India’s Ministry of Ports, Shipping and Waterways (MoPSW) will back proposals by picking up equity, for manufacture of oil tankers through SPVs (special purpose vehicles) between Shipping Corporation of India, oil marketing companies (OMCs), dockyards and other financial institutions. Projects will have a nearly 70:30 debt-equity component, indicating that majority of the project will be funded through loans or borrowed funds.
The Ministry’s exposure could be limited to a maximum of 15 per cent of the project cost or SPV, an official aware of the discussions toldbusinessline.
Owning oil tankers hedge Indian oil supplies from geopolitical headwinds and probable sanctions apart from reducing ship chartering bills, an outgo to the exchequer.
Special entity
The first such special entity could materialise over the next 6-9 months, the person said, adding that the Shipping Corporation of India (SCI) – a CPSE of the Ministry – would be roped in as one of the key investors or stakeholders in the project.
The SCI recently signed an MoU and a non-disclosure agreement (NDA) with BPCL to explore “strategic alliance in the shipping sector”. This includes developing “comprehensive roadmap, structure, and operating model for the proposed strategic alliance or entity”.
“At the most the Ministry will take up 49 per cent of the equity contribution in the SPV, which works out to be a maximum of 15 per cent of the total project cost at the most. But that too will be decided basis the project specifics,” the official said.
Nearly a year after the idea was mooted, the Ministry’s internal survey indicate that there could be requirement for nearly 100 such oil tankers across categories such as Panamaxes, Suezmaxes, ultra large crude carriers, very large crude carriers and others; and project cost – spread across 5-10 years for these 100 ships – could be around ₹25,000–30,000 crore range.
Approximately depending on size of the tanker, capex varies on the ₹800–2,000 crore range.
India does not manufacture oil tankers at the moment and nearly all its requirement are met through imports. The import bill runs into nearly $100 billion, and it includes ship chartering services. Insurance payouts and all.
Funding Details
According to the official, the SPVs would look to secure funding primarily form financial institutions and international funds, international VCs, sovereign funds, and also through PEs. This would account for “at the most” 70 per cent of the project cost.
The remaining equity could come from OMCs, the dockyards, SCI including the Ministry pitching-in where required.
Ramping Up Dockyards
“So, we have initiated discussions with dockyards too to ensure there is availability of space to carry out construction activities. In the next 6-9 months, the first SPV could materialise,” said the official.
Dockyards have been asked to ramp up on capacities and ensure space availability while the Ministry has asked them to work on expansion plans.
There were internal discussions to bring in some second-hand tankers and retrofit them, in order to speed up work. But these proposals were shot down by the Ministry.
“Retro-fitting is not an option here,” a second official said.
For instance, Cochin Shipyard Limited (CSL) has entered into a memorandum of understanding with A.P. Moller–Maersk to explore collaboration opportunities in ship repair, maintenance, and shipbuilding in India. The MoU encompasses exploration of ship repair, dry docking, and new building opportunities, among others.
