BSC buying vessels at higher prices

The Bangladesh Shipping Corporation (BSC) has initiated a process of buying from China three bulk carriers, each having capacity of 36,000 DWT (deadweight tonnage) at a cost of US$27 million.

The move has raised questions over their higher prices compared to global market price of vessels, officials said.

To procure a total of six vessels (three bulk carriers and three oil tankers), the BSC on April 30 last signed a commercial contract with the CMC (China National Machinery Import and Export Corporation).

The Chinese government is expected to provide soft loan to fund the procurement.

Officials said the Ceylon Shipping Corporation (CSC) of Sri Lanka signed an agreement with state-owned People's Bank in December last to procure two 63,600 DWT bulk carriers from China at a cost of $70 million. Each 63,600 DWT bulk carrier cost the CSC $35 million which will also be built in a Chinese shipyard.

They said the size of CSC bulk carriers are almost double than that of the BSC but the price difference among them is $8.0 million for each vessel. The price of BSC's bulk carriers should be much lower than the price fixed during signing of the commercial contract, they added.

An official of the ministry of shipping (MoS) told the FE the issue of high price of BSC's bulk carrier is being discussed among the ministry's top bosses. "But they have nothing to do since political high-ups were involved in the price fixation."

The official said when vessel price is going down globally, the BSC is buying the same at higher prices. He said many shipping companies worldwide are incurring financial losses due to low voyages, thus selling off vessels to avoid further losses.

He said Mumbai-based Varun Shipping Company, a regional leader in this field, reported a net loss of Rs 4.899 billion in the year ending in March 2014. Its financial position became worst because of lower freight globally. It even failed to pay wages of employees, thus narrowly avoiding losing licence.

According to officials who were involved in contract signing with the CMC, the state-owned BSC has compromised the standard of vessels and at the same time the prices have gone up abnormally.

They said the shipyard, which was initially selected by Bangladeshi officials through physical visits, was changed during the signing of commercial contract.

The Guangzhou Shipyard, which the Bangladeshi officials visited and selected, is the largest modern integrated shipbuilding enterprise in South China and one of the 500 biggest enterprises in China.

He said the vessel price should have gone down since the shipyard and specifications were changed. But, instead the vessels' price has gone up much higher compared to the price preliminarily suggested by a price negotiation committee.

Sources said during signing of the commercial contract, the number of cranes of each bulk carrier was reduced to four from initial proposal of five citing technical inconsistency.

Besides, compromise was made in other specifications of the vessels.

A senior MoS official said the BSC itself is a loss-making concern of the government. The procurement process is going against the interest of the BSC.

 "It won't be able to make profit in future since it is buying vessels at such higher price", he said.

He also pointed out that usually no service charge is given when the manufacturing company is previously selected. "But, in this commercial contract, some $2.0 million was set aside as service charge which is totally illegal."

When contacted, managing director of the BSC Moqsumul Quader claimed that the price was not higher compared to global scenario.

 "We signed the commercial contract after several years of negotiations. The price can't be higher in any way," he said.

Contacted over telephone, shipping secretary Syed Monjurul Islam did not want to comment on the issue and said it is yet to reach the ministry.

He asked this correspondent to contact the BSC if there is any query in this regard.