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First Bunkering conference in India finds a sea of lost opportunities

Posted to First Bunkering conference in India finds a sea of lost opportunities (by on December 12, 2011

India has all the characteristics required for becoming a bunkering hub

India could long have been a bunkering hub had the trade and the authorities sought to clinch the slew of stunning opportunities that exist and which have all the tools needed to become one. These became apparent at the first ever conference held last week on “Outlook for Bunkering and Marine Lubricants in India”.

Igniting the conference deliberations on bunkering Ashok Sharma, CMD of IRS in his inaugural speech initiated discussions providing different viewpoints that required to be dwelt upon. Interestingly reputed personalities, considered icons in the bunkering world were on hand to make their contributions to the proceedings in order to ensure that the conference reached some meaningful and conclusive result.

Basheer Ahmed Sayed, CEO of Chemoil Adani Pte Ltd., a leading bunker supplier in the country providing over 800,000 tonnes at various Indian ports annually, informed how Chemoil created a competitive niche for itself by taking on credit risks by buying oil and supplying to ships.

He contended that the main reason for Singapore having become a bunkering hub is the absence of tax to say nothing of its requisite infrastructure including terminals, the entire trade chain viz brokers, insurers, suppliers, lawyers, et al. “Singapore sources a significant amount of bunker from India and sells it in their country,” he said. “How do you think they do it? It is because they have removed taxes on bunkers which make it cheap. So also China having withdrawn its taxes bunker supplies shot up by 11 million tonnes. There is no value-added tax (VAT) in Gujarat where Mundra is situated and we are able to provide dynamic pricing which is difficult at other ports. Goa too has reduced its VAT to 1% from 4%.”

Giving the supplier’s side perspective, Sudhir Malik TM ( I & C) of Bharat Petroleum Corporation Ltd. dwelt on India’s vast coast line with its over 250 ports that hold an enormous potential. “Now all major oil companies in India have turned their focus on providing bunkers in an endeavor to cope with the rising demand in the Indian market even for supplying 380 CST,” he said. “Taxes have been a major issue so far, but the situation is changing slowly. Maharashtra state government has decided on reducing MAT to zero and other states are bound to follow suit. I see infrastructure developing at several ports. However, complying with extensive customs formalities and procedures is a burden. But bunker rates differ from Singapore by a mere $ 5 to $ 6.” He mentioned that one great initiative was that major oil companies have been canvassing with the state governments to bring down taxes and this has begun yielding results.

The undisputed fact is that much depends on infrastructure being made available. There is a need for shoring up the barge loading facilities in India. The hydrant system considered the best gets players discouraged by their exorbitant cost. Hence hardly any has been acquired.

Pointing out an irony Singapore based Richard D’Souza, Vice President of Matrix Bharat pte Ltd stated, “Singapore was sourcing its requirement of CST 380 from India. How is it then that Singapore is able to sell it at a cheaper rate?” Though he did not venture to explain the paradox he went on to explain about the hurdles coming in the way of India becoming a bunkering hub. Among the causes he citied was product availability viz marine fuel oil, RMG 380. This he said was not available earlier but is gradually coming on line.

On the tax front he mentioned that there are five Indian maritime states in India which have reduced the taxes and others too need to follow suit. Time between notice to supplier and supplies made available needs to be brought down from 3 days to one. All ports should permit night deliveries as well as outer anchorage delivery during the monsoons. Simplification and reduction in documentation and procedural matters was also desired. Ports could cut down on wharfage and port charges, concessional and duty drawbacks on bonded bunker delivery, simplified customs and excise facilities.

Taking an optimistic view of the bunkering scenario Chandan Samaiyar, Chief Executive of Gulf Petroleum observed that India was already growing at 20% and even CST 380 was now available in many ports. Suppliers were committing CST 180 to their customers and once MARPOL got enforced next year they would all have to commit to specifications.

Fuel consumption comprised of 60% of the running cost of a ship why then was there no premium for quality in bunker fuel? posed R. C. Bhavnani, Vice President, Global Marketing, Viswa Lab, Singapore. Oil was refined in India and transported by chartered ship to Singapore, yet was sold there at a cheaper cost than in India! “This is only possible because of blending of fuel,” he contended. “The heavy impurities, etc are removed and all impurities in the crude oil are carried through into the residue. If a ship manager is advised to take costlier fuel because it is good for the engine he retaliates by saying, ‘I am asking you to save money and you are telling me about spending more?’ With that the effort to right the wrong is lost.”

Mr Bhavnani explained that ship owners should be concerned about quality of fuel because the technical condition index is better. But barring a small percentage, ship owners are generally not concerned. The ship manager is not interested in quality of fuel. He narrated an instance when he met a very senior executive of an engine manufacturer who told him: “We really welcome poor quality fuels! This helps us make money on spare parts. On engine costs we don’t make much margin because of serious competition.

“The efficiency on board treatment is mostly never measured. At Vishwa Lab we did a study of fuel from different ports of the world. The fuel ignition quality is different than what is claimed. Even the quantity claimed to be delivered is not correct. We found that though Jeddah showed to be highest it was in reality cheaper considering the consumption, efficiency saving in productivity, etc. The Singapore fuel turned out to be more expensive even though it was shown to be the cheapest.”

Considering the need to hasten the formation of a bunkering hub Chandan Samaiyar called upon the delegates present to join in forming a trade association so that the government could be approached with one voice for redressal of their grievances. The representative from Indian National Shipowners’ Association Anil Devli, their CEO welcomed the idea and extended all help in the formation of the Ship Bunker Trade Association.