairs (MCA). Further to filing of First Motion Petition, the MCA vide its order dated 01.09.2022, directed the Company to convene the Meetings of the Shareholders, Secured and Unsecured Creditors.

The Revised Demerger Scheme was duly approved by the requisite number of Shareholders, Secured and Unsecured Creditors of the Company in accordance with aforesaid MCA Order. Subsequently, the Company filed the Second Motion Petition requesting further orders from the MCA on 21.10.2022, pursuant to which, MCA had called for final hearing on 29.12.2022 and directed SCI to provide responses to the Objections. Thereafter, the MCA vide its order dated 22.02.2023 approved the Demerger Scheme. The Company filed FORM INC 28 with ROC on 14.03.2023 and thereby the Demerger Scheme became effective from 14.03.2023 (effective date).

As per the Demerger Scheme and MCA order, investment of ' 1 lakh by SCI in the Shares of SCILAL stands cancelled w.e.f. 01.04.2021 (appointed date) and SCILAL shall allot equity shares to shareholders. Also, SCILAL ceased to be a subsidiary of SCI w.e.f. 01.04.2021. Further, Inter-ministerial Group (IMG) in its meeting held on 15.03.2023 decided that Maritime Training Institute (MTI) will be transferred to SCILAL as Unit/ undertaking under demerger Scheme. Pursuant to the above decision, all MTI business assets and liabilities become part of Demerger Scheme and are deemed to be transferred to SCILAL w.e.f. Appointed date i.e. 01.04.2021 at their book value. The above decision has been placed before the respective Boards.

As per Demerger Scheme, Income and Expenses related to Non-Core Assets, MTI Business have been transferred to SCILAL w.e.f. 16.11.2021, whereas Interest on Surplus cash has been transferred w.e.f. 16.11.2021 and 25.05.2022. Interest on Surplus cash of ' 45,000 lakhs has been transferred from 16.11.2021 whereas Interest on ' 1,00,000 lakhs has been transferred from 25.05.2022 i.e. from the date of approval of scheme / revised demerger scheme by both the Boards.

MANAGEMENT DISCUSSION AND ANALYSIS

The following remaining information w.r.t. to addition of new sub clause (i) under clause 1 in Part B (‘Management Discussion and Analysis’) of schedule V of SEBI (LODR) Regulations, 2015.

In advanced economies, though economic recovery is expected to continue, it will be dragged and will face persistent inflationary pressures. While most major advanced economies have been able to significantly decouple themselves from Russia, they are now facing another crisis of persistent inflation & increased systemic risks to the stability of financial institutions. During early March 2023, some of the banks in U.S. underwent a ‘bank run’, most notable of them were Silicon Valley Bank (SVB), Signature Bank, Silvergate Bank & First Republic Bank. In Europe, a global bank Credit Suisse was also under severe pressure, wherein it underwent a brokered takeover. It will be a difficult balancing act for the advanced economies, to manage inflation, interest rates & resultant slowdown as well as increased risk to financial institutions caused by tight capital availability.

Meanwhile, EMDE (Emerging Markets and Developing Economies) are expected to exhibit relatively strong growth, however their growth trajectory will be significantly hampered by the devil of inflation. Most of the EMDE economies are highly dependent on global major energy and commodity suppliers to cater to their domestic demand. If energy prices remain relatively depressed or even stable at April-May 2023 levels and no major problems arise in commodity supply, EMDEs have relatively optimistic forecasts than advanced economies. Unwinding of supply chain bottlenecks will boost their efficiency, however lack of foreign capital inflows & tight access to capital will be a major hurdle in continuing the strong growth.

For the next two years, the global GDP growth is forecasted at 2.9% in 2023 and 3.1% in 2024. The downgraded forecasts of global growth underline the pressures of inflation and strained supply chains. Looking at the year 2023, the advanced economies are expected to grow at 1.1% and EMDEs (Emerging Markets and Developing Economies) are expected to grow at 4.5%. In the subsequent year 2024, the baseline forecasts have declined from previous year, while the world GDP output is estimated at 3.0%. Since inflation has soared higher & is proving to be stickier than expected which is dampening the forecasts in short-term.

(ii) Global Trade

According to IMF, Global Trade Volume (goods and services) growth has been decent at 5.1% in 2022 and is expected to moderate to lower level of around 2.4% in 2023. In developed countries, the trade volume growth is expected to decline sharply in 2023, at an average of around 2.4%. The sharp decline in trade volume is partly due to low-base effect of earlier year settling down in this year & partly due to the raised interest rates which have made access to capital more difficult & has led to slowing down of economic activity.

In the EMDE (Emerging Markets & Developing Economies) region, the growth in trade volume during the year 2022 was 3.5% in imports and 4.1% in exports. EMDE economies are mostly import-dependent for their energy and production input needs and are thus particularly vulnerable to supply chain shocks and inflationary pressures. With limited fiscal flexibility, the middle class and lower income populations of EMDE countries are exposed to bear the brunt of inflation. This in turn puts severe pressures on demand and thus EMDEs trade volumes should theoretically languish in the upcoming year. However, in H2 2022 & H1 2023 the EMDE countries have been smartly managing import energy costs and have gained more exposure in exports due to changed trade dynamics on account of war. Overall, the world’s total trade volume is forecasted to grow by 2.4% in 2032, with significant downside risks.

Statistics-wise, IMF’s World Economic Outlook states that global trade volume will exhibit a decent growth by 2.4% in 2023 and then progress to post a forecasted 3.5% rise in 2024, as against a significant bounce back figure of 5.1% in 2022. The combined economy (GDP) of developed nations is expected to grow by 1.3% in 2023 and then rise by 1.4% in 2024. Whereas, the report forecasts that economies of Emerging Markets & Developing Countries will expand by 3.9% and then grow further by 4.2% in 2023 and 2024 respectively, as against the expansion of 4.0% in 2022. Going forward, strong organic demand accompanied with robust domestic trade as well as export-focused international trade will be the key growth determinants, particularly for EMDE countries.

The global GDP growth and corresponding economic activity directly represents the international trade (export and imports) and in turn provides useful pointers to the shipping industry as about 80% of the international trade by volume is carried out by shipping.

(i) Seaborne Trade, Fleet & Market

Globally, the average seaborne oil trade (inclusive of both crude oil & refined products) exhibited a handsome rise of 3.78% in 2022 as compared to moderate growth of 1.44% in 2021. Within the seaborne oil trade development, the ‘Crude oil’ trade increased by 4.21% with total figure at 1,956 million tons in 2022. Whereas, ‘Product trade’ (excluding Fuel Oil) was at 678 million tons in 2022, growing by 2.57%. The crude & product tanker fleets expanded by 3.11% & 9.09% respectively in 2022 (when calculated by gross dwt), as compared to the growth (+)/ reduction (-) figures of +1.65% & +5.31% during the previous year. Against the forecasts of previous year, tanker markets enjoyed a remarkable run in 2022, as robust demand is expected to keep the tonnage utilization high. As Russia’s crude was shunned by most advanced economies, this oil was bought majorly by India & China, who could procure it at cheaper than market rates. This trade kept the tanker tonnage occupied and provided a significant boost to the tonne-mile demand. With continuing solid demand in 2023 also, eastward flow of crude cargoes is forecasted grow further. In product tanker market also, the markets have turned the depressing forecasts upside down. H2 2022 & 2023 was supposed to be a slacking period as per earlier forecasts, however markets have sustained the rally the rates have been maintained at higher levels in H1 2023. However, downside risks still persist as global slowdown due to fight against inflation looms large.

The dry bulk trade registered a significant dip of -3.67% in gross cargo quantity over the course of year 2022, however the forecasts for the 2023 are optimistic, looking to bridge the gap. The war between Russia and Ukraine pushed up the commodity prices significantly. As predicted in previous year, higher commodity price inflation affected lower income countries the most, since these countries tend to be net importers of dry bulk commodities. Thus it hurt their dry bulk demand. Also, China’s strict COVID lockdowns was another factor which had a negative impact on dry bulk trade. However, with Chinese lockdowns easing & industrial activity returning towards normalcy, the dry bulk demand is expected to pick up & bridge the gap of 2022. The total dry bulk fleet growth rate was about 2.39% in 2022, which is moderated significantly than the figure of 4.15% in 2021. Dry bulk charter rates have fallen quite a bit in early 2023, diving sharply from the wholesome levels seen in mid-2022. The most intriguing factor for the dry bulk market has been the re-opening of China, which has had quite a dual tone contrasting effect. As China reopened, tonnage demand for dry bulk cargoes went up, meanwhile conversely the congestion at Chinese ports eased up. Hence dry bulk tonnage supply also increased. Result was a little see-saw market, which dipped sharply till Mid of Feb’23, rose in Mar’23, only to start falling again towards end Apr’23. iv] INDIAN SCENARIO

As per National Statistical Office (NSO), Indian economy expanded by an impressive 7.2 % (estimated) in FY 2022-23, as compared to the growth rate of 9.1% in 2021-22. The previous year’s (2021-22) high GDP growth rate was mostly due to low base formed in 2020-21. However, there are many downside risks to India’s GDP growth as India being an import-intensive country, will face the heat of commodity and energy price inflations in a major way. Although, in the passing year India’s tactile management of energy imports (especially imports from Russia amid global pressure) has led to sizeable savings in its import bill. This might have been a boosting factor for controlling inflation & spurring on of economic activity. On the other hand, any possible hopes of upside will hinge upon how inflation figures turn out. Recently due to gradually easing inflation, the Reserve Bank of India (RBI) in its April & June 2023 MPC meetings, have adopted a policy of ‘pausing’ the interest rate hikes. As per IMF World Economic Outlook, India’s GDP growth has surpassed China for the year 2022, in continuation of last year when India’s growth rate was more than that of China in 2021. The agricultural/farming sector exhibited an encouraging annual GVA (Gross Value Added) growth of 4.0% in 2022-23, while the sector had registered 3.5% GVA expansion in the earlier period. The power and utility sectors (Electricity, Gas, Water Supply and Other Utility Services) also posted an estimated GVA growth at an annual rate of 9.0% in 2022-23 as compared with 9.9% growth rate exhibited in the previous year 2021-22.

According to sources from Ministry of Commerce, India’s exports in value terms rose by 6.89% to US$ 450.96 billion in 2022-23, while imports also jumped by a figure of 16.56% to US$ 714.04 billion. One of the main reasons for this decent rise in exports was many export-oriented initiatives taken by the government & increased CPP products exports. Meanwhile imports also rose due to higher inflation, devaluation of Indian Rupee compared to US Dollar & relatively high energy costs. As per the Press Information Bureau & Indian Ports Association (IPA), the quantum of Cargo Traffic at India’s 12 major ports increased by 9.2% in the period April 2022 to January 2023 i.e. cargo traffic increased to around 646.10 million tons in the period April 2022 - January 2023, as compared to the handled traffic of 591.58 million tons in the corresponding period of previous. Looking at commodity-wise breakdown of cargo traffic, the largest commodity group in the total traffic was PO.L. (Petroleum, Oil & Lubricants) with around 30.36% share, followed by Thermal & Coking Coal at 24.40%, Container traffic at 21.81%, ‘Other Misc. Cargo’ (16.14%), Iron Ore & Pellets (5.15%), Fertilizers & Fertilizer Raw Materials (2.14%) respectively. This improvement in port performances is the result of many strategic measures initiated by the Ministry of Ports, Shipping and Waterways, focused towards elevating the performance of Indian ports. These measures include mechanization of the terminals, focus on improving the TAT (turn-around time), introduction of new processes and practices for quick evacuation of cargo, active encouragement towards use of new technologies like electronic tagging, blockchain etc., special thrust on coastal transportation, expansion/modernization of port-related infrastructure and skill development of port employees. 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 contemporary infrastructure, and the presence of captive cargo streams.

V] STRENGTHS

Years of experience in Shipping together with diversified fleet across all major segments give SCI a unique ability to exploit demand growth in any given segment with a quick-mover advantage on the peak of learning curve. Average age of vessels which was 18 years in 2007 has reduced to about 14.22 years presently (w.r.t. B&T Fleet). Longstanding COA relationships with major Indian oil refineries offer cargo security & employment assurance for sizeable part of the tanker fleet.

vi] OUTLOOK

The prospects for global economy point to diminishing levels of growth at about 2.8% to 3.0% in 2023-24, on account of rising interest rates to combat inflation creating hindrances for economic activity. In the crude tanker markets, after a buoyant market seen in 2022, tanker owners are expecting a moderate pullback in 2023-24. However, rates are still expected to be at fairly elevated levels as tonnage utilization is expected to be high. New trade patterns as well as China’s reopening are expected to keep the tanker rates high. However, there are several downside triggers such as slowdowns especially in advanced economies due to their ongoing battle against inflation. Overall flow of cargoes is forecasted to be more towards eastern side in 2023.

Similar to crude tanker markets, product tanker markets are expected to remain at higher levels for a longer duration. The new trade patterns established in product tanker markets due to Russia-Ukraine war will now continue are expected to normalize for near term. The tonne-mile demand of this new trade pattern is significantly higher than the earlier pattern & as such is expected to keep the product tanker markets uplifted. On the supply side a slow tonnage growth bodes well for CPP tanker freight markets. However similar to the crude tanker segment, the risk of demand downturn due to slowdown global economic activity persists for product tanker segment as well.

In the dry bulk market, the ride is akin to a roller-coaster one as there have been many intermittent peaks & troughs in the market. However, the overarching trend for H1 2023 has been downwards. The Q4 of FY 2022-23 was already expected to be a disappointing quarter due to Chinese lunar New Year holidays. The markets especially on the Southeast Asian side have been in depressed state with some very low rates seen in April-May 2023. However, China’s industrial activity is picking up with encouraging PMI numbers & rising demand. However, tonnage supply in dry bulk segment is increasing & this may prove to be a damper for freight markets. Due to these reasons it is being predicted that dry bulk rates will settle at a decent level, however same will be lower than the highs seen in 2022. The new regulations EEXI & CII will have very different effects on dry-bulk tonnage dynamics. The EEXI regulations will not have much impact on dry bulk trading fleet since as per estimates, the maximum capped speed due to EPL implementation is greater than extant average trading speed. CII regulations though, might have a lagging impact on trading fleet in near future after 2023.

It would be prudent here to mention that all of the above forecasts have an underlying assumption of COVID-19 pandemic being under control during 2023-24 and there is no further escalation in Russia - Ukraine war. Since the situation is quite dynamic, and since it has potential to weaken the global trade, there is a significant downside risk which may sharply pull down the shipping freight markets across segments. The outlook for shipping markets to a large extent depends upon overall global economic activity and upon readiness of the major trading economies in re-integrating with the world markets via increased globalization. National policies backing free movement of goods in the global markets, enable companies to endeavour in building extensively integrated global supply chains, thereby generating more seaborne trade.

vii]    OPPORTUNITIES

The global GDP is expected to exhibit moderate growth, increasing by 2.8% in 2023. As per IMF report, the road to recovery from pandemic as well as inflation thrust upon by war was always going to be a rocky one. The probability of soft landing is now a very small one, as the world economy is definitely in an inconvenient position due to inflation. US economy is expected to expand by 1.6% in 2023, down from 2.7% growth achieved in the previous year 2022. For tanker freight markets, there are market opportunities to be explored even with intense war in Europe. The new trade routes established due to EU economies banning Russian crude & product cargoes are expected to lend a helping hand to tanker owners in 2023 also. There is good opportunity to appropriately position the vessels in order to achieve long haul employments with possibility of triangulations. Strategically placed vessels in these regions will be primed to take advantage of this shifting dynamic. Also, in 2022, tonnage ordering slumped because of high new building prices, lack of clarity about the compliant bunker fuel and tight availability of slots with major shipbuilding yards. With inflation cooling down & more clarity on compliance norms bargain-hunting might be possible in the primary & secondary shipbuilding market. China’s GDP growth is expected to be 5.2% in 2023, sharply upwards from the figure of 3.0% exhibited in 2022, on the backdrop of COVID cases and strict lockdowns commensurate with Zero-COVID policy hampering the country’s economic activity in 2022. As stated in an earlier section, the Indian GDP growth was above that of China for the year 2022, reversing the trend of earlier years, however the difference in growth rates has reduced since Chinese economy has started recovering from COVID induced lockdowns. After scaling higher levels in 2022 & then settling down at lower levels, the rising crude oil prices are expected to dampen the economic prospects of most of the developing Asian nations, whose economies are oil-import dependent, thereby providing a case for mixed economic outlook. The Asia region (Emerging & Developing Asia) is expected to grow by 5.3% in 2023, an upwards trend as compared with achieved growth level of 4.4% in 2022, with India poised to grow at 5.9%. European economy is expected to grow only at rate of 0.8% in 2023, with growth destroyed primarily by the war between Russia and Ukraine, thereby forcing European nations to put severe sanctions on Russia, leading to rampant inflation in Euro zone. The Japanese economy is expected to grow at a rate of about 1.3% in 2023. The economic outlooks of various regions of the globe reflect seaborne tonnage demand & thereby present opportunity for shipowners to plan their tonnage deployment accordingly.

viii]    RISKS & CONCERNS

Rising inequality, weak investment realization and rising protectionism in trade offer huge challenges to the long-term global growth, thereby impacting the seaborne trade. Rise of emphasis on local-sourcing and reduced inter-dependency between nations (a.k.a. the de-globalization phase) due to stressful pandemic experience, overall rise of protectionism, volatile geopolitical environment, soaring persistent inflationary pressures hampering growth, unpredictability in US foreign policy as well as timid growth in crude oil demand remain the major macro risks. Also, the possibility of eruption of simmering geopolitical tensions in various regions across the globe poses a significant threat to the economic stability and as such present a significant macro risk. The rising crude oil prices have strained the economies of oil importing countries in both Africa & Asia, who in turn may be forced to cut subsidies and this may consequently hurt secondary demand. The most flagrant cause for concern across all segments of tankers and bulk carriers is the paradigm shift to be caused by future progress of inflation & stability of financial institutions. Apart from this, a likely tight oil supply in H2 2023 & a bleak global economic outlook might hurt tanker markets, as weak economic growth usually coincides with weak oil demand, which in turn affects seaborne tanker trade.

Similarly in the dry bulk segment, although the markets are looking optimistic, the outlook in 2023 is forecasted to be a little subdued than that in 2022, with freight rates predicted to be at lower levels than last year. Additionally, the declining cost of renewable energy, its growing acceptance in practical applications and ever-increasing compatibility remains a concern for the traditional coal importers. In India, Coal India, which is the major coal producer, continues to focus on increasing its domestic production, and this thrust to reduce the dependence on coal imports might adversely affect the coal import seaborne trade to India. Exports from black sea remain vulnerable as grain corridor is constantly under threat. Whereas, rise in tonnage supply and resurgence of dry bulk vessel deliveries remain a concern in near-term future. All the factors such as these may pose threat to dry bulk shipping business.

B.    BULK CARRIERS & TANKERS

a)    Crude Oil & Product Tankers

In the year 2022 the global demand for Crude Oil registered a decent rebound of 2.25% to 99.9 mbpd (million barrels per day) over the previous year. It is forecasted that global oil demand will recover in 2023 as global economies continue their recovery. The global oil demand is forecasted to touch or even surpass pre-COVID levels in 2023 itself. China’s economy has fully re-opened from last year’s COVID lockdowns and hence their demand outlook is positive. As the demand recovers across the globe, it is expected that OPEC will also gradually do away with their production cuts & increase production. Further on Supply side, it is estimated that since the market price of Russian crude will stay below the price cap set by EU & G7 nations. Thus the flow of Russian crude oil towards Asia will also continue, furthering the long hauls. The impressive non-OECD demand growth can be attributed to China, where consumption will increase by 1.2 mbpd in 2023 as the country is recovering from the damages of COVID lockdowns. All of these factors/events will affect the crude oil demand/supply dynamics in the coming year. Further down the road, improving fuel efficiency and rising adoption of electric vehicles are expected to adversely affect global oil demand growth.

The Indian crude oil import demand which had been steadily rising for the past few years, continued its bounce back, registering an import figure of around 232.73 MMT in 2022-23. Sharp recovery in industrial activity in India meant a sharp rise in oil demand. Accordingly, India’s oil imports have grown over the past two years.

US domestic crude output is likely to increase by about 1.0 mbpd in 2023, a decent bounce back of 5.31% over the previous year. In the case of US, the oil production is expected to rise at a significant rate this year as suppliers might be looking to bridge the gap created by OPEC+ production cuts. With US crude oil inventories seeing a bigger dip than expected in Jun’23, suppliers might be keen to keep the production levels up. Meanwhile, OPEC countries & their non-OPEC allies (collectively known as (OPEC+), are set to maintain their production curbs, thus marginally decreasing their share in the global crude oil production. In order to keep the crude oil prices at higher levels, in Aprl’23 OPEC+ members had decided to take a voluntary production cut of about 1.66 mbpd. Now OPEC+ members are extending the production cuts, thereby affecting the oil supply. There were deliveries of 20.0 million dwt of Crude oil tanker tonnage and 4.10 million dwt of (IMO Class) Product tankers tonnage in 2022. Looking further down the line, the expected deliveries of Crude oil tankers in 2023 and 2024 are 11.1 million dwt and 2.1 million dwt respectively. For Product tankers, the respective delivery figures are 2.92 million dwt and 2.43 million dwt for 2023 and 2024. New building prices for crude tankers saw a sharp rise in 2022, increasing by 16.92% on average.

Buoyant freight markets in the last year have spurred on the activity in the primary & secondary tanker markets, as many buyers have been encouraged by the market rates to place orders. Also, the inflation has caused the steel & other raw material rates to go up. Both these factors combined have led to increase in newbuilding prices for tankers. The prices are forecasted to be on firmer side due to high cost of raw materials & scarce yard availability as yards will also be occupied for EEXI/CII related fittings. Meanwhile, Newbuilding prices for product tankers also increased sharply in 2022, increasing by 16.12% on average. In tonne-mile terms, the crude oil trade grew by 2.88% in 2022 as compared to the previous year, while products trade expanded by 3.34% in the same period.

In the near future, the freight rates of crude & product tanker markets are expected to be at higher levels since global oil demand is increasing, tonne-miles are increasing due to newly established trade patterns, while new deliveries are on lower side and tanker supply will be strained because of EEXI/CII related regulations. The average spot rate yield (TCE) of TD3C route of AG/China for VLCC was US$ 15,500/day in 2022. The future market in this segment appears to be in the range of US$ 41,000-43,000/day, as China’s reopening means lot of pent-up demand of VLCCs will come in market. Also, this demand will be for a longer haul. One Year TC rate for VLCC was about US$ 25,500/day in 2022, however looks like VLCC tanker owners will be in for a pleasant ride in the next year, since long-haul eastbound large parcel size cargoes will keep the tonnage occupied, because of which market rates are expected to be pulled up. The Suezmax rate yield on West Africa - North West Europe (TD20) route was about US$ 25,500/day in 2022, which is expected to produce a big upward spike to rise to levels of US$ 44,800/ day in 2023, exhibiting an increase of about 75.69% year over year. For Aframax segment, the average spot rate on AG/Far East route (TD8) was US$ 26,500/day. These freight levels were drastically improved, and similar to Suezmax segment, rates are expected to rise up further upto $54,000 in 2023, and then moderate to mid 30,000s thereafter in subsequent years. For Product tankers, LR1 Spot rate on AG/East route (TC5) was US$ 38,300/day in 2022 and expected to exhibit moderately falling in 2023 and 2024. Average One year TC rate for LR1

was US$ 25,200/day, which is a big rise from the previous year’s avg. TC rate, allowing LR1 owners to earn sizeable profits. In MR tankers, on WCI/Japan route the spot rate (TC12) was at superbly elevated levels of US$ 22,000/day in 2022. One Year TC rate for MR tankers was US$ 20,300/day in 2022 and is expected to shoot up to levels of US$ 27,000/day over the next year.

Your company has five VLCCs & all were operational during the year 2022-23. They were mainly employed in a mix of a time charter & spot voyage charters with Indian as well as foreign charterers. The time charter fixtures were with Indian as well as foreign charterers and brought in good earnings, well above the indirect operating costs. While voyage charter fixtures earnings were in line with market. Your Suezmax tankers were mainly deployed with the Indian oil industry and performed voyage charters mainly, for both PSU as well as private charterers. Older Suezmax vessels however, unfortunately garnered lesser employment opportunities due to performance issues & problems in port acceptances.

Five LR-I tankers of the Swarna series were employed on Indian coast in a mix of COAs, Spot voyages and Time charters, catering to Indian coastal crude movement for the Indian oil industry. They were also engaged in employments of other nature such as lighterage operations, FPSO loadings and floating storage duties etc. Their earnings compare well with prevalent market levels. Another LR-I tanker MT Swarna Kaveri was deployed in CpP segment, transporting Clean Petroleum Product cargoes worldwide. It was employed with Indian as well as foreign charterers in voyage charters.

Your GP product tankers in the Swarajya Series were well employed with Indian charterers on time charter & sporadic voyage charters and their earnings were in line with market levels.

Your three MR product tankers in the Swarna series were gainfully employed with Indian as well as Foreign charterers and their earnings compare well with the markets. All 3 tankers were deployed on Indian coast. MT Swarna Kalash, MT Swarna Pushp and MT Swarna Mala, which were deployed along the Indian coast, were employed in a profitable mix of time and voyage charters supporting coastal movements of product cargoes.

The two LR-II tankers MT Swarna Jayanti and MT Swarna Kamal were employed with foreign charterers in a mix of pools & voyage charters. Their returns were stable and in line with prevailing markets.

Earnings of your coiled / double hull Aframax tankers were in line with markets, along with the average of benchmark yields under TD8 (Arabian Gulf to Singapore) and TD14 (Indo-Australia) routes on the back of COA voyages and triangulation spot voyages owing to intermittent fuel oil arbitrage trades which minimized ballast voyages. The Aframaxes mainly performed India centric - Far East / Red Sea voyages, along with occasional lighterages in Indian waters. The Aframax COA earnings are based on AFRA, which has been at decent levels throughout the year. Some Aframax employments were in the form of time charters. The time charter rates compare well with respective market benchmarks. Opportunities

The changing trade patterns, a phenomenon which began last year due to Russia-Ukraine crisis, have brought about noticeable changes in tanker tonnage engagements & freight markets in many regions. Since the overall flow of crude is moving eastwards, there has been a lot of improvement in the tonne-mile demand.

China has opened fully from previous year’s COVID lockdowns. There has been significant pent-up demand from China, which is now being realized. Strong growth in Chinese refinery runs will be a big boost for VLCCs. Also, as a rebuttal to Russia, most of the European nations have fully moved away from Russian crude. Russia has also taken retaliatory actions like closing of the Druzbha pipeline. The net effect is that most of Russian crude will now go to Asia, boosting the tonne-miles. Whereas European nations will procure their crude from US & Gulf countries, again uplifting the tonnage demand.

Moreover the crude tonnage supply is also forecasted to remain tight at least till 2025. There is a record low order book of 2.5% of total fleet and tight slot availability with yards will keep the tanker markets cheerful. Low deliveries in the next 2 years while high tonnage occupancy bodes well for tanker owners.

In product tanker markets, rates will moderate slightly from the highs of 2022, however similar to crude tankers, product tanker markets also will remain high in 2023-24. The changed trade patterns have now been established & have now become a new ‘normal’. Furthermore, the new regulations will support the rate hike as enforcement of EEXI & CII is expected to squeeze the tonnage availability in an already tight tonnage market. The product demand & CPP seaborne trade will continue to trace the growth trajectory as global economies continue to recover.

High growth in jet fuel & naphtha, particularly in northeast Asia, will keep the LR CPP tankers under high utilization, meanwhile recovering gasoline & gasoil demand is expected to keep MRs in demand. Furthermore, MRs are expected to see high increase in demand as most of European countries will replace a major chunk of the Russian CPP demand from US. This is expected to create a lot of activity in Atlantic basin, boosting MR tanker demand.

Well positioned tonnage taking cognizance of above market dynamics & regional factors will have good opportunities to earn handsome freight rates & also keep the tonnage utilization at higher levels.

In Indian context, barring a major shock, the economy would generally be on the growth track for the near future as many government initiatives and schemes kick in, giving a boost to manufacturing and capital goods sector. Consumption is also forecasted to be on stronger side. These factors will translate into robust oil demand, lending a strong hand to sustained import cargoes into the country as well as substantial coastal oil movements. SCI is uniquely positioned to cater to these trades and reap benefits therein.

With its diversified and modern tanker fleet, your company’s vessels stand to secure plenty of gainful employments. On the other hand the company is also well-equipped to withstand contingent market pressures.

Risks and Concerns

The uncertain global economic outlook poses a major risk to the optimistic forecasts in the tanker markets. Consistently high levels of inflation and counter measures taken by central banks against it, is certainly expected to have a strain on economic activity. The stability of financial institutions will be tested & will have to closely monitored, since any weakness could trigger a chain reaction & cause major slowdowns across the globe.

As the crude oil prices began coming down from the highs of 2022, OPEC+ group decided to impose a voluntary output cut on itself to the tune of 1.66 mbpd in April 2023. Furthermore in June’23 the OPEC+ nations decided to extend this output cut. The prolonged output cuts pose a risk to the global oil supply & trade growth in the coming period. Furthermore, there is a looming uncertainty over the Russian crude supplies, since if the EU & G7 decide to impose more crushing sanctions, there will be a huge impact on the overall tonne-mile seaborne tanker trade.

High new building & secondary tonnage price is another concern. The weak order book of recent quarters was expected to bring down new building prices. However, high inflation, tight slot availability & encouraging freight markets have kept the new building prices at high levels, making the new orders expensive for tanker owners.

Any economic weakness in China may hurt the tanker tonnage demand significantly, while some European economies are already showing signs of slowing down, which does not bode well for CPP tanker tonnage demand, and is a noteworthy concern for owners.

Furthermore, any escalation in COVID cases in China could cause prolonged lockdowns and severely impact China’s oil demand. This could hurt tonne-mile demand in a significant manner. Also, reduced oil demand in China will not let VLCC markets recover to profitable levels.

A change of stance by new US administration on Iran sanctions may change the Middle East tonnage scenario overnight, as a lot of Iranian vessels shall be free to do global market cargoes. This spontaneous tonnage oversupply also poses a risk to an already off-balance market, pulling the tanker earnings lower.

b) Dry Bulk

The benchmark Baltic Dry Index (BDI) fell sharply to an average value of 1668 in 2022-23, against an average of 3020 in 2021-22, exhibiting a 44.77% decrease, while registering its highest average monthly value of 2943 in May 2022.

When compared to 2022, dry bulk trade is set to exhibit a growth of 4.03% in 2023, with tonne-mile demand increasing by an estimated 4.50%. The dry bulk global trade is expected to grow at an average of 2.2% to 3.1% for the subsequent 3 years.

Dry bulk markets are expected to relatively soften & freight rates are expected to moderate from the highs attained in 2022. The journey of BDI in 2022-23 in the paragraph above, when BDI decreased by approx. 45%, is a good reflection of dry bulk market’s journey in 2022-23. The shifting trade pattern on account of Russia-Ukraine war as well as sudden unleashing of pent-up demand made markets sale higher levels in 2022. However, from 2023 onwards vessel supply is expected to strengthen as number of deliveries increases and more & more vessels come out from inactivity. Also, as congestion eases at Chinese ports, vessel supply is going to get further boost. Nonetheless, the resurgence of demand in China & expansion of overall industrial activity across regions have resulted in a encouraging demand forecasts in 2023-24. While the EEXI regulations are expected to have only a small impact on average dry bulk vessel speeds, it is the impact of CII regulations in 2024 onwards that expected to cause much of the churn in tonnage supply. Until that time, the demand-supply dynamics are still favourable to owners, however they are seen tilting slowly in charterers’ favour in the short to medium term.

The dry bulk fleet grew by 3.37% in the year 2022. Dry bulk fleet growth is expected to be elevated for the next 2 years also, as a high number of deliveries are scheduled. On account of attractive charter rates & de-congestion at ports in China, a lot of inactive dry bulk tonnage will be made available for employments. This extra active tonnage in the market is expected to complement higher new deliveries scheduled, and keep the trading fleet at a much higher level in 2023 than seen in previous 2 years.

The total dry bulk tonnage demand is expected to be on growing track for the next few years, after an obvious dip in 2022, on account of war in Europe & lockdowns in China. The dry bulk seaborne trade is expected to grow by 4.02% in 2023, while the tonne-mile demand is expected to also register a rise of 4.50%.

Global seaborne iron ore trade is set to expand by 3.70% (forecasted) in 2023. With regard to Non-Coking Coal, India’s imports are predicted to rise marginally, from the levels of 158 million tons in 2022 to a forecast of around 166 million tons for 2023. India’s imports of Coking Coal are set to rise in 2023, with forecasted imports of about 63 million tons in 2023, as compared with imports of 60 million tons in 2022.

Urea movements 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 provided a positive support to the dry segment during the year FY 22-23, however produced y-o-y decline in numbers, due to a major supply shock in the form of Ukraine in 1^st half of the FY Seaborne trade (imports/exports) of major grains remained slightly subdued, recording a fall of 2.08% in the year 2022, with major exporters being USA, European Union, Argentina, Brazil, Australia, Russia, Ukraine and Canada. On demand side, there is presence of encouraging trends with factors such as growing population translating into growing grain demand, increasing demand from Asian and African countries and corresponding increase in tonne-miles in the seaborne grain trade. Global crude steel production is projected to increase by 3.30% in 2023 with economies recovering from the disruptions caused by the pandemic. Major drivers of the crude steel trade will be India and China, with European steel trade taking a hit due to Russia-Ukraine crisis. Moreover, the Indian government’s push for infrastructure development will eventually strengthen demand for steel over the next few quarters. In the year 2023, it is projected that 101 dry bulk ships will be sold for demolition as against 43 dry bulkers in the previous year. Such reduced scrapping numbers in 2022 are mostly because of higher market levels discouraging owners from scrapping in spite of a need of tonnage restructuring along with liquidity crunch, and inflated fleet size is a discouraging sign for future dry bulk market.

In the year 2023, One-year Time Charter rate of Handymax is projected to be US$ 16,000/- pdpr, whereas for Supramaxes the same is US$ 18,200/- pdpr. In the Panamax segment, the one-year TC rate in 2023 is forecasted to be US$ 19,000/- pdpr. In the upcoming years, the freight rate forecasts exhibit a slightly upward trend, with market forecasts showing elevated levels year-on-year.

Your company’s dry bulk fleet now comprises of eight modern Supramax vessels of around 57,000 dwt each & seven modern Panamax / Kamsarmax dry carriers of around 80-82,000 dwt as on 31^st March, 2023. The bulk carriers fleet is relatively young with an average age of about 11.05 years. The earnings of our dry bulk fleet were in line with markets. In addition to the usual foreign voyage//trip-time charter/time charter mix, your dry bulk carriers were also employed on Indian coast, performing a few coastal time charters & voyage charters, whose earnings compare well with markets. 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.

Opportunities

The revival in China’s industrial activity will continue to be one of the major encouraging signs for the dry bulk market. China’s iron ore inventory has fallen which means that the country’s iron ore demand will be on the rise. Same was apparent when China’s iron ore imports from Brazil increased substantially in Q1 2023. Additionally, the coal trade crisis between China & Australia was resolved & subsequently the import volumes of Australian coal in China increased 4-fold in March’23. Resumption of coal trade between China & Australia is expected to generate a lot of demand for panamax tonnage.

Meanwhile, there is a lot of activity in thermal coal markets. There has been a robust demand of thermal coal from India & many Southeast Asian economies. In Europe, as Eu nations seek to end their dependence on Russian oil & gas for energy, there has been a rejuvenated demand for thermal coal. Germany announced to end their dependence on nuclear power in April ’23, while already as much as 26 coal-based power plants were revived in European countries. This has meant a lot of seaborne coal cargo movement in the region, thus drawing dry bulk tonnage towards the region. Vulnerabilities with respect to the Black Sea Grain Initiative has meant that many European & African countries are looking to develop substitute imports for their grain imports, which shall come mainly from US, Canada & Brazil. This is expected to generate significantly higher tonne-mile demand, keeping the tonnage occupied for a longer duration. The expansion in the minor bulk trade will augment the tonne-mile demand as China will continue to import substantial volumes of soybean, bauxite and metal concentrates from farther locations. Thus, strategically positioned tonnage will stand to gain backhaul and triangulation benefits to earn good returns.

India’s continued push to phase off petcoke has caused a big spike in its coal imports in the recent years. The Indian coal imports are expected to rise coming year too. This is a welcome development for our dry bulk ships, which are hauling a good portion of the import coal cargoes for India.

India has launched many schemes such as ‘Saubhagya Yojna’, which plans to electrify all the left out Indian households. Such ambitious plans for boosting domestic electricity, along with focus on creation of Industrial infrastructure is expected to generate a significantly robust demand-supply network for electricity. Government of India has also proposed other projects like ‘Bharatmala’ which plan to create an unprecedented road network in India by constructing roads spanning thousands of kilometers. The coal, steel & cement needed to implement these schemes will see a high demand growth in dry bulk materials, both for coastal movements as well as for imports.

Risks & Concerns

Advent of renewable energy-centric policies and increasing use of renewable energy sources in transportation and mass-scale production, poses a significant threat to the traditional dry bulk trades, especially coal. Many countries are shifting focus from traditional energy sources towards the renewable sources of energy & are actively building strategic initiatives for the same. This will not only reduce the demand for shipping of traditional energy sources like coal & oil, but bring their prices down which will make extant shipping costs unviable. This puts a question mark on future of a major traditional dry bulk cargo like coal and poses a significant risk on seaborne dry bulk trade.

Domestic factors such as ban on iron ore mining in Goa / Karnataka (however, mining ceiling caps have been raised in recent times), lengthy legal procedures involved in clearing the hurdles to re-start the mines, high export duty on iron ore etc. in India will continue to negatively affect the growth of dry bulk demand in Indian export-centric dry bulk trades.

Dry bulk trade is affected mainly by following factors - On account of elevated rates in 2022 & de-congestion in Chinese ports due to resumption of Australia-China trade & relaxation of COVID restrictions, a lot of dry bulk tonnage has come out of inactivity. The dry bulk fleet grew by about 3.37% in 2022 & on account of high number of scheduled vessel deliveries, the dry bulk fleet is projected to grow at 5.06% & 4.50% respectively in 2023 & 2024. Such a large spike in tonnage supply is expected to put a strain on dry bulk freight markets.

Inflation has been persistently high and although it is showing signs of cooling down, it is still at quite elevated levels. Raised interest rates by central banks as a response to inflation may put a damper on global growth. Financial institutions are considered to be in fragile state (with a few examples of bank runs occurring in recent times) & any fall of major institution may trigger a catastrophic chain reaction & cause widespread global slowdown. The slowdown in global trade shall not bode well for dry bulk commodities’ seaborne trade.

Moreover, although energy prices have cooled off from the highs of 2022, the industrial activity in Europe has not picked up in tandem. Many countries, especially UK, are showing signs of stagnation. As per some forecasts, this will hurt the demand for iron ore, coal & minor bulks, thereby posing a risk to the seaborne trade.

The EEXI regulations shall not pose any significant drain on vessel speeds, contrary to what was being forecasted earlier. The average vessel speeds are already lesser than capped speed limits which owners would have to adhere to in order to comply with EEXI regulations. Also, the impact of CII regulations is going to be in a much delayed manner. Hence, the tonnage easing effect that was earlier thought to come with implementation of these regulations, is no longer expected to be a threat to overall tonnage availability. This means that tonnage oversupply situation is likely to persist for a longer duration.

Grain and fertilizer trades are seasonal and could be relatively short term in nature with uncertain parcel sizes which require timely positioning of tonnage to exploit the trade.

SCI with critical mass in panamaxes is catering to transportation of three major commodities such as Iron ore, coal and grain, which are prone to be affected by economic slowdowns. High probability of persisting future slowdown in these major trades globally, the earnings of panamaxes may suffer.

The absence of long-standing COAs & similar assured business opportunities stand to make your company’s dry bulk business volatile & open to adverse impacts by the market forces. One more aspect that may churn charter rates is delayed scrapping of the vessels (especially older tonnage) in global markets, on account of temporary spikes in freight rates, which could lead to recurrence of overcapacity situation in the market.

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 pose risks to the national demand. Shipping being a derived demand will be negatively affected by these factors.

c) LNG Transportation

LNG is playing a major role in the energy markets with many countries turning to natural gas to meet their energy needs. With the increasing thrust on cleaner fuels, it is the only fossil fuel expected to grow beyond 2030, peaking in 2037.

LNG trade to grow at a compound Annual growth rate of 6.8% from 2022 to 2027 as the European LNG demand is poised to increase. The global LNG trade is expected to reach 401.4 million tonnes in 2023, increasing 7.8% YoY While Europe will continue to attract the majority of LNG cargoes, recovery in China’s LNG demand post- Covid lockdowns is raising the competition. The Europe unprecedented demand is been met by US, while China will meet its demand primarily through the Russian gas supply. This has resulted in major shift in LNG Transportation, as more than around 68% of US LNG exports is expected to head to Europe.

The last year contained a multitude of supply and demand shocks - the biggest being Russia’s invasion of Ukraine. The LNG market was already reeling under tight supply conditions when the rise in geopolitical tensions created a major shift in LNG trading patterns. Europe became the dominant importer by paying higher premiums for cargoes and edging out the price-sensitive Asian buyers.

A flurry of LNG carriers (LNGCs), mainly from the US and other exporters, to discharge at Europe’s existing LNG terminals led to high congestion and record imports. Europe was forced to build up its gas storage, attracting the majority of global LNG cargoes to the region. The almost ‘war-time’ effort to build inventories increased LnGc rates during September-November.

Asian demand softened at the start of the year, depressing shipping rates, while ships moving to Europe instead of Asia improved vessel availability. Meanwhile, China recorded its biggest fall in imports due to the country’s multiple Covid spikes and consequent lockdowns. As Europe cut ties with Russia, the latter increased its pipeline supply to China.

China’s spot in LNG demand is expected to improve in 2023, negated by the rise in domestic supply and further ramp-up in Russian pipeline supply through the Power of Siberia I.However, with the recent long-term supply deals signed by Chinese players, the country’s LNG imports are expected to recover in 2023, allowing the country to re-export cargoes if needed. China’s manufacturing purchasing managers' index

(PMI) has significantly improved to 52.6, indicating an optimistic outlook for more LNG imports.

Asia’s top five LNG buyers (Japan, China, India, South Korea and Taiwan) imported 54.7 million tonnes in 4Q for 2022, down by 10% YoY The prolonged high spot prices in 2022 discouraged the buying interest from major LNG demand centers, mainly China and India. As a result, the region’s combined lNg demand remained low in 4Q of 2022 despite LNG prices moderating over November-December.

Indian LNG imports slumped 18% YoY to 4.8 million tonnes in 4Q of 2022 as gas buyers were reluctant to pay the high prices for LNG consumption. High spot LNG prices have impacted import project development in India. India imports around 55% of its natural gas requirement. India was expected to start two FSRU projects by the end of 2022, but the Jaffarabad LNG project is delayed by at least one year and the Jaigarh FSRU project has been halted, with the vessel now chartered for a European project. In FY22, India’s LNG production was 33,131.23 million metric standard cubic metres. About 83% of local LNG comes from ONGC and Oil India Limited.

Despite the current high prices, India’s LNG demand is expected to rise in the long term, primarily from the city gas distribution (CGD) sector. The country is preparing to cater to the increasing demand by building new import capacities and expanding the existing ones. India currently has 42.4 mtpa of regasification capacity through six onshore operating terminals. There is another 16 mtpa capacity under construction, while 7 mtpa is in the planning stages. The ramp-up of existing facilities and Construction of new LNG terminals could theoretically more than triple current capacity to over 80mtpa of regasified LNG over the next 10 years.

India made a commitment in the Paris Agreement 2015 to reduce the Carbon Emissions Intensity by one third and has agreed to achieve this by increasing the share of renewals in its energy mix from 6.2% now to 15% by 2022 and 40% by 2030. This is a very ambitious target and Natural Gas and Solar power are going to be the biggest contributors in achieving the same. The Indian government, along with state utilities, is also pursuing green hydrogen opportunities to diversify the country’s energy portfolios and mitigate energy security concerns.

Power and Fertilizer sector remain the two biggest contributors to natural gas demand in India and continue to account for more than 75% of gas consumption. Balance 25% is consumed by the Petrochem and other industries, and city distribution for vehicles and domestic consumption. Currently the natural gas demand far exceeds domestic supply in India and the situation is likely to prevail in future as well. While the Middle East, in particular Qatar, was the sole supplier of LNG to India till 2004 and remains the largest LNG supplier at present, the range of suppliers is becoming increasingly diverse. India started diversifying its supply portfolio from 2006 onwards and imported LNG from many other countries including Algeria, Nigeria, Yamal, Australia, Trinidad and Tobago, Russia, UAE, Norway, Indonesia and Oman. Currently, LNG is imported in India through mix of long term, short-term and spot contracts. An important factor in the future viability of planned import projects is India’s ability to secure long-term LNG contracts at competitive prices. Current long- term contracted volumes fall way short of the potential growth in LNG demand forecast by numerous sources with newly-signed contracts pointing towards only an incremental increase.

Earlier the Indian market was unable to commit to short-term contacts (up to two years) and spot purchases as the country lacked adequate gas infrastructure. However, short -term and spot market accounted for most of the increased LNG supply in the two years given that only7.5 mtpa of LNG import is through long term contracts. Petronet has transported 1.44 mt from Gorgon and IOC has imported 0.7 mt from Cameron LNG project, USA as well. While India remains one of the most price sensitive markets for LNG in Asia, short term demand is not solely determined by the level of spot LNG prices. Competition from competing fuels, the price of contractual LNG and terminal constraints can play a role in tempering the level of spot imports. In an uncertain crude price environment, buyers may also favour an alternative balance between pure spot trades and structured contracts as part of the overall short-term mix in the near term.

India will remain sensitive to the price movements in the global LNG market with buyers switching to coal from gas for power generation with reasonable flexibility. Hence we can conclude that going forward, the industry is likely to see an increased trend of procuring LNG through mid-term and short-term contracts as these will be negotiated at rates cheaper than spot prices.

The Indian Government has plans to connect 10 million households with piped gas from the current 4.8 million households. There have been many rounds of bidding for various geographic areas for giving out licenses to companies for setting up distribution network and supplying Natural Gas in many districts. Overall Billions of Dollars have been committed in total and once implemented almost 70% of the country would be geographically covered with Piped Gas for Domestic use.

While India is emerging as major LNG market of future with all round development in LNG terminals, gas pipelines to attain desired sustainable growth, a comprehensive approach which can meet suppliers expectation on one side and meet consumers price expectation on other side needs to be firmed up. India would also need to take strategic decisions like upstream participation in integrated liquefaction projects, tax efficient structures, and a consumer friendly regulatory environment to make this dream a reality.

Your company jointly owns and operates 3 LNG carriers under long term charters with charterers Petronet LNG Limited, India for transportation of LNG predominantly from Qatar. The 4th LNG carrier is under long term charter to Exxon Mobil LNG Services B.V, Netherlands. In order to ensure its presence in the new areas of the LNG market, your company is exploring opportunities for operating small LNG carriers and coastal LNG shipping. Your company has built up a pool of trained LNG officers and the experience of independent technical operation of LNG tankers has helped to provide ship management services.

d) LPG Carriers

India’s LPG imports increased by 1% in 2022 to 17.9 million tonnes driven by lower prices. Of the total LPG imports, almost 90% was from the Middle East. India’s LPG imports are likely to grow at a CAGR of 6.4% between 2022 to 2027. An increase in the demand for Liquefied Petroleum Gas as a residential, industrial, and transportation sector is the major driver for the forecast period. The growing demand for clean cooking fuels in rural, as well as urban households is expected to give a boost to the country’s LPG market in the forecast period. However, the country’s LPG consumption primarily in the residential sector was impacted by the high global LPG prices caused by the Russia- Ukraine conflict in 2022. The high prices coupled with the removal of subsidy on residential LPG supply triggered a fall in consumption as consumers moved to cheaper alternatives. The Indian government tried to control LPG prices and announced a compensation of $2.7 billion to three state-owned refineries for selling LPG below cost at its instructions.

As per the forecast, LPG consumption in India during 2023 is expected to be higher as global LPG prices shall remain stable. The market’s growth will remain slower than pre-pandemic as urban markets are almost saturate while City Gas Distribution (CGD) networks is expected to increase the LPG demand.

Your company’s sole VLGC carrier - VLGC Nanda Devi, was employed under time charter with Indian energy PSUs during this financial year. The daily earnings were attractive as compared with markets.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial performance of the tanker segment has been largely influenced by earnings on the VLCCs, Suezmax and Aframax segments where SCI has had a mix of spot cross trade charters, market linked Contract of Affreightment and Time charter businesses to effectively hedge employment and earnings risks. In the smaller segments consisting of product carriers and LR-I dirty crude carriers, the employment was mainly to meet the domestic product and indigenous coastal crude movements on long term contracts and time charter business. The mix of employment types and geographical concentration in niche coastal business segment has ensured returns in line with market trends. The global tanker markets were at pretty good levels during most of 2022-23. However, it is to be noted that some of your Aframax, Surezmax & LR1 vessels were under dry-docks & hence some earnings opportunities were circumstantially missed. Also, a noteworthy chunk of potentially lucrative earnings opportunities was lost due to unforeseen operational challenges and inherent technical issues on the vessels. Nevertheless, internationally high market levels, thoughtful deployments & handsome earnings opportunities on SCI’s usual trade routes resulted in tankers giving a very good performance financially.

The dry bulk segment was still recovering from historically bad period and loss of key cargoes such as Iron ore exports from India, resulting in long non-profitable ballast legs thereby putting pressure on earnings. Also, some of your dry bulk vessels were planned to go into dry-docks hence the revenue operating days were comparatively less. Due to Russia-Ukraine crisis, Chinese port congestions & other global factors dry bulk tonnage dynamics changed & as economies began recovery the seaborne demand outlook of dry bulk tonnage improved. However, due to high bunker prices & high tonnage supply, dry bulk markets could not scale highs of previous year. Accordingly dry bulk markets moderated & had a profitable, but subdued performance as compared with last year. Strong recovery of Indian economy meant that activity was busy for India-centric trades & strategic tonnage deployment (including a rare COA in dry bulk segment) produced a moderately profitable financial performance in dry bulk segment.

e) Information Technology:

SCI has a robust ERP system in place. These systems are hosted in SCI’s Data center located at Powai. To ensure Business Continuity, SCI also has a Disaster Recovery Site at Kolkata office. There is an E-tendering platform which is being extensively being used for procurements, thus enabling transparency and efficiency in the procurement process. SCI has implemented a Vendor Invoice Management system which facilitates registration of invoices centrally by the vendors which then goes through a work flow mechanism for approvals till settlement. Vendor has a facility to track and understand the status of their invoices.

As part of the Cyber Suraksha initiative, SCI has been making employees aware on various topics like cyber security awareness, whatsapp scams, phishing, desktop, laptop and mobile security, precautions against fraudulent transactions through articles, emails and talks by eminent personalities.

2. LINER AND Passenger Services Industry Structure & Developments i) World Scenario:

A surge in consumer spending - especially for goods ordered online - combined with supply chain disruptions and land logistics constraints pushed container freight rates to five times their pre-pandemic levels in 2021. Surge in container shipping freight costs, which peaked in early 2022, sharply increased consumer prices for many goods. Likewise, freight rates for dry bulk - unpackaged raw materials like grains -increased due to the war in Ukraine, prolonged pandemic and supply chain crisis. An UNCTAD simulation projects that higher grain prices and dry bulk freight rates can lead to a 1.2% hike in consumer food prices, with higher increases in middle- and low-income countries. Although freight & charter rates have fallen since mid-2022, they are still above pre-COVID-19 levels. Informatively, rates remain high for oil and natural gas tanker cargoes due to ongoing energy crisis. In an increasingly unpredictable operating environment, future shipping costs will likely be higher and more volatile than in the past.

Global trade growth in 2023 is expected to be subpar despite a slight upgrade to GDP projections since last fall as forecasted by WTO. Weighed down by effects of war in Ukraine, stubbornly high inflation, tighter monetary policy and financial market uncertainty, volume of world merchandise trade is expected to grow by 1.7% this year, following 2.7% growth in 2022, a smaller-than-expected increase that was pulled down by a sharp slump in fourth quarter.

According to IMF, Global Trade Volume (goods & services) growth has been decent at 5.1% in 2022 and is expected to moderate to lower level of around 2.4% in 2023. In developed countries, the trade volume growth is expected to decline sharply in 2023, at an average of around 2.4%. The sharp decline in trade volume is partly due to low-base effect of earlier year settling down in this year & partly due to the raised interest rates which have made access to capital more difficult & has led to slowing down of economic activity.

Trade growth is expected to rebound to 3.2% in 2024 as GDP growth picks up to 2.6%, but this estimate is more uncertain than usual due to presence of substantial downside risks, including rising geopolitical tensions, global food insecurity, possibility of unforeseen fallouts from monetary tightening, risks to financial stability and increasing levels of debt.

(ii)    Indian Scenario:

India’s growth continues to be resilient despite some signs of moderation in growth. Although significant challenges remain in the global environment, India remains one of the fastest growing economies in the world. As per National Statistical Office (NSO), Indian economy expanded by an impressive 7.2% (estimated) in FY 2022-23, as compared to the growth rate of 9.1% in 2021-22. There were some signs of moderation in the second half of FY 22-23. Growth was underpinned by strong investment activity bolstered by the government’s capex push and buoyant private consumption, particularly among higher income earners. Inflation remained high, averaging around 6.7 %in FY22 -23 but the current-account deficit narrowed in Q3 on the back of strong growth in service exports and easing global commodity prices. World Bank has revised its FY 2023-2024 GDP forecast to 6.3% from 6.6%. Union Minister for Finance & Corporate Affairs has projected a baseline GDP growth of 6.5% in real terms in FY 2024. Projection is broadly comparable to estimates provided by multilateral agencies such as World Bank, IMF, ADB and by RBI, domestically. Growth is expected to be constrained by slower consumption growth and challenging external conditions. Rising borrowing costs and slower income growth will weigh in on private consumption growth, and government consumption is projected to grow at a slower pace due to withdrawal of pandemic-related fiscal support measures.

Although, headline inflation remains elevated, it is projected to decline to an average of 5.2% in FY 2023-2024, amid easing global commodity prices and some moderation in domestic demand. Reserve Bank of India’s has withdrawn accommodative measures to rein in inflation by hiking policy interest rate. India’s financial sector also remains strong, buoyed by improvements in asset quality and robust private-sector credit growth.

Central government is likely to meet its fiscal deficit target of 5.9% of GDP in FY 2023-2024 and combined with consolidation in State government deficits, general government deficit is also projected to decline. As a result, debt-to-GDP ratio is projected to stabilize. On external front, current account deficit is projected to narrow to 2.1% of GDP from an estimated 3% in FY 2022-2023 on the back of robust service exports and a narrowing merchandise trade deficit.

Major Ports have set new records by exceeding cargo handling targets and have handled 795 MT for FY 2022-23, with 10.4% year over year growth. Deendayal Port, Kandla, Jawaharlal Nehru Port, Paradip Port, Syama Prasad Mookerjee Port, Kolkata and Visakhapatnam Port have achieved highest ever level of cargo handling during FY 2022-23. Informatively, India has 12 major ports — Deendayal (Kandla), Mumbai, Mormugao, New Mangalore, Cochin, Chennai, Ennore (Kamarajar), Tuticorin (V.O. Chidambaranar), Visakhapatnam, Paradip and Kolkata (including Haldia) and Jawaharlal Nehru Port.

On 22.03.2023, country’s first National Centre of Excellence in Green Port & Shipping (NCoEGPS), a collaboration between MoPSW and The Energy and Resources Institute (TERI), was inaugurated by Hon’ble Minister of MoPS&W at research institution’s field station in Gwal Pahari, Gurugram. NCoEGPS is expected to play a vital part in greening the shipping industry and ports by steering it towards carbon neutrality and circular economy.

Cargo movement on National Waterways during FY 2022-23 reached an all-time high of 123 MTs which is an increase of 13.06% as against FY 2021-22.

(iii)    Business Sector & Outlook

Years 2021 & 2022 were characterized by capacity pressures. Several carriers have utilised their record-high profits to place orders for new vessels, which are expected to create an oversupply starting 2023 onwards. While new vessels will ease capacity shortages, shipping lines would likely cut freight rates to improve volumes, which will benefit exporters. Experts also predict that this trend will continue with large shipping companies focusing aggressively on acquiring & deploying more environmentally friendly & sustainable new capacity.

Freight rates in 2022-23 have decreased substantially from their record highs of 2021- 2022. Freight rates are further expected to drop by 15% to 40% in 2023 as compared to 2022. During March 2023, freight rates for Asia - North America West Coast trade fell by 8%, for Asia - North America East coast trade by 10% and for Asia-Europe trade by 17%, as compared to February 2023. Global shipping giant Maersk expects global annual container demand to shrink by 2%-4% in 2023. This reduction in demand has led to a decrease in freight rates.

The year 2023 is expected to witness a further slowdown in economic activity. The International Monetary Fund (IMF) estimates global economic growth to reduce from 3.2% in 2022 to 2.7% in 2023. A broad-based recession is expected to impact global value chains - from availability of raw materials to production and transportation. Moreover, gradual withdrawal of Covid-related stimulus measures will intensify recessionary impact. This is expected to lead to a further decrease in consumer spending and global demand. However, estimates indicate that global e-commerce will grow. Moreover, lower shipping costs may cause cargo that previously travelled by truck or train to shift to water vessels. Together, these factors may have a slightly moderating impact on demand.

Another factor that is likely to affect freight rates is the rise of digital transformations across freight forwarding industry. Traditional freight forwarders are introducing digital tools to increase transparency and improve communications. Moreover, several digital companies are providing services to organize and coordinate movement of goods. According to Allied Market Research, digital freight forwarding industry is expected to grow from US$ 2.92 billion in 2020 to US$ 22.9 billion in 2030.

(iv) Expected Changes & Trends in Shipping during 2023

Re-shoring of Source & Protectionism: As companies grappled with fallout of having far flung sourcing origins and supply chains that were heavily impacted by Covid-related restrictions, many have adopted measures to diversify sourcing to insulate themselves against global macro-factors. Several companies have adopted re-shoring and friendshoring and moved production closer home to protect themselves from disruptions and delayed deliveries. According to shipping journal Lloyd’s List, this reorientation of trade flows is “creating extra loads into the system,” and may open opportunities for shipping companies. However, alongside this reconfiguration, protectionism is expected to rise with countries implementing measures to reduce imports and boost domestic industries. These measures will impact global trade, and in turn the freight forwarding industry in the future. However, the exact ramifications of these trends will only become clearer in the long-term. Digitisation & Automation: While shipping industry has generally not been one of the prime movers when it comes to adoption of new & innovative technologies, unpredictability & chaos caused by successive black swan events over last 2 years have significantly added to complexity of planning transport & shipping process, for both Carriers & Shippers alike and has compelled Carriers to consider investing in sophisticated transport planning systems and laying greater emphasis on digitization and automation in their internal processes. Permutations and combinations that the present scenario throws up render it impracticable to rely on rudimentary planning tools; a realization that is slowly dawning on Carriers. Sector has, therefore, been heavily investing in technological solutions and also formed industry associations to standardize processes and facilitate automation and adoption of common industry-wide processes. Biggest players in the industry have for a few years now been exploring Blockchain technology and the increased usage of Big Data, AI and ML, with market leaders even forming a partnership to adopt these technologies to maritime sector. Post participation of bigger players, medium-sized carriers and ports too have joined the partnership, thus rapidly creating core mass needed for such technology to be widely adopted & become industry standard. Environmental Focus & Green Supply Chains: As environmental awareness grows world over and consumers & corporates become progressively aware of their responsibilities in reducing overall carbon footprint, we are witnessing enhanced focus on environment-friendly business and commercial practices. Driven by a growing consumer preference for eco-friendly products and services, coupled with willingness to pay a premium for such products, sustainability has become a keyword for major corporates. While selecting transport vendors (including shipping companies & inland hauliers), shippers & manufacturers world over are laying greater emphasis on reduction of emissions and lower carbon footprints, to the extent that higher weightage is being given to these aspects in the annual tendering process. Governments and international trade and maritime organisations too have been becoming increasingly cognizant of the need for shipping to reduce emissions and have been setting stiff emission reduction targets. Major container carriers have taken this a step further and set themselves emission reduction targets that are even more ambitious than what regulations stipulate. Carriers are also allocating higher amounts for research on reducing emissions and becoming open to investing in new technology and fuel types. Proof of this is the LNG fuelled vessels that a growing number of Carriers have opted for in the last couple of years. As an aside, it might seem counterintuitive that Shipping has been subject to such intense scrutiny, despite being one of the least polluting modes of transport. This is however explained by the fact that even though shipping is the most environmentally friendly mode of transport in relative terms (to other transport modes) and also at a per-unit level, sheer volume of internationally traded cargo that the maritime sector caters to means that total emission levels generated by the shipping industry are massive. Overall, this is one of the positive trends in the shipping industry, and though expected to raise freight rates, will in the long run contribute immensely to sustainable international trade and development.

SWOT Analysis Strength & Weaknesses

Liner Division of SCI has vast experience in liner trade, which is the most formidable force instilling confidence in cargo interests / owners who continue to lend their invaluable support to SCI.

Customer friendly approach at all levels and SCI’s customized services puts SCI ahead in the league.

Wide network of agents, all across the world, provides and facilitates for localized contacts in markets to offer customised end to end logistics solutions.

Operating partnerships have been forged with internationally recognized container carriers in select consortia, to enhance coverage and frequency on major trading routes.

Break-bulk operations are largely profitable and provide stable source of revenue.

Though SCI started predominantly as a liner shipping company but currently has only 2 liner vessels and has a miniscule share in global DWT.

Opportunities & Threats:

Substantial growth of Indian EXIM container trade facilitated by enabling GOI policies viz. Sagarmala, Gati Shakti, Maritime Vision 2030, National Logistics Policy, Foreign Trade Policy 2023 etc.

Substantial potential for enhancing presence on Indian coast in coastal shipping sector, feeder operations, IWT etc.

Capitalise on substantial movement of project cargoes, heavy lift shipments.

Tapping more PSU / GOI / Defence cargoes.

India-Maldives Service to serve as template for expansion into Indian Ocean Region & near Coastal Regions.

Provide Technical, Operational & Commercial Management, of IWAI vessels through SCI Regional office.

Break bulk sector continues to maintain good potential in respect of ocean freight arrangements of General cargoes, Over-Dimensional Cargoes (ODC), Project cargoes, Heavy Lift cargoes etc. on account of Government Departments / PSUs and other GOI organizations. Supply / demand overhang with huge box-ship order-book dominated by larger ships (ULCS / VLCS) placing considerable stress on already depressed freight markets.

Declining merchandise / EXIM trade owing to emerging geopolitical risks, global inflationary trends, slowing consumer demand, high inventory overhang etc. depressing fill factor / capacity utilization etc.

Trade-wars, protectionism etc. & its impact on emerging markets pose serious headwinds.

On-going industry consolidation, capacity management & network optimisation forcing cascading of bigger vessels into niche segments stressing out freight rates, capacity utilisation, revenue and profitability.

Extreme volatility in input costs viz. especially bunker prices, port / terminal / depot tariffs etc. severely impacting bottom line.

Availability & matching of right type / size of equipment / inventory owing to systemic trade imbalance.

Liner Shipping Services 2022-23 A) Segment-Wise Performance

A.1. Liner Vessels: Table below shows profile of your Company’s owned liner fleet having a total container carrying capacity of 8,800 TEU (nominal capacity).

A. 2. Both container vessels namely, m.v. SCI Chennai and m.v. SCI Mumbai are 14 years old. As on 31.03.2022, 1 in-chartered container

vessel having Net Tonnage of about 10,643 MT was operated by your Company. In addition to above owned and in-chartered vessel, your Company also has cargo loading rights on 23 vessels of its partners in various consortia arrangements that your Company has with leading Shipping Lines such as Mediterranean Shipping Company (MSC), Sima Marine / Simatech. Your Company continued to be present in the following sectors.

B) Container Services

B. 1. Himalaya Service (erstwhile ISE Service): UK-C Cellular Container Service was commenced in 1994 by SCI, as a single operator,

deploying three vessels of 1,800 TEU capacity. Service was subsequently upgraded to a fixed day weekly service with two partners deploying a total of seven vessels of similar capacity. During economic downturn of 2008-09, service was rationalised by forming a consortium with MSC in May 2009, to operate a weekly service with a total of eight vessels, out of which two vessels of 4,400 TEU capacity was contributed by SCI. Thereafter, in early 2016, service was upgraded to eight vessels of 8,500- 10,000 TEU capacity and accordingly SCI’s contribution was revised to one in-chartered vessel of about 8,500 TEU capacity. Since August 2021, service is being operated by MSC with 9 vessels and SCI is maintaining its presence in India - Europe sector through purchase of slots from MSC as SCI was unable to induct a suitable vessel.

B.2. IPAK Service: In a slot swap arrangement between SCI and MSC, SCI has been allotted 150 TEUs slots @ 12 MT/TEU by MSC, which operates IPAK service in exchange for similar slots allotted to MSC on Himalaya service.

B.3. SCI Middle East India Liner Express (SMILE) Service of SCI and India West Coast Service (IWCS) & Chennai Colombo Gulf

Service (CCG) of Partner: SMILE and CCG services seamlessly link up Persian Gulf with East Coast of India and West Coast of India, thereby, strengthening and expanding SCI’s presence in Coastal Shipping Sector. Joint operation on this route is a force multiplier for SCI, which provides high quality 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 CCG with their service rotations makes it feasible to connect pan-Indian ports with improved transit time. SCI seeks to cooperate with other Indian Companies to work out best transportation solutions for trading community vis-a-vis commercially, economically viable and environmentally feasible options. SCI connected West Coast of India to Southern and Eastern ports of India viz. Katupalli / Krishnapatnam / Vizag / Haldia / Kolkata and Pan India service got stabilized during 2017-18 up till February 2021 thus, promoting GOI initiative ‘Sagarmala’ and increased coastal shipping. Pursuant to Ministry of Shipping, Ports & Waterways (MoPSW) directives to overcome high freight rates and to overcome high freight rates and for promotion of exports, SCI Management was directed to deploy on of its owned container vessel viz. m.v. SCI Chennai on a feasible EXIM sector to cater to requirements of Indian exporters. In this regard, it may be worthwhile to note that since the measure to deploy SCI vessel in EXIM trade to Middle East was taken to overcome high freight rates and shortage of containers has eased out, due to which the vessel was re-deployed on coastal sector where profitability was higher as compared to Persian Gulf sector.

B.4. India - Maldives Shipping Services: India - Maldives Cargo Shipping Service between India and Maldives, was jointly launched through a virtual ceremony on 21.09.2020, adding a new chapter in connectivity initiatives taken by both countries in Indian Ocean Region (IOR), connecting Indian Ports of Cochin and Tuticorin with Kulhuduffushi and Male. Majority shipments are of bulk/break-bulk nature, whereas, thrust is to fill-up vessel with containerized cargo for better profitability. Informatively, service was briefly discontinued in September 2022, due to off hiring of the vessel. However, Service was continued through interim arrangement with other carriers. B.5. Inland Waterways Services: Inland & Coastal Shipping Limited, a wholly owned subsidiary of your Company has forayed into Inland Waterways Shipping Services by taking over IWAI vessels viz. m.v. Rabindra Nath Tagore and m.v. Lal Bahadur Shastri for operating these vessels on nW1 between Kolkata - Patna - Varanasi and on NW2 between Kolkata and Pandu. Subsequently an MoU has been signed on 11.03.2022 with IWAI for taking over of two RO-RO vessels viz. m.v. Gopinath Bordoloi and m.v. Sankar Dev.

B.6. Feeder Operations: SCI makes feeder arrangements with “Common Carriers” between various destinations / port-pairs on Indian Subcontinent.

B.7. Slot swap arrangements: SCI enters into slot-swap arrangements with service providers depending upon trade requirements.

B.8. Break-Bulk Services: SCI arranges carriage of break-bulk cargoes on space charter basis from various regions across the globe including USA, Europe and Far East for imports on account of Government Departments / PSUs and other GOI organisations, which includes Shipments of Over-Dimensional Cargoes (ODC) / Project cargoes / Heavy Lift cargoes / IMO Class I Cargoes etc. and also containers.

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, Virtual Meetings with agents, shippers, freight forwarders, NVOCC’s etc. are held periodically, and SCI representatives also participate in various trade meets at important locations in India.

Outlook: Year 2023 is expected to witness a further slowdown in economic activity. International Monetary Fund (IMF) estimates global economic growth to reduce from 3.2% in 2022 to 2.7% in 2023. A broad-based recession is expected to impact global value chains - from availability of raw materials to production & transportation. Moreover, gradual withdrawal of Covid-related stimulus measures will intensify impact of recessionary trends. This is expected to lead to a further decrease in consumer spending & global demand. However, estimates indicate that global e-commerce will grow. Moreover, lower shipping costs may cause cargo that previously travelled by truck or train to shift to water transport. Together, these factors may have a moderating impact on demand. Outlook for container shipping market next year may not be bright considering decreased trade volume due to factors such as inflation and interest rate hike. It is expected that container freight rates would further drop by approx. 15% to 20% in 2023 as compared to 2022.

While forecasting 2023 profits, carriers had banked heavily on market conditions improving in 2nd half of 2023 on the back of increased demand stemming from inventory restocking by major retailers and positive seasonality in 3rd quarter 2023. However, it seems far from materializing as inventory continues moving slowly and retailers focus on depleting existing stock. Presently, order-book is at 7.41 million TEU, which is 28.1% of existing fleet of 26.39 million TEU. Having surpassed 20 million TEU in 2017, exiting fleet is forecast to rise 50% to 30 million TEU by 2025. The highest ever order-book / fleet ratio was in November 2007, at 61.3%, when order-book in absolute terms, 6.58 million TEU, was lower than today’s 7.41 million TEU. That mistake ushered in many years of pain as average daily global containership earnings sank dramatically before recovering on the back of Covid led trade resurgence. Incidentally, biggest ships are also the newest and the smallest the oldest and there is a vast tranche of ageing mid-sized ships that may be vulnerable should capacity growth not match demand growth in the near term. Destocking continues and restocking will follow but, in the absence of strong demand, it is apprehended

that many large ships may face layup.

In tandem with movement of global freight Indices, India Sub-continent Europe Sector would remain extremely volatile in terms of both cargo volume and freight rates in coming months. Freight rates are expected to remain depressed due to slow-down in global trade volumes. This underscores increased risk of onset of a global recession as consumer demand gradually shrinks amid rising inflation, which can partly be attributed to on-going conflict in Ukraine and global economic uncertainty. Due to prevailing slowdown and unprecedented high levels of inflation (about 8%) in European Union, most European manufacturing facilities and exporters are trimming their production output, resulting in reduced cargo flow & softening of freight rates.

SCI's weekly Coastal service (SMILE) with owned vessels viz. m.v. SCI Chennai & m.v. SCI Mumbai (52,000 DWT each) is operated in partnership with Chennai-Colombo-Gulf Service (CCG) operated by partner. Informatively, m.v. SCI Chennai & m.v. SCI Mumbai are largest vessels ever deployed in coastal services. However, due to excess tonnage and reduction in cargo volumes, downward trend of freight rates and cargo volumes expected to continue at least till mid of FY 2023-24.

For Inland Waterways, though India has been underutilizing its navigable waterways; however with government’s focus and initiatives like Sagarmala and Gati Shakti Plan for development of Multimodal Transport, Inland Waterways could be a new sunrise sector. SCI is already operating in inland waterways and is looking for further opportunities for expansion through its Inland & Coastal Shipping Limited Company, which is a wholly owned subsidiary of the Shipping Corporation located at Kolkata.

Risks & Concerns: As container freight rates in the last two years touched record high levels, it is unlikely that such rates will continue to maintain at the same levels this year. This can taper down SCI’s Liner services profitability depending on degree of reduction in box rates. SCI needs more partners for market expansion for its EXIM as well as coastal services. However, in absence of suitable partners / alliance with other EXIM / coastal operators, SCI’s EXIM / coastal services growth may remain stagnant.

Discussion on Financial Performance w.r.t. To Operational Performance: Your Company’s liner segment registered a loss of ' 31.19 crores in FY 2022-23 as against net profit of ' 612.27 crores in 2021-22. Operating Income decreased to ' 1,128.59 crores in 2022-23 from ' 1,469.14 crores in preceding year due to excess tonnage and lower freight levels. You may like to note that your Company is adopting various cost saving measures accruing to liner services viz. considerable saving on feeder and transhipment costs by reducing carrying cargoes to non-base ports, better inventory management, control on repair costs of vessels and containers. On-time schedule reliability of our services, particularly in Europe sector continues to be very good and comparable or better than the global players.

Measures Taken By Us To Improve Our Services & Operations: Liner Division is ensuring that General Rate Increases (GRI) are being strictly implemented from time to time keeping in mind market sentiments and demand-supply gap dynamics. Performance of each service is being reviewed monthly from the point of view of profitability. Ultra slow steaming is planned and achieved on the container ships. Liner Division has already expanded its Coastal and Feeder Services and is trying for further expansion. Further, ports like Kandla and newly emerging container ports in East Coast of India like Kattupalli, Krishnapatnam and Vizag are offering substantial discounts on transhipment costs and storage charges, and by using these ports optimally, substantial system costs reductions are being achieved. Our focus is to maintain right sized leased equipment inventory to optimum levels to make services sustainable and undertaking firm negotiations with leasing companies and vendors for achieving desired results. Aging inventory is being replaced by younger fleet at better terms. Division is scouting for second hand vessel(s) if it fits commercial requirements.

Important Developments, If Any: Direct shipping service commenced between India and Maldives, through induction of m.v. MSS Galena, from VO Chidambarnar Port, on 05.05.2023. The initiative would not only cut logistics and other related costs but will also enhance connectivity and will reduce time taken to transport goods between the two countries. Commencement of this service has added a new chapter to connectivity initiatives taken by both countries in the Indian Ocean Region. Service has also promoted, developed, and stabilized shipping connectivity between Indian and Maldivian ports and will further give impetus to bilateral trade between India and Maldives.

3. Technical and Offshore Services Division Industry Structure and Developments:

World scenario:

The offshore support vessels industry is dependent on utilization of rigs, E&P activities and other activities in oil fields, which in turn depends upon strategic decisions of energy security by oil and gas producers, shifts in Government policies and long term crude oil price trends. Global headwinds, economic turmoil, recessionary trends in many developed economies, impact of Russia-Ukraine war, etc. played / will be playing the critical role in deciding future course for the off-shore market.

Indian scenario:

The offshore activities remained subdued with only few selective opportunities for employment of offshore vessels.

Meanwhile, offshore vessels of your company were engaged on long term charter with ONGC and other Govt. Departments, thus having less impact of the subdued market.

Outlook:

Most of the demand for Offshore Support Vessels (OSV) can be attributed to the rising deepwater development activities, driven by the declining production from the mature fields and increasing crude oil demand.

With the continuous volatility and mixed trend shown by crude oil prices, the coming year is expected to generate increased opportunities for employment of offshore assets. Furthermore, ONGC is also expected to come up with many tenders with long term requirements for its offshore assets. Also, more requirements, albeit short term, are emanating from private operators / contractors in the Indian offshore market. Strengths and Weaknesses:

Your company has a diversified fleet of offshore vessels with 02 nos.80T AHTSVs, 04 nos. 120T AHTSVs, 02 nos. PSVs and 02 nos. MPSVs, thus enabling it to cater to requirements of various clients in the offshore market. It also has a young fleet giving technological advantage compared to older vessels in market. Further to keep the vessels technologically up-to-date your company has taken the initiative to upgrade its offshore vessels from UKOOA 'C' compliant to UKOOA 'B' compliant as per UKOOA ERRV guidelines. Additionally further up-gradation of the vessels is carried from time to time for meeting the charter party requirements and to fulfill the tender criteria.

Further, during the period under review, your Company has successful deployed majority vessels on long term charter thus ensuring steady revenues for long term period.

While SCI has a young and diversified offshore fleet, it is comparatively small to cater to needs of all the E&P companies in India.

The global head-winds and Russia-Ukraine war played its role wherein spot market opportunities also got dwindled because of lesser EPC projects, thus showing impact of other markets on the Indian offshore market.

ONGC being the biggest E&P Company in India, your company has been employing majority of its vessels with them on short term / long term basis. However to mitigate the risk of dependence on one client, your company has been in constant discussions with various other public/private operators to deploy our vessels for their offshore activities.

Opportunities and Threats:

With increase in crude oil prices, the E&P activities are expected to rise, thereby creating shipping demand for offshore assets in Indian coast. Substantial potential foreseen for growth in offshore services on the Indian coast as well as in the neighbouring areas. ONGC is coming up with many tenders with long term requirement of offshore assets. Further, in general, more requirements albeit short term, are emananting from private operators/contractors, thus various opportunities are expected for offshore vessels of your company.

Also your company is being approached by various Government organizations like ISRO, NTRO, MDL etc for requirement of offshore vessels, thus highlighting the opportunities for deployment of offshore vessels of your company.

Global economic instability has led to curtailment of E&P activities all over the world. This, in turn has resulted in loss of employment for OSVs worldwide and few assets are being diverted to Indian waters. Due to which, the competition in upcoming tenders of ONGC for offshore vessels is expected to increase further, impacting the charter rates adversely. Further, due to fall in asset prices in the global Offshore S&P market, few private companies have bought offshore assets (for meeting ONGC requirements) at very low capex, which may become a threat while competing in upcoming ONGC tenders. Also uncertainty about renewal of O&M contracts by ONGC for vessels which your company has been managing since many years, is a threat to the steady revenue that your company has been earning.

Risks and Concerns:

Entry of new players in the Indian market with low capital expenditure is a major concern and challenge for your company. To counter the same, your company has been taking all efforts to deploy vessels on long term basis, so as to avoid the impact of fluctuations in charter hire rates in market.

Uncertainty about renewal of O&M contracts of vessels of ONGC, which were being managed by your company since many years, is also a matter of concern. While, during the last year 2022-23, your company had enhanced its fleet of managed vessels by entering into an O&M agreement with Union Territory of Lakshadweep Administration (UTLA) for managing their vessels, by the end of year, UTLA has requested your company to handover these vessels to LDCL.

Further, as per Govt. of India guidelines for Global Tender Enquiry (GTE), local tenders are required to be floated for dry-docking and major repairs of vessels. Only local yards are participating in dry-docking tender. This has resulted in significant increase in repairs cost due to limited number of yards in India capable of dry-docking the vessels.

Your company is taking efforts to keep the dry-docking expenses as minimum as possible and within budgeted cost with advance planning for carrying out most of the repairs and surveys during waiting or offhire period.

OFFSHORE ACTIVITIES

Information relating to the year under review viz 01.04.2022 to 31.03.2023:

The T&OS Division of SCI operates fleet of 10 owned offshore vessels. In addition to the above, it also manages vessels of various organizations / Government departments. As on 31.03.2023, this comprised of 04 vessels of ONGC, 27 vessels of A&N Administration, 3 vessels of Geological Survey of India, and 23 vessels of UTL Administration.

SCI owned Offshore vessels:

Your Company’s owned offshore fleet comprises of 10 vessels i.e. 02 nos. 80T Anchor Handling, Towing & Supply Vessels (AHTSVs), 04 nos. 120T AHTSVs, 02 nos. Platform Supply Vessels (PSVs) and 02 nos. Multi-Purpose Support Vessel (MPSV).

During the year under review, one PSV (SCI Nalanda) and the four 120T AHTSVs continued to be on long term charter with ONGC. The two MPSVs were once again onhired by DRDO and Indian Navy on long term charter, assisting them in their national missions of strategic importance. Further, during the year one more vessel (PSV), was deployed with the Indian Navy for one year period for their mission requirements.

The remaining two 80T AHTSVs were operating in the spot market and were deployed with various Government and private clients.

O&M of ONGC owned vessels

i.    Offshore Supply Vessels (OSVs) of ONGC:

Your company was awarded Operation & Maintenance (O&M) contract for seven OSVs of M/s ONGC since their induction from 2013 onwards till 31.03.2023. Accordingly, these contracts have come to an end and the vessels have been handed over back as per directions of the owners. Out of the seven vessels, six vessels have been handed over on 31.03.2023 and one vessel (m.v. PR. Nayak) was handed over on 16.05.2023.

ii.    Mobile Offshore Drilling Units (MODU):

SCI had been providing Marine Man Management services to two MODUs of ONGC viz; ‘Sagar Vijay’ and ‘Sagar Bhushan’, since last 6 years on cost-plus basis. The contracts were valid till June/Aug’2022.

The contract of MODU ‘Sagar Vijay’ was valid till 30.06.2022, which was extended till 04.07.2022, subsequent to which the vessel was handed over as per directions of ONGC. The second MODU ‘Sagar Bhushan’ was valid till 18.08.2022, contract for which has now been extended by OnGc till 31.12.2023.

iii.    Specialized vessels:

During the year 2022-23, your company continued the Operation & Maintenance management (O&M) of ONGC’s one Geotechnical Vessel (GTV) (Samudra Sarvekshak). The existing contract for Samudra Sarvekshak, which was valid till 31.03.2022, was earlier extended upto 30.09.2022. The contract has now been further extended by ONGC upto 30.09.2024.

Your Company has also continued the Operation & Maintenance management (O&M) of ONGC owned Well Stimulation Vessel (WSV) “Samudra Nidhi” since the vessels delivery in year 1986. The six year long term contract for Samudra Nidhi which was valid till 31.03.2023, has been extended by further 2 years i.e. upto 31.03.2025.

3.0 O&M of A&NA owned vessels:

In addition to Offshore operations, your Company operates domestic passenger and cargo transportation services between the Mainland and the A&N group of islands and inter-islands by managing vessels owned by the Andaman and Nicobar Administration (A&NA). During the year one 500 Passenger-cum-cargo vessel ‘M.V.Nalanda’ was added to A&NA fleet, O&M of which has also been handed over to SCI. Accordingly, presently a total of 27 vessels of A&N Administration are being managed by SCI. These comprise of 17 nos. Foreshore Passenger vessels, 8 inter-island vessels, 01 Mainland-island vessel and 01 cargo vessel.

O&M of UTLA owned vessels:

Your company, on 02.02.2022, executed an agreement with Union Territory of Lakshadweep Administration (UTLA) towards Operation and Management (O&M) of their entire fleet of vessels. While your Company had taken over 09 vessels by 01.04.2022, during the year 2022-23 various vessels of the UTL fleet was taken over in a phased manner, with a total of 26 vessels taken over by Sept’2022.

Subsequently, as per requirement of UTLA, SCI has assisted the Administration in decommissioning and disposal of 03 vessels, which included 02 High Speed Crafts and 01 Passenger-cum-cargo vessel, bringing the number of vessels of UTLA being managed by your company to 23. Thus during the year 2022-23, your company has managed operations of 23 vessels of the UTL Administration, which comprised of 05 Passenger vessels, 06 High Speed Passenger Crafts, 03 POL vessels, 05 Cargo vessels and 02 Harbour Tugs and 02 vessel laid-up for decommissioning.

Thereafter, by the end of the 2022-23, your company has received letter dated 21.02.2023 from the UTL Administration informing about signing MoU with Cochin Port Authority, Cochin Shipyard Limited and Lakshadweep Development Corporation Limited for Port Infrastructure development projects and Shipping operations and maintenance of UTLA vessels. As per the letter, your company has been requested to take

necessary action for handing over operation and management of UTL vessels to LDCL. Accordingly, suitable arrangements are being made by your company for smooth handing over.

O&M of other organizations:

During the year, your company continued operation and management of Oceanographic and Coastal Research vessels on behalf of Government agencies/ departments viz; three vessels owned by Geological Survey of India (GSI) under Ministry of Mines and four vessels of Ministry of Earth Science.

However, as per directions from Ministry of Earth Science, their four vessels were handed over back during Aug-Sept’2022.

Manned and Managed vessels:

The following table shows the profile of Passenger vessels, cargo vessels and other vessels of various Government departments managed by your company:

DRDO Project:

Defence Research & Development Organization (DRDO) had placed its requirement with your company for hiring of two support vessels for a firm period of 3 years plus 1 year extension option. Accordingly, your company has deployed its Multi-purpose Support Vessel (MPSV) ‘SCI Saraswati’ w.e.f. 20.09.2022 for this new contract. Your company is exploring various options for providing one more vessel, as per their requirement. The vessels are to be utilized to meet support requirements towards DRDO’s strategic missions of national importance. Further, similar to previous year, during current year also, the Indian Navy has continued to avail services of your company’s MPSV, ‘SCI Sabarmati’, for assisting in its new Deep Submergence Rescue Vehicle (DSRV) project. Your company is proud to have been associated & assisting the Indian Navy in conducting their trials on the West Coast & East Coast of India.

Additionally, Indian Navy was in requirement of one more offshore vessel for their strategic missions, for which your company has provided its one PSV for one year period.

Technical Services:

Technical Consultancy Services

During the year under report the Company continued to provide technical consultancy services to A&N Administration, Union Territory of Lakshadweep Administration, Geological Survey of India and other Government Departments for their various ship acquisition projects. During the year, your Company assisted A&N Administration in construction supervision of 2^nd 500 Passenger-cum-cargo vessel, “m.v.Nalanda”, which after successful sea trials in March 2022 was delivered to the Administration on 05.07.2022. The 2^nd 1200 PAX vessel out of series of 2 nos. 1200 PAX vessel at M/s CSL, was launched on 14.08.2022. The first 2000 LPG cylinder carrier out of series of 2 nos. 2000 LPG Cylinder carriers under construction at M/s Goa Shipyard Ltd. is scheduled to be delivered to UTL Administration by Sept’2023 In 2022-23, technical consultancy was continued to M/s Cochin Shipyard Ltd. (CSL) for acquisition of secondhand floating dry-dock to be deployed at Indira Dock in Mumbai Port Trust (MbPT).

Tonnage Acquisition Programme

During the year under report, your company had envisaged acquisition of secondhand vessels in various segments. Out of the above, your Company floated global tender for acquisition of 1 No. Platform Supply Vessel (PSV) of up to 10 years old considering requirements from Charterers for specific type of vessels. By FY 2022-23, technical evaluation of the offered vessels was in progress and if the offered vessels meet the technical & commercial requirements, the vessel is planned to be acquired during the coming financial year i.e. FY 2023-24. Acquisition of vessels in other segments would be planned considering the market dynamics and fund position.

Informatively, your company has been continuously scanning the market for right assets in the market in relation to the available employment

opportunities and is optimistic about acquisition of vessels at the opportune time.

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 (MARPOL). Necessary steps have been taken to minimize air pollution and oil pollution from ships.

Your company has successfully complied with IMO's 0.5% sulphur fuel regulation which came into force from January 2020 and all vessels are being supplied low sulphur fuel oil since 1^st January 2020.

Your company has already taken necessary steps to meet IMO's fuel oil data collection system directive, as per IMO directives to report fuel oil consumption data from 01^st Jan’2019.

For the existing vessels, your company had developed a Ship Specific Energy Efficiency Management Plan (SEEMP) to improve and monitor energy efficiency in ship operations. Installation of Ballast Water Treatment plants on new ships and in phased manner on existing vessels, availability of Inventory of Hazardous Materials on most of its ships, usage of TBT free paints, replacing conventional lights on all ships with LED lights, etc are some of the measures showing your company’s commitment to Eco-friendly policies and conservation of energy. Installation of Ballast Water treatment plants have been completed on 24 out of total 42 required vessels and is in progress on remaining vessels.

Your company has geared itself to comply with latest emission reduction targets set for shipping by IMO. The IMO has introduced Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII) regulations as part of its interim measure under the Green House Gas strategy. Ship Energy Efficiency Management plan developed for all ships which includes SEEMP Part III (w.e.f 01.01.2023 - CII rating based on the annual fuel consumption of each ship) has been completed.

Your company has embarked on various Technical & Operational measures to improve energy efficiency with options to use bio-fuels. The EEXI calculations have been done in-house by your company and the EEXI technical files for all vessels have been approved by Classification Society. The regulations are applicable based on the 1st Annual, Intermediate or renewal IAPP survey falling due on or after 01.01.2023. Depending on above survey schedule, Engine Power Limitation (EPL) is being carried out in phased manner as one of the basic measures to improve the energy efficiency of existing ships in terms EEXI.

For compliance with aforesaid regulation as far as Carbon Intensity Indicator (CII) is concerned as an operational measure to reduce emissions, SCI is exploring various types of Energy Saving Devices (ESDs) such as Pre-swirl devices, propeller boss cap fins, rudder bulb etc, low resistance (high performance) anti-fouling paints, alternate fuels for main and auxiliary machinery, trim optimization, time & speed monitoring, wind assisted propulsion, etc with an objective to achieve continuous improvement in ship’s operational CII.

We have already banned single use plastic on our ships as per the DG Shipping order.

Technology Absorption, Adoption and Innovation

The technological advancement in Maritime sector in present day is focused towards optimizing ship operations, building cost efficiencies, developing sustainable and environment friendly maritime business.

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 is continuously trying to identify and implement emission reduction technologies and best practices.

Your company has taken the initiative to upgrade its offshore vessels from UKOOA ‘C’ compliant to UKOOA ‘B’ compliant as per UKOOA ERRV guidelines. As per Emergency Response Rescue Vehicle (ERRV) Group ‘B’ guidelines vessels are to be equipped with two Fast Rescue Crafts with Inboard Diesel Engines of capacity of 15 persons each. After the upgradation, offshore vessels of your company will be capable of rescuing persons from water, providing medical aid, place of safety for workers and on scene co-ordination in the event of emergency on offshore installations.

Your company has taken initiative to install Ballast Water Treatment Plants on all those vessels which are not fitted with the treatment plants. This exercise is being carried out in a phased manner in order to comply with the IMO regulations.

To take of the Cyber related risk, SCI has developed “Cyber Risk Management Policy” in line with the IMO regulations, so as to build capabilities to prevent, mitigate and respond to cyber risks, to reduce vulnerabilities and minimize damage from cyber incidents and protect information systems of SCI.

For the (2 firm + 1 optional) 2000 Domestic LPG Carriers for UTL Administration which are under construction at M/s Goa Shipyard Limited, your company as the technical consultant has recommended various optional features such as installation of sewage treatment plant, double hull protection to fuel oil tanks, etc. over and above rule requirement for such size of vessels which reflects your company's commitment environment protection and technology absorption.

Similarly, for 1200 Passenger vessels under construction for A&N Administration, your company had recommended adoption of certain technological up gradations for comfort and operational efficiency.

Situation in Coastal operation and Offshore areas:

The onset of Russia-Ukraine war and global uncertainties, recessionary trends again bought with it uncertainties of vessel employment and reduced opportunities. Thereafter while the pandemic situation has improved, the overall offshore market has remained subdued with limited opportunities in the spot market.

Further there has been shortage of availability of yards on the Indian coast for dry-docking and repairs of offshore vessels. These are only limited yards present and various difficulties are being faced in availability of dry-dock slots as per vessel requirement. This inturn leads to delay in onhiring of vessels with the charterers.

The spares supply from OEM located overseas are delayed due to logistics issues caused by the pandemic. The delivery of spares is also getting delayed due to airlines not having fully resumed cargo operations.

Measures taken to improve services and operations

The global economic scenario, cross-border tensions, Russia-Ukraine war, etc. are relative restrictions that had an impact on UKOOA B up gradation projects that were being undertaken in two of 120 AHTS to meet charter party requirement. However in spite several restrictions, the up-gradation were completed and the vessels were handed over to ONGC for employment. The up- gradation of crane on SCI Mukta is underway to meet long term charter contract requirements.

One MPSV-SCI Sabarmati engaged with the Indian Navy, wherein, the vessel's LSA and accommodation capacity enhanced to meet charter party requirement by undertaking necessary modifications/up-gradation with prior approvals from Class. Now, the vessel stands engaged by the Indian Navy for their project of national importance on long term contract.

The Chemical code applicable to Offshore vessels came into force from 01.01.2021. The necessary up gradation is carried out on WSV Samudra Nidhi cargo, ventilation, bilge pumping systems etc to meet guidelines for transport and handling of limited amounts of hazardous and noxious substances in bulk on offshore vessels.

Awards and Accolades:

Appreciation letter received from ISRO for successfully undertaking their national mission and telemetry observatory reading on 26.03.2023. Purchase & Services department:

Procurement of Goods and Services:

Your company enters into rate contract on periodical basis for procurement and supply of high value and safety items like Marine Lubes, Marine Paints, Charts, Wire ropes, LSA / FFA, Life Rafts etc. both at Indian ports and major foreign ports, like Singapore and Fujairah. This ensures timely supply of right quality goods / services to the vessels at reasonable price.

During the financial year 2022-23, your Company continues to support the Micro and Small scale Enterprises (MSEs) by procuring 51.29% of its applicable supplies of goods and services from MSEs as against the set target of 25% in line with the revised Public Procurement Policy. The Procurement from Women MSE vendors during the year is 2.53% of total eligible procurement, while from SC/ST owned MSE Vendors there is NIL procurement. The shortfall in sub-target has been met from other mSe vendors.

Further, your company actively participates in the programs organized by the Ministry so as to make MSEs aware of the SCI’s requirements. Also Vendor Development Programme (VDP) is also being planned by your company to be conducted in the coming financial year 2023-24. In line with Government's vision for procurement through Government-E-Marketplace, your company has adopted the Government e-Marketplace (GeM) system of procurement for items which are available in GeM. Target for procurement through GeM portal was set at ' 55 Crore for the financial year 2022-23. With consistent efforts, your company was able to achieve 100% target set for the procurement through GeM portal.

Protection & Indemnity (P&I) Insurance:

Protection and Indemnity (P&I) Insurance cover entered with three International Group P&I Clubs for your company’s fleet for the policy year 2022-23 commencing from 20.02.2022 has been negotiated by your Company. There was an increase of 17.75% in the renewal premium over the expiring premium for policy year 2021-22 due to hardening of insurance and reinsurance markets globally.

Developments, if any, of material nature affecting the financial position of the Company subsequent to the close of the said year viz; after 01.04.2023 till the preparation of the report.

Subsequent to receipt of letter dated 21.02.2023 from UTLA for handing over of their vessels to LDCL, the vessels are being handed over in a phased wise manner. As on 04.08.2023, 17 vessels have been handed over to LDCL and awaiting instructions from LDCL for handing over of remaining 6 vessels.

Your company has conducted focused Vendor Development Programmes (VDP) on 12^th June 2023 and 13^th June 2023 for SC/ST owned MSEs and Women owned MSEs.

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 recognising 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.

As regards, Safety Management Certificate (SMC) for SCI fleet, all ships are put up for periodical/ renewal SMC audits within time frame and respective SMCs are accordingly endorsed.

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

Towards addressing all emergency related issues, dedicated contact numbers remain manned 24 hours in the operating divisions:

The achievement of time-bound certifications was the result of the SCI’s strength of professional experience, planning, training, execution, systematic analysis and quality expertise, which is an asset for any world-class ship operator or owner. The SCI is also in a position to provide such management expertise to other national/ international ship operators.

ISPS Cell

The SCI has successfully implemented the ISPS Code on all vessels on international voyages and coastal trade vessel as per the Administration requirement.

SCI is committed to the following objectives to fulfil the requirements of its security policy:

•    Security of its ships and their crew, passengers and cargo

•    Support to its ships in implementing and maintaining the Ship Security Plan.

Integrated Management System (IMS)

SCI is now in compliance with IMS (ISO 9001:2015 - Quality Management System, ISO 14001:2015 - Environmental Management System and ISO 45001:2018 - Occupational Health and Safety Management System) on board all vessels and shore establishments.

The scope of IMS certification includes Owning, Managing and Chartering of ships for transportation of Goods and Passengers, Offshore and Marine Advisory Services, Maritime Training Services. The Certificate is valid till 20^th December 2024.

PERSONNNEL AND ADMINISTRATION

A. FLEET PERSONNEL

There is an acute shortage of senior Floating Staff officers, especially in the ranks of Masters and Chief Engineer Officers. The Fleet Personnel Department is trying to mitigate the shortage by recruiting officers on direct contract and through manning agents by offering market-related wages which have been revised significantly in the Main Fleet and Offshore Sector. However, the shortage continues due to taxation issues and overall shortage of floating officers due to Ukraine war. In order to attract officers, SCI has revised the day rates of the top four ranks and has introduced MCF across B&T and Offshore vessels. SCI is also advertising the vacancies in the shipping publications on regular basis to boost the appointment of officers, especially at senior ranks on direct contract basis. Shortage is being felt in the junior ranks also. In order to overcome the shortage, FP has started taking 2^nd Mate, MEO Class IV and ELOs from the open market.

To ensure an uninterrupted supply of Officers, Deck/Engine Cadets and Trainee Electrical Officers, on completion of their shipboard training and subsequent to their obtaining the certificate of competency (CoC), are being offered employment on the terms of INSA-MUI Agreement and are inducted as regular officers as part of the Roster.

The applicable Collective Bargaining Agreements (CBA) viz. NMB Agreement applicable to ratings/ petty officers and the INSA-MUI Agreement applicable to officers are now valid up to 2023. The management approval for the implementation of the NMB Agreement has been accorded and is now in the process of being implemented across the fleet shortly. Implementation of new INSA-MUI agreement is in progress.

SCI has implemented online system for crew (rating) selection. The selection process is being reviewed every now & then to keep up with the changing scenario.

Fleet Personnel department had been conducting a three-day Shipboard Orientation Workshop at MTI for fleet officers to enhance the quality of our seafarers and their level of awareness of the continuous evolving shipboard developments. The workshop also included Behavior

Based Safety course. During & post Covid pandemic period the physical workshop could not be conducted. With the resumption of physical classes at MTI, the workshop can be held once again.

There were no instances of Covid infection on board and there has been no loss of life on board due to Covid during the period.

B. MARITIME TRAINING INSTITUTE (now under SCI LAL)

Maritime Training Institute (MTI) at Powai has successfully conducted all DGS approved STCW courses in the year 2022-23.

In the year 2022-23, three batches of Diploma in Nautical Sciences (DNS) have successfully completed and new three batches of DNS course have started. Also, One batch of Graduate Marine Engineering (GME) and one batch of Electro Technical Officers (ETO) practical training have completed at Powai Campus, during this year.

During this year, as per DG Shipping Order 12 of 2022 dated 29/3/2022, MTI has started all residential pre-sea training courses, as well as modular courses and post-sea courses with 100% capacity, which were fully / partially suspended due to pandemic. These courses have been started with 100% physical lectures and 100% capacity for practical exercise with the strict compliance of SOP for COVID from 31/3/2022.

MTI has been assigned GRADE A1 (Outstanding) rating by DNV-GL during the last inspection as per the Comprehensive Inspection Programme (CIP) Guidelines of the Director General of Shipping (DGS). CIP audit for the current financial year is due and will be carried out in last week of July 2023 by IRS. The Institute has significantly improved in the external examinations conducted by Indian Maritime University (IMU) where the passing percentage has gone beyond 95 percent in the first attempt.

MTI has conducted 348 Courses for 3647 participants in FY 2022-23 and the total man-days of training during this year are 86514. MTI also conducted various online seminars and management development programme in coordination with Personnel’s department of SCI for skilling SCI Employees.

MTI has fully complied with the requirements of Directorate General of Shipping pertaining to conduct of courses and has also complied with the Indian Maritime University guidelines.

Details of presidential directives issued by Central Govt. and their compliance during the year and in last three years.

•    SCI has complied with the requirements of Directorate General of Shipping (DGS) pertaining to conduct courses and has also complied with the Indian Maritime University (IMU) guidelines.

•    SCI had actively participated in Swachh Bharat drive within the campus and in public places. Cadets, trainees, faculties and staff were involved in the activities planned at regular intervals. In line with Govt.’s vision, SCI-MTI contributed well in the Swachhta Pakhwada observed during the last 3 years; and organized various cleaning drives. Informatively, the cadets contribute 2 hours every Sunday in the upkeep of MTI Hostel and Garden area making MTI more green and beautiful. MTI is utilizing the in-campus natural waste (leaves, etc) to create manure and Lake/Well Water for gardening work in MTI campus, thus realizing Government of India and SCI’s vision of self-sustainability.

Information towards major achievement during the year under review i.e. FY 2022-23 Academic Achievements

A. MTI has entered in MoU with following institutes in the year 2022-23:

a.    The International Maritime Training Centre (IMTC) in April 2022 for practical training of IGF Basic Course and various DG approved Fire Fighting Courses

b.    The Institute of Marine Engineers (IME(I)) in March 2023 for practical training of Basic IGF Course, Basic Training for Oil & Chemical Tanker Cargo Operation and Basic Training for Liquefied Gas Tanker Cargo Operations.

Non - Academic Achievements.

A.    SCI-MTI became CCTV enabled campus with 24 x 7 CCTV surveillance of all the administrative and residential buildings, including security posts throughout the campus. Classrooms in MTI have also been added to the CCTV surveillance.

B.    SCI-MTI is utilizing the in-campus natural waste (leaves etc) to create manure and Lake/Well Water for gardening work in MTI campus, thus realizing Government of India and SCI’s vision of self-sustainability.

C.    MTI continued to save around 30% on the monthly expenditure toward electricity consumption with support of its solar power plant of

0.5 MW capacity, which is operational since December’ 2017.

D.    SCI-MTI has significantly improved its tendering process by following online tendering for all tenders and contracts at MTI. Procurement from Government e-Marketplace (GeM) portal has been exercised wherever possible. Proudly, SCI-MTI has reduced the annual financial implications of many major tenders/contracts of the Institute, including catering contract, uniform contract, civil contracts etc.

E.    Many assignments of structural renovation, such as MTI Canteen, have been carried out at MTI. Proposal for structural repairs of Sagar Gyan is also processed.

Other Initiatives

A.    100s of saplings were planted on various occasions, during this year. “Ayush Vatika” in MTI campus is being maintained with various divine/ medicinal / ayurvedic plants.

B.    MTI also ensures that cadets are well versed with various Government initiatives such as “Yoga Day”, “LiFE Mission” and “Swachh Bharat Abhiyan”, where various functions were held to celebrate at MTI.

C.    SHORE PERSONNEL

Material developments in Human Resource / Industrial Relations front, including number of people employed

The total Manpower as on 01.07.2023 is 489 (excluding Board Level members), out of which 446 are officers and 43 are staff members. With a view to meet the present and future challenges and be a globally competitive Corporation, various capacity development initiatives and employee engagement activities were carried out in the year 2022-23.

Training and Employee Engagement Activities of 2022-23:

Employee trainings and engagement has much more to do with an individual’s own investment and emotional connection to the organisation they work for rather than job satisfaction. It helps to build and expand knowledge and refine skills that can influence their motivation as well. And to implement this, we nominated our employees to external training from industry experts to enhance the knowledge of the employees. The various trainings imparted to the employees during the year were majorly towards Skill development, Specialized courses in Domain and other areas, compliance related trainings, session towards Wellness, Stress & well-being and towards Art of living were also organized. External trainings also involved DPE Trainings on the Topics -

Implementation of International Financial Reporting Standards(IFRS) / Ind-AS in CPSEs, Outsourcing and Contract Management, Strategic Marketing Management, Project planning and monitoring.

Effectiveness of Compliance Management focusing DPE guidelines, Companies act 2013 and SEBI regulations, Supply Chain Management, Corporate Branding in Digital era, Training programme on Contract Management/ Public Procurement policy for Micro and Small Enterprises (MSEs) (Preference to Make in India), Ethics in Governance and preventive Vigilance, all the DPE workshops were organized under the aegis of Azadi ka Amrit Mahotsav (AKAM) during 2022-23. To safeguard our crew/ officers/ Ships and Marine life Seminar on transportation of Hazardous Material (HAZMAT) was also organized.

Training / Interactive session on procurement through GeM portal for all employees involved in procurement activities was conducted.

To boost Indian Economy through procurement of Indigenous products Capacity Building Program on “Procurement (Policy & procedures) based on GFR, GeM & E-procurement was introduced.

For the health and wellness of employees, National Ayush Conference (NAC)-2022 was organized on Work Life balance through Holistic Health. For professional Development of employees special training of “Corporate Leadership Development Program (CLDP)” was imparted. For providing safe working environment at workplace, SCI has an Internal Complaints Committee (ICC), the members have been nominated to an interactive session / training programme on "PoSH Act".

Vigilance is to study the existing Organization procedure and eliminate or minimise factors that provide opportunities for corruption or malpractices and suggest remedial measures. These practices were updated /revised by CVC through conducting various training programs like Advanced Training in “Vigilance Investigation”, Preventive Vigilance, Training programs for IOs /POs to employees.

Vigilance Awareness Week was also observed from 31.10.2022 to 06.11.2022 and this time SCI was very happy to welcome hon’ble Chief Vigilance Commissioner (CVC), Shri Suresh Patel, on Valediction function of Vigilance Awareness Week 2022.

Azadi Ka Amrit Mahotsav Celebrations To commemorate the 75 years of Independence of the progressive India and its glorious history encompassing its people, culture and achievements, series of activities were organized such as organizing employees and family welfare program on Career Guidance, Nutrition & Exercise, Self Defense Techniques. SCI also celebrated International Mother Language Day, Organized health check-up camps at Head Office & Regional Offices, Under Har Ghar Dhyan Campaign conducted Yoga Session. The International Day of Yoga 2023 this year was celebrated under the theme “Yoga SAGARMALA”. Various activities including physical Yoga and sessions on benefits of Yoga by eminent Yoga teachers/ faculty was conducted for employees & all stakeholders.

Reservation Policy

Company is complying with all the guidelines issued by the Government regarding Reservation from time to time in Recruitments and Promotions.

SC/ST/OBC Report

Annual Statement showing the representation of SCs, STs and OBCs as on 1^st January 2023 and number of appointments made during the preceding calendar year:

*In calendar year 2022, recruitment drive of 46 Assistant Managers on Contract was carried out, of which 36 have joined the organisation as on 01.04.2023 Women Representation

Company is committed to the principle of equal employment opportunity and strives to provide employees with a workplace free of discrimination. All HR activities of recruitment, placement, promotion, transfer, separation, compensation, benefits and training ensure equal opportunities for skill enhancement and career progression. Company’s efforts are reflected in the representation of women across various hierarchical grades. At present women constitute around 21.05% of total workforce at shore establishments of your company. As an effort to boost the morale of women seafarers, Company felicitated all Women Seafarers onboard SCI Tanker Swarna Godavari, as prelude to International Women’s Day, 2022. Thus, acknowledging their professional contribution to Shipping and encouraging them to excel further. NMDC Function for 'International Day for Women in Maritime 2023' was held on 18^th May 2023 in the MTI Auditorium. Shri Shripad Naik, Minister of State Ministry of Shipping, graced the occasion, wherein more than 250 participants attended the programme.

Policy to prevent sexual harassment in workplace.

The Company promotes gender equality and has been taking proactive measures to prevent any Sexual Harassment at workplace. The Company has constituted a committee comprising of senior women executives and a woman representative from the NGO Pratham to enquire into complaints of Sexual Harassment at the workplace. No complaints were received in the year 2022-23.

Corporate Social Responsibility (CSR) and Sustainable Development (Annual report on CSR Activities for FY 2022-23)

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, women empowerment, environment sustainability, skill development and other areas of social upliftment.

Your company has framed its CSR policy in line with the guidelines contained in the Companies Act 2013 and Companies (CSR Policy) Rules, 2021 notified therein" and constituted a CSR committee as per the act to coordinate and oversee the implementation of CSR initiatives. The budget available for CSR initiatives in the year 2022-23, as per applicable provisions was ' 12.13 Crores. Against the available budget, your company allocated ' 12.13 Crores against the following initiatives in the year 2022-23:

1. Health & Nutrition -

a)    Project to a. Support of Dialysis Machines & related equipment’s, Supporting BPL Dialysis Patients & Imparting training to students to become qualified dialysis technicians & nurses.

b)    Enhancing the medical facilities at The Leprosy Mission (TLM) Hospital, Ayodhya, UP by providing anaesthesia machine.

c)    Project to support Mid-Day meal Program by supporting 3,000 children.

d)    Organizing Vaccination Drives (Booster Dose).

e)    Distribution of Face Masks with SCI Branding.

f)    Holistic Development of Underprivileged children (GAP Gadadhar Abhyudaya Prakalpa Project).

g)    Support towards Assam Floods Relief.

h)    Project to support children infected with HIV / AIDS.

i)    Support for providing Sustainable Menstrual Health & Hygiene for school girls.

j)    Empowerment of Adolescent Girls & Women through Menstrual Health & Hygiene Awareness Workshops.

k)    Support towards Cancer Patients.

l)    Support towards Sickle Cell Anemia detection program.

m)    Support towards Swasthya Ahara Program.

n)    Support towards Mid-Day meal to students of tribal schools.

o)    Conducting Camps towards Health & Women Hygiene.

p)    Conducting Health & Hygiene Camps.

q)    Support towards Pediatric cardiac OPD services.

r)    Support towards Building Hostel for Disable Students (Deaf, Dumb, Blind).

s)    Support towards Distribution & Training of Assistive devices for 750 Differently Abled People

2.    Promotion of Education & Skill Development -

a.    Project to Identify, educate, empower and Impact 25 destitute girls Children through SHEEKSHA (Support Educate and Empower Children through Knowledge, Scholarship and Action).

b.    Project to support 5,000 children through School Kit Drive.

c.    Support to buy machines for the new courses (eg. Fitter Trade, etc). Machines include CNC Machine, Lathe Machine, Welding Machine, tools equipment's, etc.

d.    Support towards Annual Grants for Maritime Education for renewal of 25 students

e.    Support towards Har Ghar Tiranga Campaign.

f.    Support towards Setting up E-learning Classrooms for economically weaker schools.

g.    Support towards Construction of digital library & Open Gym for ZPHS Majeru (AP).

h.    Support towards 20 Smart Class Rooms in 12 Govt. schools of Karnataka.

i.    Support towards Shine Olympiad (Maths & Science Olympiad benefiting 10,000 children of MCD schools).

j.    Support towards Apparel Skill Training program.

k.    Support towards Financial assistance for the distribution of sewing machine to skilled blind women or wife of blind person (50 nos).

l.    Support towards Skill Development training program for 240 nos unprivileged women.

3.    Environment Sustainability—

a.    Support towards Supply and installation of "SPV LED High Mast Lighting Systems & SPV based water purification Plant.

b.    Support towards Installation of 50 units of Semi High Mast Lights (Solar)

Against the allocation of ' 12.13 crores, ' 1.82 Crores have already been disbursed and balance will be disbursed on achievement/ completion of project specific timelines.

Material Orders of Judicial Bodies / Regulators

Details of significant and material orders passed by any Regulator, Court, Tribunal, Statutory and quasi-judicial body, impacting the going concern status of the company and its future operations - Nil.

Implementation of Official Language Policy.

In accordance with the Official Language policy of the Union Government, your company reiterated its commitment and made consistent efforts towards the progressive use of Hindi in its day-to-day affairs during the year under report. Your Company conducted Hindi activities and competitions at regular intervals and awarded prizes to the winners. Apart from this, your company also arranged Hindi typing and translation training programme for its employees.

To commemorate the 75 years of Independence, an essay writing competition was organized in English, Hindi and Marathi on the theme of India, i.e. India's rich culture and heritage, Relevance of Gandhi's thoughts and methods in the 21^st century, 75 years of maritime development in India, etc. Along with this, an online quiz competition in English and Hindi was also organized.

Under the Hindi Incentive Scheme, employees' children were encouraged by giving incentive prizes for scoring 70% and above marks in Hindi subject in SSC / HSC level exams held in the academic year 2021-22.

In order to create a sense of competition amongst all Divisions/Departments and individual officers for increasing the use of Hindi in daily correspondence and activities, the Annual Rajbhasha Shield (at Divisional Level) and Annual Rajbhasha Gaurav Sammaan (at Individual Level) schemes were continued for 2022-23 after necessary modifications. However, for the year 2021-22, the “Annual Rajbhasha Shield” was awarded to Bulk Carriers & Tankers Division, and “Annual Rajbhasha Gaurav Sammaan” was awarded to three officers on the basis of their Hindi performance. Besides this, twelve employees from various divisions were given Certificates and dictionaries. All these initiatives have culminated into a very conducive environment for progressive use of Hindi in daily office routine work.

Appointment and Remuneration policy

The appointments in our company are done in accordance with Government of India guidelines. The remuneration to the senior management and other shore employees of our company is governed by the Presidential Directives issued by the Ministry of Ports, Shipping and Waterways (MoPSW) and Department of Public Enterprises (DPE), from time to time, which form the remuneration policy of our company. RIGHT TO INFORMATION ACT, 2005

Your company complies with the requirements of the Right to Information Act, 2005 (RTI) which became effective on 12^th October, 2005. Detailed information on RTI is hosted on SCI Website under following link http://shipindia.com/rti/rtipage/rti-act-2005 and the same is updated from time to time as per the guidelines received from concerned authority. Dr.Soma Tandon, DGM (IT) is the Public Information Officer (PIO) to deal with queries received from the Indian Citizens under RTI. During the year, 105 RTI applications have been received which have been responded to within the specified timelines.

SPECIAL PURPOSE VEHICLE:

Sethudsmudram 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 2016-17, SCI had invested ' 50 crore in the project. Work suspended since 17.09.2007 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 27.7.2009. Supreme Court’s final hearing on the matter was scheduled on 06.04.2018, however, the hearing was withheld indefinitely. SCL Board during its Board meeting held on 18.03.2021 accepted the resignation of Smt. Sangeeta Sharma, Director (L&PS), SCI, as Director, SCL from the Company. Further, SCL requested SCI to nominate new Director on SCL Board, in place of Smt Sangeeta Sharma who has been retired on superannuation.

Memorandum of Understanding (MOU) with the Ministry of Ports, Shipping & Waterways

The MOU for the financial year 2023-24 is under progress. The MOU is being processed as per the consolidated guidelines issued by Department of Public Enterprise (DPE) vide circular dated 12^th October 2022. Under the new guidelines, entering, signing, monitoring and evaluation of MOU will be done through online dashboard. SCI rating for 2020-21 & 2021-22 is Very Good.

MOU performance evaluation data for financial year 2022-23 on the basis of Audited accounts will be submitted to DPE through online dashboard after the approval of the Board and through the Administrative Ministry by 31^st October 2023.

a)    Ship Availability as a percentage of Total Ships:

The Planned Ship Availability (Total days of the year less quoted days for planned repair and dry dock) for 59 ships for 2022-23 was 20644 days. The Ships were available (Total days of the year less Actual repair and dry dock days) for 19065 days which is 92.35 % to the Planned Ship Available days.

b)    Revenue from Exports:

Earnings of SCI from Export Revenue as per the GST Returns filed for the FY 2022-23 amounts to INR 1,71,809 Lakhs (previous year INR 1,51,814 Lakhs). Basis the above, export earnings as a percentage of Revenue from Operations for the FY 2022-23 stands at 29.65% (previous year 30.39%).

c)    Compliance parameters not verifiable from any outside sources:

(i)    DPE guidelines issued from time to time on CSR expenditure by CPSEs has been complied with.

(ii)    Target as given by DIPAM / NITI Aayog on Assets Monetization Milestones has been complied with.

(iii)    Parameters w.r.t. steps and initiative taken for Health & Safety improvement of Human Resources in CPSEs has been complied with. Utilization of Proceeds from public issues, right issues, preferential issues etc.

During the year 2010-11, your Company had floated 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 ' 582.45 crores 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. 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 payments for two projects. The investment in the rescinded contracts out of the FPO Proceeds was ' 330.65 crores.

Your Company has received back entire sum of ' 330.65 crores from the shipyards. The shareholders vide the resolution passed through postal ballot on 11.02.2017 approved the proposal to re-deploy the said sum of ' 330.65 crores received as refund from Shipyards, towards various shipbuilding projects including offshore assets and liquid petroleum gas (LPG) vessels and also for acquisition of the any other such vessels, on such terms and conditions as the Board would deem fit from time to time as mentioned in the approval of the postal ballot. Further based on the approval granted by the shareholders, the Company can also utilize the sum towards the balance payments remaining due for the tonnage acquisition made by it.

Out of the said amount of ' 330.65 Crores, an amount of ' 196.80 Crores has been utilised till date as under:

The un-utilised FPO proceeds amount of ' 133.85 crores are kept in fixed deposit.

Additional Disclosures as required under the Guidelines laid down by DPE

1. To the best our knowledge and from the data gathered from all the departments transactions with all related parties have been entered at arm’s length or in accordance with the provisions of Companies Act and SEBI (LODR) Regulations, 2015.

2.    To the best of our knowledge there is no item of expenditure debited in books of accounts which are not for the purposes of the business

3.    There are no expenses incurred which are personal in nature and incurred for the Board of Directors and Top Management.

4.    The office and administration expenses as a percentage of total expenses are 4.89% in FY 2022-23 as against 6.03% in FY 2021-22.

5.    The finance expenses as a percentage of total expenses is 3.56% in FY 2022-23 as against 3.71% in FY 2021-22.

Segment-wise Performance

Report on performance of the various operating segments of the Company (audited) is included at Note No. 31 of Notes on Financial Statements (Standalone) for the year ended 31^st March 2023, which is forming part of the Annual Accounts.

Internal Control System:

The Company has an internal control system that is adequate and commensurate with the size, scale and complexity of its operations. Internal financial controls framework and Risk Control Matrix (RCM) for various business processes is in place. The internal control systems (including Internal Financial Controls over Financial Reporting) are reviewed on an ongoing basis and necessary changes are carried out to align with the changing business / statutory requirements.

Internal audit is carried out by an independent firm of Chartered Accountants / Cost and Management Accountants on concurrent basis. The scope and authority of the Internal Audit function is defined in the Internal Audit Plan, which is approved by the Audit Committee. To maintain its objectivity and independence, the Internal Audit function submits quarterly reports to the Audit Committee of the Board. The Internal Audit examine, evaluate and report on the adequacy and effectiveness of the internal control systems in the company, its compliance with the laid down policies and procedures and ensure compliance with applicable laws and regulations. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are reviewed, deliberated and presented to the Audit Committee of the Board.

Dividend Distribution Policy:

As per the guidelines dated 27.5.2016 issued by Department of Investment and Public Asset Management (DIPAM), MOF, GOI in respect of dividend, bonus shares, etc. the Company has an obligation to comply with these guidelines. However, the company shall take in to consideration and be guided by the provisions of the Companies Act 2013, Companies (Declaration and Payment of Dividend) Rules, 2014 and Guidance Note on Dividend & Secretarial Standard 3 (SS3) for taking necessary action appropriate and deemed fit in the circumstances. The link to access SCI Dividend Distribution Policy is https://www.shipindia.com/ ^ About SCI ^ Policies

OR https://www.shipindia.com/upload/policies/SCI_Dividend_Distribution_Policy2.pdf

Role of Vigilance Division in SCI:

SCI has a full-fledged Vigilance Division headed by Chief Vigilance Officer. The Division operates as per the guidelines of the Central Vigilance Commission for Vigilance management in Public Sector Enterprises and is guided further by the instructions issued by the Ministry of Ports, Shipping and Waterways. During the year under review, the Chief Vigilance Officer put in place preventive vigilance initiatives in the business processes thereby striving towards greater transparency and improved ethical & corporate governance standards. There was concerted effort to achieve greater transparency and eliminate systemic weaknesses through use of technology in business processes such as e-payments, Supplier Relationship Management, bill tracking, greater use of GeM portal and online dissemination of important circulars/ guidelines. Further there is a provision for online registration of complaints through the Vigilance Kiosk which was inaugurated by the CMD in October 2022. Vigilance Division interacted with various employees of SCI as well as various stake holders which has helped in understanding the issues from their perspective as well.

Activities of the Vigilance Division carried out in 2022-23

During the year under review, the Vigilance Division carried out the activities under Preventive, Punitive and Participative Vigilance. The important activities carried out in 2022-23 by the Vigilance Division were as follows:

A.    Complaints were handled as per complaint handling policies stipulated in Vigilance Manual issued by the Central Vigilance Commission. Investigations into complaints of corruption/malpractice were conducted.

B.    In adherence to the CVC guidelines, random scrutiny of APRs of SCI employees was carried out.

C.    Active monitoring of the implementation of Integrity Pact in SCI has been done.

D.    Vigilance Division has acted as a catalyst in the implementation of preventive vigilance measures such as e-payments, bill tracking systems, transfers of employees posted in sensitive areas in a phased manner etc.

E.    As part of preventive vigilance activities, three Chief Technical Examiner Type inspections, and three Systemic studies were finalized during the FY 2022 - 23 and recommendations for systemic improvements were issued on basis of their findings. Two surprise inspections, one at the SCI’s regional office at Kolkata and another on - board one of SCI’s owned vessel, were carried out.

F.    The existing IT systems and processes in SCI were reviewed under the aegis of Vigilance Division in accordance with the CVC guidelines and the Report of the review Committee, along with its recommendations was put up before the SCI Board.

G.    Selective scrutiny of Voyage Repairs Bills, dry-docking bills, various accounts have been done during the year.

H.    An interactive session on GeM by Mr. Nikhil Patil, Nodal Officer, GeM, BF - Maharashtra, was organized for SCI employees on

01.11.2022.

I.    Training session on the topic ‘Countering corruption by strengthening ethics & integrity, awareness and expectations’ by an external speaker was organized for SCI employees on 03.11.2022.

J.    An interactive session on the topic ‘Recent developments in Public procurement policies, present & future challenges’ by Mr. Kanwalpreet, Director (Procurement Policy), MoF, DoE, was organized for SCI employees on 29.12.2022.

K.    For the annual Vigilance Awareness Week, in - house programmes were held to spread Vigilance Awareness among employees and their families.

L.    As part of Vigilance Awareness Week, SCI organized various outreach activities, such as Poster making competition, Slogan writing competition, Quiz competition, Essay - writing competition among youths in schools and colleges in Mumbai and other cities where SCI has regional offices, including Port Blair.

M.    In order to spread the awareness about Vigilance machinery among people, an awareness campaign was organized via FM Radio, wherein jingles related to the Vigilance functions and VAW-2022 theme were aired throughout the Vigilance Awareness Week.

N.    Awareness campaign was conducted on-board SCI ships for generating awareness about Vigilance amongst seafarers. The Integrity pledge was also administered onboard the ships and banners were displayed.

O.    As part of spreading awareness, the weblink to Hon’ble Prime Minister’s address at the CVC programme on Vigilance Awareness Week held at Vigyan Bhavan on 03.11.2022, was shared by SCI on its employee portal. The links to several publications by CVC, viz CVC’s booklet on “Preventive Vigilance Initiatives”, CVC’s newsletter “Vigeye Vani”, links to eleven pictorial booklets on “Ethics and Good Practices”, were published on SCI’s employee Portal making it available to all its users.

P Hon’ble CVC Shri Suresh N Patel graced the SCI valedictory function of Vigilance Awareness Week 2022.

Q. A handbook on “Prevention of common mistakes observed during procurement in SCI”, compiled by the Vigilance Division of SCI was released by Hon’ble CVC Shri Suresh N Patel during the valedictory function of Vigilance Awareness Week 2022.

Handbook on “Prevention of common mistakes observed during procurement in SCI” being unveiled on Valedictory Function of Vigilance Awareness Week 2022 held on 05.11.2022 in the gracious presence of Central Vigilance Commissioner Shri Suresh N. Patel

R.    14^th Edition of the annual Vigilance newsletter “SCI Voyager” was published during the FY 2022 - 23.

During the FY 2022 - 23, 62 complaints (including 6 paras of various Audit Reports) were processed by the Vigilance Division. As on 31/03/2023, 59 of them have been disposed off as per prescribed procedure, and remaining 3 have been carried forward to the next financial year for complete disposal. Recommendations for systemic improvements were issued to the concerned Divisions in case of 4 of the registered complaints and the 6 Audit paras.

Vigilance Study Circle Mumbai Chapter:

The Vigilance Study Circle Mumbai Chapter, started on the initiative of SCI Vigilance Division in 2010, is today a thriving forum for knowledge - sharing with active participation from CVOs of 29 member organizations from varied sectors in the Western zone. 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. Taking forward the continual learning and knowledge sharing initiative, following workshops/ training sessions were organized by the Mumbai chapter of VSC during the FY 2022 - 23:

A.    A two days’ training program for the member CVOs of VSC, Mumbai and nominated IO/ POs from their respective organizations was conducted by the faculty associated with the training module of HPCL.

B.    A training session on Anti Bribery Management System (IS/ ISO 37001)’ by Bureau of Indian Standards was organized by VSC -Mumbai on 02.03.2023 for its member CVOs and nominated officers from their respective organizations.

C.    A meeting of the member CVOs of VSC - Mumbai with Hon’ble Central Vigilance Commissioner, Shri. Suresh N Patel and other dignitaries from the Central Vigilance Commission was conducted at Mumbai during the Vigilance Awareness Week in November 2022, wherein a number of vigilance related issues, updated Procurement Manuals released by DoE in collaboration with CVC and, roadmap for future activities were discussed.

Cautionary Statement

The statements made in the Management Discussion and Analysis report 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.

Key Managerial Personnel

Shri Vikram Dingley was appointed on the Board of SCI as Director (T&OS) by the Ministry of Ports, Shipping and Waterways w.e.f 19.05.2022. Consequent to her superannuation w.e.f. closing hours of 31.05.2022, Smt. H.K. Joshi ceased to be on the Board of the Company w.e.f.

01.06.2022.    During the period 01.06.2022 to 02.09.2023 Shri Atul Ubale, Director (B&T) held the additional charge for the position of Chairperson and Managing Director of the Company. Capt. B.K. Tyagi was appointed as the Chairman & Managing Director w.e.f. 03.09.2022 and also held additional charge of Director (L&PS) from the said date.

Shri C.I. Acharya was appointed on the Board of SCI as Director (Finance) by the Ministry of Ports, Shipping and Waterways w.e.f 13.06.2022. Shri Lawrence Serrao ceased to be the Chief Financial Officer of the Company w.e.f. 13.06.2022. Shri N. Subramanya Prakash is appointed as the Chief Financial Officer w.e.f. 05.08.2022.

Consequent to his superannuation on 30.11.2022, Shri PK Gangopadhyay, Director (P&A) ceased to be on the Board of the Company w.e.f.

01.12.2022.    The Ministry appointed Shri Manjit Singh Saini as Director (P&A) w.e.f. 05.07.2023.

As on date Capt B.K Tyagi Chairman and Managing Director holding additional charge of Director (L&PS), Shri Atul Ubale Director (B&T), Shri Vikram Dingley Director (T&OS), Shri C.I. Acharya Director (Finance), Shri Manjit Singh Saini Director (P&A), Smt Swapnita Vikas Yadav, Company Secretary and Shri N. Subramanya Prakash, Chief Financial Officer are the Key Managerial Personnel of the Company.

Declaration of Independence

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

Composition and Meeting of the Board and its Committee

As on 31.03.2023, the Company is non-compliant with the Regulation 17(1) (b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, regarding the requirement of having at least half of the Board of Directors as Independent Directors. In Quarter 1 of FY 2022-23, the Company was compliant with the Regulation w.e.f., 01.04.2022 till 18.05.2022 and from 01.06.2022 to 12.06.2022. During FY 2022-23, the Board of the Company is non-compliant with the aforesaid mentioned regulation from 19.05.2022 till 31.05.2022 and thereafter from 13.06.2022 till 31.03.2023. The various Committees of the Board are constituted in terms of requirements of the Companies Act, 2013 read with the rules made thereunder and SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015. The details in respect of the number of Board Meeting and Committee meetings of the company are set out in the Corporate Governance Report which forms part of the Annual Report.

Performance Evaluation of Board, Committee and Directors

In accordance with applicable provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the evaluation of the Board as a whole, Committees and all the Directors was conducted, as per the internally designed evaluation process approved by the Board.

Secretarial Standard

The Company complied with all the applicable Secretarial Standards.

Secretarial Audit

Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Board had appointed M/s Mehta & Mehta, Practicing Company Secretary firm to conduct Secretarial Audit for the Financial Years 2022-2023 and 2023-2024. The Annual Secretarial Compliance Report in compliance to Regulation 24A of SEBI LODR Regulations 2015 and Secretarial Audit Report in Form MR-3 as per Companies Act, 2013 for the financial year 2022-23 is appended to the director’s report. The Secretarial Auditor in his report for the year ended 31^st March, 2023 has brought out that:

During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above except Regulation 17(1) (b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, regarding the requirement of having at least half of the Board of Directors as Independent Directors. Further, it may be noted that for quarter ended 30.06.2022 the Company was compliant with the Regulation w.e.f., 01.04.2022 till 18.05.2022 and from 01.06.2022 to 12.06.2022. The Board of the Company is non-compliant with the aforesaid mentioned regulation from 13.06.2022 till 31.03.2023.

The Management views on the above observation are as follows:

As on date, the Board of SCI includes the following five Independent Directors: Shri Gulabbhai Rohit, Shri Anil Kumar Misra, Shri Shreekant Pattar, Shri KNP Chakravarthy and Ms.Arunima Dwivedi. SCI is following up with the Ministry of Ports, Shipping and Waterways for appointment of required number of Independent Directors.

Auditors Report

The Statutory Auditors have given an unqualified report on the Financial Statement of the Company for the Financial Year 2022-23. Comments of Comptroller and Auditor General of India (C&AG)

The Comptroller and Auditor General of India in their comments for the year ended 31st March 2023 have brought out that;

Standalone Financial Statements

A. Comments on Profitability

1. Statement of Profit and Loss

SI. No. VIII Tax expense

Tax Pertaining to earlier years (-) ' 9309 lakh

An amount of ' 9309 lakh being income tax paid for earlier assessment years 2008-09 and 2022-23 was written back and acknowledged as profit in the Statement of Profit and Loss. The SCI has opted Tonnage Tax option under the Income Tax Act. According to this option a concessional rate of tax is applied on income from shipping activities. On the income from other than shipping activities, regular rate of income tax is charged.

For the assessment year 2008-09, SCI had made an appeal with Income Tax Appellate Tribunal for considering interest from bank deposits amounting to ' 227.68 crore as income from shipping activity. Tribunal passed its order on 14.03.2023 which stated,” the appeal by the assesse (SCI) is partly allowed for statistical purposes”

Based on the Tribunal’s order and without waiting for refund order from the Income Tax Department, SCI accounted for ' 9314 lakh (' 77,58,19,031 A.Y 2008-09 and ' 15,56,32,008 for A.Y 2022-23 on same grounds) as profit arising from tax refund.

Management has confirmed that they had neither received any refund order nor any communication regarding appeal by the Income Tax Department. Thus, the calculation for refund is not based on any concrete evidence. Hence, the accounting treatment of refund is not correct. This has resulted in overstatement of Profits and Income Tax Assets (Net of Provision) (Note-8) by ' 9309 lakh¹.

Consolidated Financial Statements A. Comments on Consolidated Profitability 1. Statement of Profit and Loss SI. No. X Tax expense

Tax Pertaining to earlier years (-) ' 9309 lakh

An amount of ' 9309 lakh being income tax paid for earlier assessment years 2008-09 and 2022-23 was written back and acknowledged as profit in the Statement of Profit and Loss. The SCI has opted Tonnage Tax option under the Income Tax Act. According to this option a concessional rate of tax is applied on income from shipping activities. On the income from other than shipping activities, regular rate of income tax is charged.

Management has confirmed that they had neither received any refund order nor any communication regarding appeal by the Income Tax Department. Thus, the calculation for refund is not based on any concrete evidence. Hence, the accounting treatment of refund is not correct. This has resulted in overstatement of Profits and Income Tax Assets (Net of Provision) (Note-8) by ' 9309 lakh¹.

The Directors response to the above comment is as follows:

SCI is assessed under Chapter XII-G of Income tax Act for the purposes of computation of its income from the business of operation of qualifying ships. During the year ended 31.03.2023, Hon’ble ITAT Mumbai has passed an order in favor of the Company in respect of an appeal filed for A.Y 2008-09 by ruling that the interest income would be treated as a part of core shipping income and hence it need not be offered to tax as ‘Income from other sources’. Based on internal assessment of the order and judicial precedence, the Company has reversed the provision and has also disclosed its impact in the financial statements.

The Indian Accounting Standards (Ind AS) mandate that accounting for transactions is to be made based on “substance over form” and the provision shall be reversed based on the best estimate of the management. Since, the Company has reversed the provision created for AY 2008-09 and AY 2022-23 based on the favorable ITAT order and judicial precedence in similar other cases, the Company is of the opinion that the reversal of provision is in accordance with the requirements of Ind AS.

150^th Report of the Committee of Papers Laid on the Table (COPLOT) presented in Rajya Sabha on 31 March 2017 - Para 24 of the COPLOT recommendations

Please find the following information with respect to Pending Audit Para:

Name of Audit Para: Para No. 9.2 of CAG Report No. 13 of 2019 Brief of the Para

Payment of Performance Related Pay in violation of DPE guidelines.

SCI paid an amount of ' 11.03 crore as Performance Related Pay to employees for the financial year 2014-15. C&AG however raised an observation that payment of Performance Related Pay of ' 11.03 crore for the year 2014 -15 was made in violation of DPE guidelines and that the non-core profits had not been deducted for calculation of PRP

PRP of year 2014-15 was paid after approval of Nomination and Remuneration Committee. However, matter was again put up to Nomination and Remuneration Committee held on 04.02.2020 specifically to review the position with respect to C&AG observation.

SCI stand on C&AG observation is reiterated below:-

a)    Profit on sale of Vessels: Scrapping of vessels is a normal activity in shipping and SCI follows a policy of scrapping at the end of the useful life of the vessel after a techno economic study is done on possible further extension of the life of the vessel. All activities starting from placing of an order building a ship till the end point of scrapping of the ship at the end of its useful life fall within the ambit of core business activity of a shipping company.

b)    Income (Compensation) received from rescindment of Contract: Possibility of contract rescindment termination in any business is normal and cannot be ruled out. Hence, rescindment of contract needs to be considered within the purview of normal business activity. In our case compensation/ income received for rescindment of contract is nothing but is in nature of liquidated damaged given by shipyard for their subpar performance and not completing the contract on time. Had the vessel been delivered in time SCI would have earned normal income from freight/charter hire.

c)    Interest on loans given to Joint Ventures: Formation of Joint venture is a normal business activity. Loans given to Joint Venture Companies is part of well deliberated strategic planning by all JV partners and in line with the MOA.

The Nomination & Remuneration Committee deliberated the matter in detail and concluded that all the above mentioned items are core activities of SCI.

Resolution of minutes of above agenda is placed below:

The Committee thereafter passed the following resolution:

RESOLVED That any business activity which is undertaken to sustain, promote, enhance or grow its primary business is to be considered as “Core Business Activity” of the Company

RESOLVED Further THAT income from rescindment of contract (liquidated damages), interest earned on loan exposure to the joint venture companies, profit on sale of ships constitute as income arising from core activity

Resolved Further that payments made by the company to the employees as Performance Related Pay for the FY 2014-15 based on the above notion, on which taxes have been paid by the employees and further in order to avoid complications arising on account of differential treatment afforded to the same class of employees whether serving or otherwise, should not be recovered

RESOLVED FURTHER THAT the Company may communicate the above decision of the Committee to the Ministry of Ports, Shipping and Waterways (MoPSW) for further action.

In view of instructions of the Nomination and Remuneration Committee, matter was put to The Ministry of Ports, Shipping and Waterways (MoPSW) on 27.07.2020 seeking guidance on the way forward considering the above resolution of the Nomination & Remuneration committee.

Thereafter, on 02.12.2021, letter was sent to MoPSW stating that considering the Strategic Disinvestment of SCI being in advanced stages, DIPAM had opined that the Administrative ministry should take necessary action to get all employee related liabilities pertaining to the period that the company is a CPSE cleared before the company’s management control is transferred so as to safeguard the interest of the employees.

Reporting Status:

The Audit para no. 9.2 of CAG report No. 13 of 2019 was presented to Lok Sabha/ Rajya Sabha on 25^th November 2019. SCI is coordinating with CAG office and MoPSW for early resolution of the matter.

Corporate Governance.

A report on Corporate Governance pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached to this report and forms part of it.

Business Responsibility and Sustainability Report.

The Shipping Corporation of India's Business Responsibility and Sustainability Report (BRSR) for the fiscal year 2022-23 emphasizes its unwavering commitment to Environmental, Social, and Governance (ESG) principles and the strides we have made in addressing sustainability challenges. We see our responsibility to take the lead in sustainable development not only as a duty to the society but also as an opportunity to do well by doing good.

ESG Related Challenges:

Over the past year, we have encountered a range of ESG challenges that have guided our focus on responsible business practices. We acknowledge our responsibility in mitigating the impact of shipping operations on the en vironment and communities. Additionally, ensuring the safety, wellbeing, and growth of our workforce while fostering transparency, diversity and inclusion both within and outside our organisation continues to be a priority for us.

Processes:

In response to these challenges, we have set ESG processes that align with our commitment to sustainable shipping and fostering a culture of diversity and inclusion within our organization.

1.    Emission Reduction: The Company is compliant with International Maritime Organization (IMO) - MARPOL Convention and has taken appropriate actions impacting Emissions, Ballast Water Treatment, Domestic discharges and Oil Pollution enabling us to contribute to global efforts to combat climate change and promote cleaner oceans.

2.    Waste Management: Waste generated on board during normal operation of the ship is managed as per the vessel-specific garbage management plan and landed ashore at approved reception facilities for further processing. Also, the discharge of oil, solid waste & sewage etc. from its ships is prohibited under MARPOL (International Convention for the Prevention of Pollution from Ships). Most of our vessels comply with Green Passport or equivalent notation. In addition, the Company diligently adheres to the compliance requirements specified in the administration circular concerning the Transport and Handling of hazardous and noxious liquid substances in bulk on Indian-flagged offshore support vessels.

3.    Workforce Development: Multiple training programs with a core focus on the principles of varied topics such as Leadership, Soft Skills, Health & Wellness and Industrial skills were conducted for the workforce ensuring their professional growth and well-being while fostering a diverse and inclusive work culture.

4.    CSR Initiatives: Our community engagement initiatives positively impacted the lives of multiple individuals and many families, focusing on education, healthcare and livelihood opportunities across diverse communities.

5.    Vendor Selection: The Company sources vendors who are maintaining registration under local/ regional laws, are complying with National and International applicable legislations, and are maintaining management systems under ISO 9001 and 14001 or any other equivalent

systems wherever applicable. Additionally, suppliers are requested to be in accordance with SOLAS Chapter 11-1/ Reg 3-5. Furthermore, the sellers should guarantee that no hazardous material identified under MEPC269 (68) and EUSRR has been used in the supplies, no use of plastic for packing material and whenever possible assist the vessel in collecting back the packing material if the vessel so requests. Flexibility in Placement:

As an organization that values transparency and accountability, we have exercised our flexibility in placing this disclosure within the Annual Report. This ensures that stakeholders have easy access to crucial information about our sustainability efforts and responsible business practices. Conclusion:

At The Shipping Corporation of India Limited, sustainability is ingrained in our corporate ethos. We view ESG as a foundation for creating long-term value and positively impacting the world around us. Through collaboration and unwavering commitment, we remain steadfast in our pursuit of sustainable shipping solutions.

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:

a)    That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b)    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 and loss of the company for that period;

c)    the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d)    the directors had prepared the annual accounts on a going concern basis; and

(e)    the directors, 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 detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

(f)    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.

Acknowledgements.

Your Directors extend their gratitude to Shri Sarbananda Sonowal, Hon'ble Minister of Ports, Shipping and Waterways and Minister of AYUSH, Shri Shripad Naik and Shri Shantanu Thakur, Hon’ble Ministers of State for Ports, Shipping and Waterways for their support and guidance in managing the affairs of the Company. Your Directors also extend their gratitude to Secretary (Shipping) Ministry of Port, Shipping and Waterways for guidance.

Your Directors also wish to express their thanks to the officials in the Ministry of Ports, Shipping and Waterways 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, other stakeholders 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.K. Tyagi

Dated : 04.08.2023    Chairman and Managing Director

1

Ratios of comparative period i.e., FY 2021-22 are based on previous year figures which have been restated, regrouped and rearranged wherever necessary to confirm to current year presentation of the financial statements as per Schedule III (Division II) to the Companies Act 2013.

Ratio - Details of Significant changes and explanation thereto:

1.    Debt Equity ratio - Debt Equity Ratio of standalone financial statement has decreased from 0.57 as on 31^st March 2022 to 0.41 as on 31^st March 2023 due to repayment of long term loan and profit earned during the year.

2.    Operating Profit Margin - Operating Profit Margin has come down due to increase in expenses. Expenses in F.Y 2022-23 is increased by ' 921 Crores whereas revenue in F.Y 2022-23 is increased by ' 806 Crores.

A. INDUSTRY STRUCTURE AND DEVELOPMENTS

The overall scenario under which the Shipping industry operated and which impacted the various segments is discussed below.

i] WORLD SCENARIO

The world GDP grew by an average of 3.4% in 2022, compared to the economic expansion of about 6.1% in the previous year. The growth estimates for 2023 and 2024 are 2.8% and 3.0% respectively. It can be seen from the declining estimates of global growth in 2023 & 2024 that economic expansion will be gradual in short-term. The medium term outlook also indicates subdued economic activity globally. The road to recovery from the crises of pandemic as well as Russia-Ukraine war was never going to easy, and the recent reports affirm this. One of the main impacts of the Russia-Ukraine war on economic side was the ballooning inflation, which is apparently more stubborn than initially believed. In spite of central banks across the world increasing base interest rates, inflationary pressures remain stickier and continue to cause an overhang on recovery forecasts. Meanwhile, activity does not seem to be softening as much as expected, a phenomenon confirmed by a tight labour market. This might be due to the pent up lingering demand & resolution of some supply chain bottlenecks. However, at this juncture it is important for economic activity to soften, in order to have a grip on high inflation, as otherwise central banks & policymakers will have to continue to raise the interest rates. Too high interest rates pose a great risk to financial markets, as can be seen from recent collapse of some regional banks in US & Europe. Also, the resulting global slowdown due to long drawn fight with inflation may lead to geo-economic fragmentation, uneven recoveries & increased fiscal & financial risks.