Sunday, June 18, 2017

Coal transport ship payments snare Sri Lanka Shipping Corp. in debt trap

 The Sri Lanka Shipping Industry points out that the Sri Lanka Shipping Corporation is falling in to a huge debt trap due to the huge payments that is required to be made for the purchasing of the two ships used to transport coal.

Vessels M V Ceylon Breeze was delivered in January 2016 and M V Ceylon Princes was delivered in June 2016 and today the daily rental and maintenance cost to be paid for both ships account to a staggering US $ 32,000 a source from the shipping community said at the Shipping Council Annual General meeting held last Friday

However the revenue gained or the saving from operating this amount is less than half of the price that has to be paid.

Norochcholai Coal Power Plant commenced operation in 2011 with 300 Mw. As Ceylon Shipping Corporation Ceylon Limited (CSCL) didn’t have vessels to transport Coal, a tender was called in 2011 to transport 700,000 Mt Coal and this was awarded to Mercator Singapore for a period of three years from 2011 September till 2014 April.

With the development of the second phase of 300 Mw power plant a tender was called in 2014 for 1.5 million tons of coal. This was awarded to PCL Singapore for a period of three years from 2014 September till 2017 April.

Since another 300 Mw Plant was under construction by 2014 the government ordered two modern bulk vessels considering to develop CSCL as a national carrier than to become a broker on freight.

These two vessels could carry only a maximum 700,000 Mt and also their movements are also restricted from mid-September to end April each year due to tides in the sea.

Due to high purchase price of the two vessels CSCL Cannot make profits and have to depend on the Charter Market during the period from October to April every year. Since the worldwide shipping market is in a bad shape this too is a burden to CSCL as they can earn only around USS 8,000 each from these operations

“The two ships take around 34 days to deliver a load of coal to Norochholai and six months of the year the two ship are being rented out on a daily basis to other operators. The income from these ‘rentals’ amount to only US$ 16,000 (for both) which is far below to meet the cost of payment.”

Considering the negative direction the CSCL is heading several world renowned shipping companies have submitted Expression of Interest (EOI) to assist CSCL and develop Joint Venture companies on PPP basis which is also the plan of the government in turning loss making SOEs to profit making SOEs.

Next Transportation of coal is to be commenced by Mid-September and the Contract with PCL was expired on end April.

“Up to now no tender have being called while several EOI’s submitted by different Shipping Companies too have not being considered. The shipping community urges the authorities to call for a tender soon so that they could get involved in the bidding process and work closely with the CSCL.”

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