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India's Great Eastern to sell-off old ships to avoid maintenance costs

MUMBAI's Great Eastern Shipping is to sell off its older ships after the signing of a contract to dispose of it 16-year-old Jag Pratap and the dismantling of seven more to stem losses on rent.

"We would be happy to sell older ships, where the cost of holding on to them is pretty high in terms of the higher cost to be incurred on maintenance," said its chief financial officer G Shivakumar after second quarter profit dropped 84 per cent.

The biggest private ocean carrier in India saw its net profit in the second quarter ending September, drop 30 per cent year on year to INR270 million (US$5.2 million) drawn on revenue of INR6.7 billion. The depreciation of the rupee against the dollar gave rise to a foreign exchange loss of INR200 million compared to INR40.6 million in the same quarter ending September 30, 2010.

Global overcapacity is creating pressure on freight rates which is unlikely to alter in the next six months, said New Delhi-based Drewry Shipping analyst Nikhil Jain, reported London's International Freighting Weekly. Mr Shivakumur said structural oversupply will need to be reduced in order for a turnaround. "If the bad rates continue for another year or so, it will lead to a wholesale scrapping of sub-20-year-old oil tankers and bulk carriers," he added.

Its fleet stands at 35 vessels, comprising of 25 tankers (nine crude carriers, 15 product tankers, one LPG carrier) and 10 dry bulk carriers with an average age of 8.1 years.

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