July 20, 2020: In an intimation to the BSE, the Shipping Corporation of India (SCI) has detailed the impact of the Covid-19 pandemic on the company and the way ahead.
The pandemic and the lockdown imposed to flatten the curve of infection have caused an unprecedented and a massive havoc in the entire economy and business operations. SCI has also not been immune to its effects.
Overall impact on company’s business
On an overall basis, the company’s business has not been significantly impacted as there has been a rise in tanker rates in the backdrop of sharp drop in oil prices and demand for floating storage. This may not sustain in the future.
The shipping business and markets have been adversely impacted as the cascading effect of the lockdown pervaded the port and cargo operations leading to delays in clearing of cargo containers, berthing of vessels, clearance of documents/immigration, resulting in demand compression and utilisation levels of the ships. Overseas and domestic container trade is witnessing a slowdown translating into a downward pressure on freight rates.
Offshore activities planned before onset of monsoon have been delayed affecting the commercial operations and revenues.
Invocation of Force Majeure clauses by the charterers due to declaration of Force Majeure by the ports to avoid their liabilities could have a far reaching impact on the shipping lines in terms of disputes related to demurrage for bulk carriers and termination of contracts by the charterers leading to non-operational days of offshore vessels affecting the revenues again, apart from increasing the costs.
The near-term outlook for major shipping segments like dry bulk, containers and offshore appears negative.
Steps taken to ensure smooth functioning of operations
SCI has been alert and adeptly managing and constantly endeavouring to foresee and mitigate the negative impact. The company was one of the first to have a Business Continuity Plan (BCP) in place in March 2020 itself to minimise disruption to operations and ensure that business remains viable during the virus outbreak and further.
Business operations and functions are being managed effectively in accordance with the BCP which is constantly reviewed for refinement in accordance with the dynamic changes. All out efforts are made to ensure the supply chain and logistics which has been badly affected and directly impacts the operations; the long standing relationships with the domestic and overseas agents and support could be leveraged to overcome the adverse scenario to a great extent.
Maintaining operations and other timelines
SCI vessels have ensured uninterrupted supply of critical and essential commodities like crude oil/clean products, thermal coal, fertilisers, grains, etc. for India coast as well as to other countries during the lockdown and global pandemic period.
The stipulated timelines laid down by law have also been met and the financial statements were prepared in a timely manner despite the lockdown, and SCI was the first CPSE in Navratna/Maharatna category to have adopted its financial results for FY 2019-20 when no other CPSE in this category had declared the same.
SCI has also remained ahead of most private companies including its peers in the industry, which was a major feat considering the prevailing conditions in Mumbai. The Board Meeting for adopting the Accounts was held on 29th May 2020 without availing of any extensions granted by SEBI due to the pandemic.
It is also further assessed that Covid-19 does not have any considerable impact on company operations going forward. The management based on its assessment, has estimated its future cash flows for the company, which indicates no major change in the financial performance as estimated prior to Covid-19 impact and hence, the company believes that there is no impact on its ability to continue as a going concern and meeting its liabilities as and when they fall due. The company has access to line of credit which can be utilised to meet emergencies, if any, arising out of the impact of Covid on its operations. With system-driven environment, there has been no impact in the internal controls and reporting as well.
SCI remains committed to serve the customers and the stakeholders and it is hoped that the stimulus packages announced would lead to the desired impact on the economy and the lost momentum will be regained.
Source: EXIM India Online