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Lack of low sulphur bunker to halt ship operations on east coast

Coastal shipping operations along India’s eastern coast will come to a halt this week due to lack of availability of low sulphur fuel oil- which ships are mandated to use as per a new global rule  IMO 2020  that came into force from January 1 to cut emissions.

The new rule means that the global limit for sulphur in fuel oil used on board ships has been reduced to 0.5 per cent m/m (mass by mass) from the earlier 3.5 per cent.

Ship fuel or bunkers account for as much as 40 per cent of the operating cost of a vessel.

“There is virtually no supply of low sulphur fuel oil and all the coastal ships including the feeder container vessels plying between Indian ports on the east coast will come to a standstill from this week as soon as they exhaust whatever little stock they had,”  according to a top executive with a shipping company.

The looming crisis was discussed at a meeting called by the Government with ship owners, PSU oil refiners and the Director General of shipping on January 9.

Situation on the West coast is relatively better

Bunker suppliers say that east coast require about 30,000 tons of low sulphur fuel oil a month to meet the requirement of coastal ships plying on local routes. The situation on the West coast is relatively better due to the availability of the fuel in Kandla and Cochin for most coastal ships.

And for the unsettling crisis, oil refiners have been blamed for having started production of low sulphur fuel oil late.

Refiners’ prioritization also has pushed back the coastal ships for bunkering

 A bunker supplier said: “They should have been ready with the product in adequate quantities by December 1 to meet the demand. The first lot of the product were sold by refiners such as Indian Oil Corporation and Hindustan Petroleum Corporation in the open market and then when the DG Shipping pushed them to supply to coastal ships, they made some priority rules that gave first preference to supply to ships they have chartered to transport their own crude and petroleum products, followed by coastal vessels/Indian flag ships and then to other vessels. This prioritisation should have been done prior to start of sales.”

 “Whatever they produced is finished and virtually there is no supply and they want us to operate vessels. I don’t know how,” the shipping company executive said.

Govt advised ship operators to use diesel oil

During the January 9 meeting, the Government advised ship operators to use diesel oil till the situation improved. But, ship owners say that this was not a workable and sustainable option.

“That is not a workable and sustainable solution because diesel oil is costing ₹87,000 a ton today. At least, we know we will not be using diesel oil and as soon as we exhaust our low sulphur fuel oil stock, we have no option other than to stop operating ships,” the shipping company executive mentioned earlier said.

“Each coastal vessel typically consumes as much as 25 tons of bunker a day. Already from normal fuel oil, which was costing Rs30,000 a ton, we had to move to low sulphur fuel oil priced at Rs55,000 a ton and that also is not available and now they want us to use Rs 87,000 a ton diesel oil,” the executive said.

That aside, there are technical issues related to use of diesel oil on the ships’ engine.

When ships stop operating, it affects transshipment business from Indian ports

A stoppage of operations will also hit India’s efforts to promote container transshipment business from Indian ports.

Once, exporters and importers realise that lack of low sulphur fuel oil on the east coast will hamper feeder shipping services, they will again shift back to Colombo and Singapore for their transshipment needs.

We lose transshipment business again to foreign ports

“Then, it will be very difficult to bring them back to India. After all the effort we have made to bring them here, we are going to lose transshipment business again to foreign ports,” the executive added.

 

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