Impressive Recovery

Hansavivek SCINDIA STEAM NAVIGATION has recorded impressive recovery in its performance due to the favourable freight market conditions. Freight earnings and charter hire receipts have gone up from Rs 81.31 crore in the previous year to Rs 105.66 crore in 1979-80 and the outcome has been a gross profit of Rs 16.27 crore against a trading loss of Rs 43 lakh. After depreciation and foreign taxation, there is a net profit of Rs 5.02 crore to stand against a net loss of Rs 10.30 crore of the previous year. This has enabled the company to wipe off carry forward loss of Rs 4.61 crore. After transferring back Rs 1.70 crore from development rebate reserve on completion of the statutory period of eight years and after transferring to this reserve Rs 2.20 crore, in respect of a vessel acquired in an earlier year, the loss carried forward to the current year's account is barely Rs 9 lakh. During the year, the company acquired one ship for which it is entitled to claim investment allowance amounting to over Rs 4.20 crore. It is required to create statutory reserve at 50 per cent of the investment allowance and this will amount to Rs 2.10 crore. Together with the balance of the previous years, total amount of statutory reserve required to be created in order to claim development rebate and investment allowance is Rs 11.48 crore. The directors state that the company's bulk- cargo vessels have been profitably employed throughout the year and charter hire earnings have increased from Rs 7.15 crore to Rs 19.50 crore. But earnings on the liner trade continue to lag behind expenses, chiefly because increases in freight rates are not commensurate with increases in costs. With the cost of fuel consumed going up from Rs 10.95 crore to Rs 15.99 crore, bunker prices have been pushed up substantially. Similarly, interest on borrowings went up from Rs 5.31 crore to Rs 7.13 crore. Consistent rise in operational expenses due to worldwide inflation has given cause for con cern. There does not seem to be any let up in costs as OPEC continues to increase fuel prices frequently. Moreover, as more and more high-priced ships are acquired, depreciation charges go up. The directors, however, hope that the results for the current year's operations will be as satisfactory as those of the year before. The company is affected by the amendment made by the Finance Act, 1980, in Section 80-J of the Income-tax Act with retrospective effect. The management is taking all steps necessary along with other companies to safeguard the company's interest on this point by such legal action as may be deemed necessary. The liner trade is undergoing a fast change owing to new mode of earning cargo in containers. Operations of container services require different types of ships involving heavy investment. The company is taking steps to change over its fleet progressively to containers. The company's joint venture in Nigeria, Equitorial Carriers, suffered a IONS of Rs 67 lakh for 1979, after charging depreciation. Total carried forward loss is of the order of Rs 2.16 crore. After close of the year.