November 11, 2010

Calculated mistake.

My calculator and I are confused again.

For most of my working life I have been told, by the cabal sitting ashore, that crew costs are rising unsustainably and that we Indian sailors are- to use a favourite banality- ‘pricing ourselves out of the market’. So you can imagine my surprise when I read of a Lloyd’s List article that said that, since 2003, when the the International Bargaining Forum began, ”the costs of the 23-man model ship used as the basis for negotiations have increased from USD 42,794 a month to USD 54,850, a rise of 28%”. Coincidentally, another report I ran into, this time by Moore Stephens, says that total ship operating costs fell between 2% and 8% in 2009 after 7 years of rise, although they are expected to be marginally higher this year. The nine year average rise is between 6 and 7 percent.

My calculator and I work out that a 28% increase in crew costs over 7 years translates to a compounded annual rate of a little above three percent. That, in reality, is a number much closer to the wage hike that we seafarers have been given over time, and is hardly the earthshaking rise that my colleagues in management have been whining about. I also know that the US dollar that a sailor is normally being paid with is dropping against the Rupee, and that a low level grunt working for a software company in India will often wrinkle his nose at the 15 percent annual increment he is almost guaranteed, barring the odd year or two. True, ’crew costs’ may include repatriation, insurance and other such expenses and is therefore not an absolute indicator of wages, but I believe that my calculator is close enough. And, as we know from experience, years may pass, in our market consumed by supply and demand, with no increase in wages at all- or even a dollar decrease. If that were to happen today, a seafarer will be doubly hit, because the dollar isn’t what it used to be and the rupee is stronger.

You will excuse me for wondering if I, a Master since 1991, whose ambit of responsibility at sea cannot even begin to be compared with that software grunt’s, should be getting an annual increment just a fourth of that guys. If, on the other hand, I am a fresh faced 18 year old, I will likely question the business model of an industry that jumps up and down wailing about wages- of contracted workers, at that- in panic with doomsday scenarios built in, when all it offers is a 3 percent os so increment annually over time.

Obviously you will tell me shipping is not software. It is a different industry, capital intensive and cyclical and so the two cannot be compared. Fair enough, but what you are really telling me- whether I am me or that 18 year old- is that working at sea is not all that great financially. That i am better off elsewhere. In which case the business model is up in the air- or down the tube- once again. These objections, even when I compare shipping with, say, the aviation industry, actually tell that youngster that we acknowledge those industries as superior, and trust on either goodwill or subterfuge to get him to choose shipping as a career instead. As is obvious with the numbers and the quality of new entrants seen today at sea, this sleight of hand does not work anymore. Neither does it make shipping a career of choice, with due emphasis on the last two words.

Popular thinking- the cabal’s and the seaman’s- is that shipping is tough but the money is good. I am afraid that is no longer true for India. Sure, the money is good if, as that 18 year old Class 12 graduate, your folks cannot afford good higher education for you. The money is good if you are terribly below par and so really cannot make good anywhere else, now or in the future. However, looking purely from an earnings perspective, sailing today is a financial dead end If either of these caveats do not apply to you.

For example, the chances of a well educated youngster earning a seagoing Master’s (or at least a Chief Officer’s) wages ashore within a decade or so are quite high in many other industries in India if he or she is any good. This possibility becomes actually very likely if you factor in future exchange rates and the wage-increase disparity I have spoken of. And, given that working lifespans are longer ashore, the decision to ignore a career at sea, with all the additional handicaps thrown in, becomes almost a no-brainer. Sure, the salary ashore will be before tax, but then again, tax rates for resident Indians are being relaxed with slabs raised annually- while those for NRIs and seamen working abroad are being tightened. The tide is turning against the mariner here too.

As somebody who has loved the life the sea has given me, I take no pleasure in propogating my arguments in this piece- in my opinion, these point to an approaching tragedy. Also because I see few youngsters with love for the sea life today, a passion that made going out to sea as- and sometimes even more- interesting as the money. Unfortunately, shipping today has a huge problem if it cannot even prove to its sailors that future financial rewards are worth the risk and hardship that they are being asked to undertake.

We are getting second-rate new talent. And what is even worse, this is not the career of choice for the second-raters either. Many of us still say, somewhat derisively, that rocket scientists are not required at sea. This statement may be true, but it obfuscates the fact that what is indeed required of new talent- motivation and commitment, for a start- is usually missing or is at levels that are abysmal.

As for the old canard about Indian sailors pricing themselves out of the market, it lies nakedly exposed before us. Indian mariners may well dwindle in numbers in future, but that won’t be because they have priced themselves out of the market. It will more likely be due to reasons outlined here or the growing realisation amongst owners that higher salaries are not justified given the dropping calibre of officers. The industry would do better addressing those issues instead of continuing to waste energy on its old fictions.



V M said...

Spot on. And part of it is also because the average seafarer does not really go and work out the real cost of being at sea. Thanks . . .

Rajneesh Lakhotia said...

Manu - u are amazing - with a cerebral contnet like yours , wonder how could you ever have lived and loved as well, the sea ...

captain sharam-se-halal said...

Hi Manu- even more distressing and shocking will be the revelation, that from a shipowner's perspective , the Captain is nothing more than a bloody expensive AB ( er..can we reduce his salary by about $500 - during budgeting negotiations with shipmanagers) - this Im telling from personal experience working in the commercial department of a shipowner- with this knowledge, I really can never never go back to sea - bereft of even the slight dignity I thot I had , forget the paltry salary.... Captain Sharam-se-halal