October 18, 2012

The three per cent solution

Consultancy firm Moore Stephens’ recent annual statistics on vessel operating costs- OpCost 2012- were regurgitated with some alarm by many shipping magazines last week. A typical title of the excited churnalism screamed that rising crew costs were the biggest factor in increased bills for running ships. 

All the excitement, when the figures-shorn of the hoopla- said that there was, within an average of 2.1 per cent increase in operating costs, just a 3.3 per cent overall increase in crew costs year on year. Nobody got delirious at some other figures published in the report, by the way. For example, expenses on stores have gone up 2.7 per cent on an average- and 6.5 per cent for LPG ships. Within the same ballpark, it was crew costs that hit the headlines. You mean those guys don’t work for free!?

Nobody bothered to highlight Moore Stephens partner Richard Greiner’s educated comments on the report. He said, “The average overall increase in crew costs was in fact marginally down on the figure for 2010. But while crew costs remain the single biggest contributor to higher operating costs, they are still modest in comparison to some of the hefty increases posted in earlier years. Investing in good people is a must for the shipping industry, and will justify the price tag in the long term”.

Now I do not know- or even want to- what comes under the heading ‘crew costs’; I assume that wages constitute just a part of these, even a significant part, and perhaps travel, insurance and the so called ‘training’ costs make up the rest. But leave that be; pretend for a moment that the entire increase- 3.3 per cent- is due to seafarer wage hikes. So what?  

In the Indian context, a three per cent annual wage hike in any industry is nothing, even in these troubled times. I suspect this is also true for countries like the Philippines. The headlines, therefore, are meant to either calculatedly repeat the old hatchet-job that has been attempted on seafarers forever (you are pricing themselves out of the market, don’t ask for too much or there will be no jobs, etc.) or are just sensationalism without substance. Either way, yawn. 

Shipping’s shaky business model has always been a supply and demand one when it comes to seafarer job security or wages. While statistics may be interesting, therefore, the industry is in no position to shed crocodile tears now that times are bad and good people are scarce. Or cry wolf. It needs to spend its energies more on finding solutions to the shortage of qualified and experienced crews instead of bemoaning its own HRD debacles. 

Most Indians in the workforce would consider the HRD policies of the Indian Public Sector Units- government controlled industries including oil and gas, mining and such- to be the pits, pachydermous, inflexible, and bound by overregulation. But the level of HRD in shipping is so abysmal that I can compare it with what some of these PSU’s are doing today and find shipping wanting. Many PSU dinosaurs, who can’t even reward competence with higher salaries thanks to government controlled rigid pay scales, are finding innovative ways of posting their brightest to unpopular remote locations like mines and oil rigs (where there is a two week on and two weeks off rotation, by the way, laughable compared to what a seafarer goes through).

They are paying hardship allowances. Giving the spouse a job in mining towns where the partner is employed. Offering home loans, and house, entertainment or communication allowances. Granting longer time off and ‘emergency leave’. Providing air and chopper services and contemplating paying for children’s “coaching classes” into prestigious engineering or medical colleges, and paying their fees (for non-executive employees’ children) thereafter. Also arranging Wi-Fi facilities, fast food and coffee joints in mining towns or remote locations. 

In short, they are doing whatever they can to retain the people that they want in the unpopular locations that they want them in; a scenario shipping must surely find analogous. 

We in shipping could learn a lot from those PSU folk. But will we? Will our managers show some will, spine and ability before it is too late? Will we stop taking bribes for giving jobs to hopeful first time cadets and ratings long enough to think about this simple fact- that the time is long gone when you can hope to solve the problem by just throwing a piffling three per cent at it?

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