Japan's Mitsui OSK Lines (MOL) has set up a VLCC and VLGC company in India to take advantage of state subsidies.

The company told TradeWinds that Sakura Energy Transport was set up in Mumbai in April.

The new operation owns and operates two India-flag ships.

A spokeswoman for the Japanese group said the venture is part of its latest management drive called "Rolling Plan 2021".

"We have set Asia, including India, as one of the core regions within the regional strategy," she added.

"The set-up of this new company is in line with this strategy, and we are hoping to expand our business in India and Asia going forward."

The Sakura website lists the owned vessels as the 80,199-cbm VLGC Hisui (built 2010) and 302,500-dwt VLCC Kasagisan (built 2006).

The site makes no mention of MOL, but says Sakura Energy Transport was founded to serve India's growing energy needs. Expansion is planned, it adds.

The Business Line daily reported that Sakura has secured a two-year charter from state-owned IndianOil for the VLGC. The VLCC scored a deal for a year, plus an option to extend for 12 months, from the same company.

Cash boost approved

Shipping sources told the newspaper that this is an early indication of overseas companies setting up shop in India to capitalise on state help for Indian shipowners carrying crude, LPG, coal and fertiliser cargoes for government firms.

A subsidy scheme was approved by the government in July.

Domestic shipping companies will receive a payment of between 10% and 15% on top of agreed charter rates for vessels flagged in India after February, depending on age.

Mitsui OSK Lines' president and CEO is Takeshi Hashimoto. Photo: MOL

For ships registered before that, the premium is between 5% and 10%.

Indian shipowners have a right of first refusal for public contracts.

The state budget for the subsidy scheme is INR 16.24bn ($219m) over five years.

"Foreign fleet owners are beginning to register subsidiary companies in India and bringing ships under the Indian flag to gain assured business in carrying Indian cargo," according to one industry official cited by Business Line.

MOL's 2021 strategy involves new investments totalling ¥450bn ($4bn) up to 2023, including ¥200bn in carbon-emission reduction projects.

The group expects this to lead to an extra ¥40bn in annual profits by 2027.

In May, Singapore's BW LPG said it had increased its stake in VLGC joint venture BW Global United LPG India to 85%.

The company was formed in 2017 on a 50:50 basis with Global United Shipping India.

It initially had two VLGCs that it purchased from BW LPG, a spin-off of the BW Group. This has now been increased to five ships in an increasingly important gas market.

BW LPG also signed a new five-year loan deal for BW Global United LPG India, worth up to $198m, although it did not specify a use for the money.

The cash has come from a syndicate of seven banks, at an all-in cost of Libor plus 1.98%.