The purpose of this Bill is to provide for an increase in the authorised capital of Irish Shipping Ltd. from the present figure of £5 million to £12 million; to provide for an increase in the maximum borrowing by the company which may be guaranteed by the Minister for Finance from the present limit of £2 million to £5 million; and for the repeal of the provisions of the Irish Shipping Ltd. Act, 1947, whch empowered the Minister for Industry and Commerce to pay subsidies to the company.
Irish Shipping Ltd. possess at present a fleet of modern vessels totalling 140,000 tons dead-weight, consisting of 17 dry cargo vessels, one deep sea tanker and one coastal tanker. A second deep sea tanker of 18,000 tons deadweight has been launched and will be delivered later on in this year. As Senators are aware, the company have grown to be a very considerable enterprise, giving employment now to some 900 persons either ashore or afloat. The scale of their operations may be deduced from the fact that, in the five years which ended on 30th April last, the freights earned by the company amounted to approximately £9½ million.
The Irish Shipping Ltd. Act, 1947, provided for a maximum authorised capital of £5 million and for borrowing, with the consent of the Minister for Finance, up to £2 million. These limits are no longer adequate. Expenditure on the present fleet, including payments in respect of the tanker under construction, has amounted to approximately £12½ million. Of that sum, the company contributed from earnings some £5¾ million. Five million pounds, being the full authorised capital of the company, has been contributed by the Minister for Finance in the form of share capital. The balance of approximately £1¾ million is covered by overdraft with the company's bankers. The overdraft was arranged for the purpose of financing the purchase of two deep sea tankers and is guaranteed by the Minister for Finance.
When, after the war, the programme of expansion for Irish Shipping Ltd. was determined, the target aimed at was a dry cargo fleet of 250,000 tons deadweight. In the light of our wartime experience, that was considered to be the minimum size of fleet required to carry essential imports to this country in time of war. Because of increases in the size and in the speed of the dry cargo vessels with the consequent improvement in their overall efficiency, it is now considered that minimum emergency requirements could be put at a figure of 200,000 tons. The cost of an additional 80,000 tons required to put the company's fleet up to 200,000 tons in respect of dry cargo vessels will, at present prices, be of the order of £9,000,000. I should like to make it clear that it is not intended to limit the company's growth to that tonnage but expansion beyond that figure must depend solely upon commercial considerations.
The Board of Irish Shipping Ltd. consider that the best shipping practice requires that they should replace their vessels when they become relatively uneconomic to operate. On that basis, a number of the company's vessels will fall due for replacement during the next few years. I should mention that, as an alternative to replacement, the company have undertaken the conversion of two of the older vessels to diesel propulsion.
The cost of replacing vessels would in the normal way be met from the sale of the older vessels and from depreciation reserves. Since the vessels of the present fleet were built, however, the cost of new vessels has risen very considerably and, moreover, the company's entire reserves have been applied, at the direction of the Government, to the acquisition of new tonnage. The cost of replacements which will, over a long period ahead, amount to many millions of pounds will, therefore, have to be met to a considerable extent from new capital. Outstanding commitments on the tanker due for delivery this year amount to about £420,000 and the payment of the outstanding sums is expected to bring the company's overdraft to over £2,000,000. In view of the present shipping slump, the company will not be able to pay that overdraft from earnings in the relatively short time originally envisaged. It may be necessary eventually, therefore, to liquidate the overdraft by long-term borrowing or by payment from capital account.
The Irish Shipping Company, Ltd., like other shipping companies, have been affected by the present severe slump in freight rates. They have been fortunate in that a large part of their fleet is modern and relatively economic to operate, and that a number of their vessels is on long-term charter at rates which were negotiated before the slump began. The company expect that in the present year they will break even, the profits on some vessels offsetting the loss on others. They have, however, been forced to lay up two of the older and less economic vessels. The company are unable at present and for the time being to devote any part of their earnings to the liquidation of their overdraft or to the acquisition of new ships. The extent to which they may be able to do so in the future will depend very much on developments in the freight market.
It is not possible in present circumstances to estimate with any degree of precision what the gross capital requirements of the company may be for a considerable number of years ahead or what contribution the company may be able to make from their earnings towards the cost of future replacements and expansion. Any such estimates would have to depend to a considerable degree on developments in the world shipping market. The Government, however, consider that adequate statutory provision should be made to meet whatever developments may be found to be practicable and desirable in the light of future experience.
It is proposed, therefore, that the maximum authorised capital of the company should be increased from £5,000,000 to £12,000,000. That figure of £12,000,000 is in any case more in keeping with the present value of the company's assets which amount to £13,000,000. It is also proposed to increase from £2,000,000 to £5,000,000 the amount which the company can borrow under guarantee of the Minister for Finance. Taking into account the prospects for a return to normal conditions in the shipping industry within some reasonable time the provisions now proposed should be sufficient to meet the company's requirements on capital account for some years.
It is proposed to repeal the provision in the 1947 Act which empowers the Minister for Industry and Commerce to pay subsidies to the company. When that Act was being passed Irish Shipping, Ltd., was beginning to meet, for the first time in peace, the brunt of competition from established shipping companies. It was expected that competition would become more acute and that the company would have to face the discriminatory practices operated by some Governments to protect their own shipping and unfair competition from some combines of private shipping concerns. The provision of subsidy is considered to be no longer necessary and the retention of powers in legislation to pay subsidy could give rise to misunderstanding and difficulty. Since 1947 this country has become a member of the interGovernmental Maritime Consultative Organisation, one of whose aims is the elimination of discriminatory and restrictive practices in the shipping industry. While it is not to be expected that these practices will be eliminated entirely it is hoped that some mitigation of them may be brought about. In our circumstances discriminatory action in favour of our own vessels would be impracticable even if it were desirable. Our national interest, both from the narrow point of view of the success of Irish Shipping, Ltd., as well as from the broader aspect of the freight levels which affect the cost of our imports and exports, is best served by supporting the abolition of discriminatory and restrictive practices in the industry, and as a token of our view in that regard we are moving to delete this power to pay subsidy which, in fact, has never been utilised.