Freight costs rise in Haldia’s shallow waters

Bangalore: State-owned Indian Oil Corp. Ltd (IOC) and Steel Authority of India Ltd (SAIL) are paying more in freight costs to import raw materials because of insufficient depth at the Haldia dock of the Union government-owned Kolkata port.

Recently, when IOC’s mooring facility at Paradip port in Orissa was shut for repairs for a few days, the refiner had to revert to an older system of importing crude to feed its refinery at Haldia.

Port constraints: A supertanker at sea. Indian Oil Corp. has had to use smaller tankers to ship crude as supertankers can’t dock at Haldia.

A mooring point is used by oil tankers to offload crude that is transported through pipes to the shore.

IOC used to earlier import crude oil to Kakinada, Andhra Pradesh, on supertankers that can carry as much as 280,000 tonnes of the fuel. From Kakinada, the crude was unloaded on smaller tankers and taken to Haldia since supertankers cannot call directly at Haldia, where the depth is 7.5-7.8m depending upon the tide.

IOC prefers to bring the crude on supertankers to save on freight. It pays about Rs1,500 crore a year in shipping bills.

When the Paradip mooring point was closed for repairs, IOC had to hire three smaller tankers to take the crude arriving on supertankers from Kakinada to Haldia. Though each of these tankers can carry 95,000 tonnes of crude, they could load only 35,000-45,000 tonnes because of the insufficient depth at Haldia.

The freight cost to bring crude on supertankers from West Africa to Kakinada is about $3 million (Rs14.49 crore). This works out to about $11 per tonne, according to two ship brokers who did not want to be named.

To unload the crude oil from one supertanker, smaller tankers hired by IOC have to make six-seven trips from Kakinada to Haldia. For each trip, IOC paid about $4.5 lakh per vessel. So, while IOC imported crude oil from West Africa to Kakinada at a rate of $3 million, it was paying the same amount to ship it from Kakinada to Haldia. “This is a very costly affair,” said one of the brokers.

An IOC executive said on condition of anonymity that the firm had to resort to the older system to keep feeding the Haldia refinery. The mooring facility at Paradip has since started functioning.

Similarly, out of 10 million tonnes (mt) of coking coal SAIL imports every year for its steel plants, it wants to ship about 6 mt directly to Haldia. But it can ship only 3-4 mt because of depth constraints.

As a result, SAIL imports coking coal first to Visakhapatnam in Andhra Pradesh, from where about half the quantity is unloaded and taken to the steel mills by rail. This entails higher freight costs compared with transporting it to plants from Haldia.

Although the load is reduced at Visakhapatnam and the ship becomes lighter, the remaining cargo is shipped from Visakhapatnam to Haldia at an extra cost ranging from $1.5 to $2.5 per tonne on the entire quantity.

For instance, assume SAIL transports about 70,000 tonnes of coking coal on a ship to Visakhapatnam at a rate of about $10 per tonne. At Visakhapatnam, about 40,000 tonnes are unloaded and taken to the mills by rail. To ship the rest to Haldia, the steel maker has to pay $1.5-2.5 over the base freight of $10 per tonne on the entire 70,000 tonnes and not on the balance 30,000 tonnes of coal.

“Thus, SAIL has to pay more on freight to ship coking coal to Haldia because of insufficient depth at the port,” said the second ship broker. SAIL pays about Rs1,200 crore a year to ship raw materials.

The Haldia port needs dredging throughout the year to maintain the current depth, for which the Union government pays about Rs500 crore a year.