Shipping Corp plans exit from Singapore vessel management model

State-owned Ceylon Shipping Corporation (CSCL) plans to replace its long-running vessel management arrangement with Singapore-based Wallem Shipping, with a direct brokerage model, as it seeks to reduce management costs and improve access to international freight markets, following concerns raised by Parliament’s Committee on Public Enterprises (COPE).

The proposed shift, expected after the expiry of the current agreement in September 2026, emerged during a recent COPE review of the corporation’s management, financial controls and operational performance, based on the Auditor General’s reports for 2021, 2022 and 2023.

The COPE examined the agreement with Wallem Shipping, which has managed the commercial operations of the CSCL vessels since 2016. The committee noted that the commission fees and daily management charges were being paid from the vessel charter income, while the expected revenue targets had not been achieved.

The committee further observed that the corporation’s heavy reliance on the Singapore-based manager had limited operational flexibility and highlighted the absence of penalty clauses for failing to meet the agreed revenue targets as a major weakness in the arrangement.

The officials told the COPE that a Cabinet memorandum had been submitted seeking approval to replace the intermediary management structure with a system that would utilise six government-registered direct brokers to conduct commercial shipping operations. According to the officials, the proposed model is expected to reduce management fees and commissions, provide direct access to international markets, improve flexibility in meeting government transportation requirements and help build technical expertise within the corporation.

The review also highlighted broader financial challenges facing the state-owned shipping company. The COPE was informed that US $ 47 million remains outstanding from a US $ 70 million loan obtained in 2016 to acquire two vessels. The debt had to be restructured following the delays in repayments, while rising fuel costs, inadequate maintenance systems and operational inefficiencies had constrained the corporation’s ability to generate stronger returns from international operations. The committee also questioned the effectiveness of investments in six subsidiaries and associated companies, noting that investments amounting to Rs.630 million had generated an annual dividend income of only around Rs.400,000.

The COPE further found that the corporation’s 2024-2027 Corporate Plan lacked a clear connection between the objectives and implementation strategies, observing that it appeared to have been prepared largely to satisfy the administrative requirements rather than serve as a practical roadmap for operations.

The COPE also expressed concern over the governance and human resource management issues, noting that several key positions, including that of general manager, had been held on an acting basis for extended periods, weakening leadership and decision-making.

Among other issues discussed were the failure to conduct a formal investigation into the disappearance of 1,852 litres of lubricating oil from the vessel Ceylon Breeze, a loss of Rs.1.4 million linked to an Education Ministry school uniform distribution project and failure to recover a further Rs.6.3 million.

The COPE recommended that CSCL undergo comprehensive restructuring, strengthen internal audit mechanisms, reduce unnecessary expenditure and refer identified fraud and irregularities to relevant law enforcement authorities where necessary.