Reports reduction in losses of Rs. 1.15 billion in two years
Posts Rs. 636 million profit in first 8 months of FY 2021/22
If CSC fleet size is increased, country can save millions of dollars spent on chartering ships, says president
by Sanath Nanayakkare
The Ceylon Shipping Corporation (CSC) made an impressive turnaround in its fortunes, going from a loss-making public company to a profitable public company in two years.
In the financial year 2020/21, CSC recorded a profit of Rs. 636 million in the first eight months of the financial year 2021/22, changing the situation completely different from the losses it made in the 2018/19 (Rs. 1.523 million) and in 2019/20 (Rs. 1.085 million) which had caused problems for them.
CSC President Wineendra S. Weeraman said The Island Financial Review that CSC’s profit curve was well thought out.
“When I took over as President of CSC in December 2019, no one was interested in taking the helm of CSC under such dismal financial circumstances,” he said.
Weeraman said he first prioritized settling a $75 million loan taken out from the Banque Populaire by the former management for the purchase of two ships.
“This loan was guaranteed by the Treasury and I decided to clear all arrears because I did not want to postpone it by paying huge interest on the principal of the loan. In the accounts I saw that we had an outstanding payment in the amount of Rs 1,400 million which needed to be collected from Lanka Coal Company – the procurement entity of CEB. Through a formal process, I was able to retrieve those funds and use them to repay that loan. What I had to pay, I paid and made the decision to charter our ships at the right time despite the threat of Covid-19. These are the key decisions I made and this is how we are making profits now,” he said.
Speaking further, he said:
“Currently, CSC’s main business is to deliver coal to Norochcholai Power Station. In this regard, CSC deals with the Lanka Coal Company and the Ceylon Electricity Board (CEB). CEB charters our two bulk carriers ‘Ceylon Breeze’ and ‘Ceylon Princess’ each with 62,000 deadweight tons, to ship coal to Sri Lanka from South Africa.The CEB pays us in Sri Lankan rupees when chartering our ships, but when it charters foreign vessels for this purpose, it pays in US dollars.
“CSC provides a third of the total coal needs of the Norochcholai power plant. We can help save a considerable amount of US dollar payments made as vessel charter costs if CSC has its own fleet to meet all coal needs.
“At the height of Covid-19, despite expert concerns that we should keep both vessels at anchor, after checking IMO regulations and the advice of the Harbor Master and the Port Authority doctor of Sri Lanka, I decided to send our ships out to sea and bring much needed foreign currency to the country, without letting the ships idle at sea and suffer losses for six months.With this operation, we were able to bring back 3 million dollars in about 6 months.
“When we charter a vessel to transport coal to the Norochcholai plant, purchased through Lanka Coal Company, the charter alone costs US$1.3-2.0 million plus other costs. for each charter. If we have four other ships in our fleet, we can prevent this outflow of foreign currency from happening every time. »
“If we expand the fleet to six ships with one or two tankers, we can bring in the entire supply of coal, rice, sugar and even petroleum products without chartering international ships for an infinite number of years. How many millions do we pay for transporting fuel and other goods? As the buyer of these products, we should be able to dictate how they are transported. We can ask them to use our boats. If the government says that all fuel imports into Sri Lanka must be carried on CSC ships, then we can save many millions of dollars.
“Government decision makers should support us in this regard. They should support key government organizations such as the CSC and build its capacity to make it more productive in its operations and empower it to support the country’s economy more robustly. We have made requests to policymakers regarding this goal, including the former president of CSC, who could help us organize funds,” he said.
“The annual turnover of CSC is around Rs. 3.8-4.0 billion while the annual turnover of Ports Authority of Sri Lanka is around Rs. 55 billion. Comparatively speaking, the CSC also contributes significantly to the economy with the limited resources at its disposal. CSC has great potential for growth if it gets the necessary political support.
“CSC employs 125 people internally. On each ship we have around 22 to 23 crew – that’s around 46 on both ships and we have a crew reserve for crew changes. Our salary structure is very competitive with that of international shipping companies. We pay a ship captain around $8,500 to $9,000 per month. We must pay these salaries to ensure the deployment of qualified and qualified people on board our ships. However, the advantage here is that the whole crew is Sri Lankan”.
“Before Covid, when we chartered our vessels to international parties during the off-season, we were making $8,000-13,000 per day per vessel. With the spread of the initial Covid wave, these prices fell to $6,500-7,500. After the second wave of Covid, freight rates skyrocketed to around $35,000-40,000. So this is the best time for the global shipping industry and we should make the most of this situation for CSC.
“The biggest difficulty we have with CEB is that we are fighting with them to get priority over us in charter services and they also prefer to give it to outsiders by finding a single fault that could easily be corrected. And even after providing the services to them, they take months and years to pay our dues, and then we can’t operate on a positive balance sheet.
“I would like to urge policy makers and senior officials to take bold policy decisions to strengthen CSC’s fleet.”
Speaking about his future plans, he said:
“There are several projects I intend to start here. There were negotiations in 2017 – with Bangladesh Shipping Corporation to operate a collection service here. If you take the port of Colombo, its capacity is 7 million TEUs. In Bangladesh, it’s 3.5 million. Twenty percent of their cargo arrives in Colombo. This represents approximately 700,000 TEUs. Bangladesh’s ports are very congested. Shipowners don’t like to go there because it takes days to reach a terminal. If we sign this bilateral agreement, they will save on the number of days spent transporting their cargo. If we can sign him, CSC will be able to earn around $2 million a year. The SLPA will also benefit when the TEUs are brought to the port of Colombo. It will be a win-win situation for all parties.
“Bunker prices are very high here compared to Singapore. Sometimes we don’t get bunker activity unless prices fluctuate competitively for ship operators. If we supply them with off-shore or out-of-port bunkers, they will prefer to supply themselves with oil at a lower price. I also submitted a proposal for a floating bunker.
“And then the ferry service between Colombo and Tuticorin which started in 2011. I plan to resume this service. Not only Tuticorin, we can try various other ports in India.
“To go further, I have a plan to organize medium-sized cruise ships between Colombo, Male and Goa. If we organize these tours, everyone will find them exciting and will benefit from these tours which will bring us income. »
“CSC also wants to get involved in passenger transportation. I signed an agreement with Sail Lanka Yachting Group, a global company that builds yachts in Sri Lanka. They already operate from Colombo Port City Marina. They agreed to build larger ships to join CSC’s plans for passenger transport.
“These are plans for the future and I have submitted them to policy makers. If we want to make a maritime hub here, these things have to be facilitated.
“Ship repair is another area. I also line up to get CSC ships repaired. In addition to the Colombo shipyard, we need to build another shipyard, ideally in Trincomalee. »
“Finally, we must bear in mind the Sagarmala program which is underway in India and which aims to reach its peak by 2035. It is designed in the areas of modernization of ports, development of new ports, improved port connectivity and port related industrialization one day this is going to affect us so we need to equip all the critical facilities here to stay in the business and thrive in the new industry emerging in the region. I call on policy makers and senior government officials to support CSC with a bold policy for its exponential growth, while strengthening key industry verticals at the same time.