Why in the News?

• The Government of India has announced a major revival plan for the Shipping Corporation of India (SCI), including the purchase of over 200 merchant ships through joint ventures with other PSUs.

What’s in Today’s Article?

• Shipping Corporation of India (Evolution, Role in National Interest & Strategic Missions, Decline During Liberalisation, Global Trends, Govt’s Revival Plan)

Evolution of the Shipping Corporation of India

• For decades, the SCI stood as one of the world’s leading national carriers, operating over 120 ships across categories such as oil tankers, gas carriers, chemical tankers, passenger vessels, liners and offshore vessels.
• SCI symbolised India’s maritime pride, combining national service with commercial capability.
• SCI also led technological upgrades, introducing the latest German marine engines, operating India’s first LNG carrier, and building vessels in Indian shipyards despite delays and cost overruns.
• Its diverse fleet and national obligations made it central to India’s maritime economy.

Role in National Interest and Strategic Missions

• Energy Security: Historically, SCI had first rights on transporting India’s oil, making tankers the backbone of its fleet.
• National Service: It transported civilian workers at concessional rates to the Andaman Islands and supported defence logistics during crises.
• Risk Operations: During the Iran-Iraq war, SCI tankers bore the word INDIA in large white letters to signal non-hostility and ensure safe passage.
• Skill Development: SCI’s Mumbai-based training institute in Powai trained thousands of marine professionals who went on to earn significant foreign exchange for India.

Decline During Liberalisation

• The 1990s ushered in the era of Liberalisation-Privatisation-Globalisation (LPG), and Indian maritime policy moved in line with global trade norms.
• Under WTO rules, India had to dilute preferential treatment for its national carrier in EXIM cargo.
• Key consequences included:

• Loss of “right of refusal” over oil cargo, a major revenue source for SCI.
• Neglect in fleet modernisation, only two ships were ordered in 10 years before the recent purchases.
• Shrinking tanker capacity and rising average fleet age (18 years, nearing scrapping levels).
• Collapse of Indian presence in container shipping after cabotage relaxation.

• India’s share of EXIM cargo carried by Indian vessels fell from 27% earlier to just 7%, illustrating a precipitous decline.

COVID-19 and the Reassessment of Strategic Shipping Capacity

• The pandemic became a turning point. Global freight rates skyrocketed, up to 10 times pre-pandemic levels, as port delays and geopolitical bottlenecks grew.
• Many global carriers skipped developing country ports, disrupting India’s key exports such as rice and shrimp and affecting essential imports such as rubber.
• India’s lack of national container capacity left it vulnerable to:

• Supply chain disruptions
• High freight costs
• Loss of export competitiveness

• This renewed recognition of maritime self-reliance prompted the shift away from privatisation and toward rebuilding SCI.

Global Trends Supporting Public Ownership

• The revival of SCI is not an isolated move. Across the world, governments have increased intervention in strategic sectors:

• United States: The Biden administration invested billions in semiconductors, while the Trump administration acquired stakes in companies including Intel and U.S. Steel, abandoning earlier reluctance toward industrial ownership.
• Rare Earth Sector: U.S. government investment has grown due to supply chain vulnerabilities.

• This global shift toward strategic state-driven industrial capacity strengthens the logic behind reviving SCI.

Government’s New Revival Plan for SCI

• Large-Scale Ship Acquisition Through PSU Joint Ventures
  • The government plans to purchase 200+ merchant vessels for SCI through joint ventures with other PSUs using funds from the Maritime Development Fund.
  • PSU partners, such as oil companies, the Container Corporation of India (CONCOR) and others, will provide long-term assured cargo contracts, enabling SCI to finance new ships sustainably.
• Rebuilding Container Shipping Capacity
  • One major initiative includes the creation of Bharat Shipping Line, a joint venture of SCI and CONCOR, to buy 20 new container ships, reviving India’s long-neglected container fleet.
• Balancing Newbuilds and Market Realities
  • While the revival is ambitious, experts note that global ship prices are currently extremely high due to a prolonged post-pandemic shipping boom.
  • Therefore, expansion will be gradual, balancing strategic needs with market conditions.

Need to Support Private Indian Shipping

• Industry experts emphasise that revival efforts should not remain limited to SCI.
• India’s broader merchant shipping capacity can grow only if private operators also receive:

• Long-term cargo contracts
• Support for capital investment
• A competitive taxation and regulatory environment

• A holistic approach would build India’s overall flag tonnage, enhancing supply chain resilience and global trade competitiveness.