Government plans to anchor oil tanker production via SPVs
India to Boost Oil Tanker Production via SPVs
India’s Ministry of Ports, Shipping and Waterways (MoPSW) is set to support the production of oil tankers through special purpose vehicles (SPVs). These SPVs will be formed in collaboration with the Shipping Corporation of India (SCI), oil marketing companies (OMCs), dockyards, and financial institutions. The funding structure will primarily consist of a 70:30 debt-equity ratio, meaning that most of the project costs will be covered by loans. The Ministry’s investment will be capped at 15% of the total project cost.
The initiative aims to enhance India’s oil supply security, reducing reliance on imports and minimizing ship chartering expenses. Currently, India imports nearly all its oil tankers, leading to an import bill of approximately $100 billion, which includes chartering and insurance costs.
Strategic Partnerships and Future Plans
The first SPV is expected to be established within the next 6 to 9 months, with SCI playing a crucial role as a key stakeholder. Recently, SCI signed a memorandum of understanding (MoU) with Bharat Petroleum Corporation Limited (BPCL) to explore a strategic alliance in the shipping sector. This partnership aims to develop a comprehensive roadmap for the new entity.
The Ministry’s internal survey indicates a demand for around 100 oil tankers, including various categories such as Panamaxes, Suezmaxes, and very large crude carriers. The projected cost for these vessels over the next 5 to 10 years is estimated to be between ₹25,000 and ₹30,000 crore. The capital expenditure for each tanker will vary based on size, ranging from ₹800 crore to ₹2,000 crore.
Funding for the SPVs will primarily come from financial institutions, international venture capitalists, sovereign funds, and private equity firms, covering up to 70% of the project costs. The remaining equity will be sourced from OMCs, dockyards, and contributions from the Ministry as needed. The Ministry is also in discussions with dockyards to ensure adequate space for construction activities, emphasizing the need for ramped-up capacities and expansion plans.
