Bangalore: State-run Shipping Corp. of India Ltd (SCI) has called off plans to buy three new container ships from Cochin Shipyard? Ltd as it seeks to go slow on ship purchases to deal with a downturn in the shipping industry.

"Our ship acquisition committee decided not to pursue the purchase of three container ships from Cochin Shipyard because of the high price quoted by the yard," J.N. Das, a director looking after liner and passenger division at SCI, said. Shipping Corp. and Cochin Shipyard were discussing the finer details of the deal ahead of signing a formal contract.

This is the first clear indication that India's biggest ocean carrier is becoming cautious on buying new ships as a global oversupply of ships, low freight rates and rising costs hurt margins of fleet owners.

The firm, 63.75% owned by the Union government, has reported losses in the past two quarters.

"What appears to be a large cash reserve suddenly looks fragile because everything is happening in the reverse direction-higher depreciation on new ships inducted into the fleet, lower freight rates and higher interest rates," said a Union shipping ministry official who sits on the board of SCI.