Indian shipbreaking companies have lost almost Rs 800-1000 crore during financial year 2011-12 due to rupee depreciation against US dollar. According to the industry, weak rupee converted profits into losses, mainly after October 2011 period.
"There has been an increase in work in tonnage, but due to rupee depreciation against US dollar, we have lost about Rs 800-1000 crore in financial year 2011-12," said Nitin Kanakia, joint secretary of Ship Recycling Industries Association of India (SRIA).
Adding further, he said, "We have to pay more in rupee terms to buy ships. The rupee-dollar rate was different at the time of deal and at the time of payment the dollar value has changed. This situation has started after October 2011."
According to industry sources, ship breakers paid money in a period of 6 months. This means, for the the deal, that was made during April to September 2011, the payment was made after October 2011. By that time, rupee had started depreciating against US dollar. This led to a loss of about Rs 800-1000 crore for the ship breakers.
Jayant Vanani, secretary of SRIA said, "The industry, overall, was doing very well but due to rupee depreciation against US dollar, the industry had to pay more in rupee terms than the amount mentioned at the time of signing the deal."
According to Vanani, "At the time of the deal, rupee price was around Rs 44-45 per dollar and by the time of payment, the rate had shot up to around Rs 50-51 a dollar. This difference hit most of the ship breakers in Alang."
Indian rupee had fallen to Rs 53.714 against US dollar on December 14, 2011, while it remains at around Rs 50.975 at present. "Still the rupee is not stable and we fear further loss in coming days," said Vanani.
About 365 ships come to Alang shipyard for recycling every year.
Alang ship breaking yard that is located near Bhavnagar in Gujarat, is Asia’s largest ship recycling place. Over 100 ship breaking companies are active in Alang and turnover of the industry is about Rs 10,000 crore per year.
Source: Business Standard. By Vimukt Dave. 2 April 2012