High duty tariff will bring
scrapping business at standstill besides rendering thousands jobless
Sep 20 - 27, 1999
Shipbreakers fear that high tariff would force them to stop further
import of ships for scrapping. This, they claim, would result in a loss of Rs 3-4 billion
( between $58 to $77m at current exchange rate) besides causing unemployment to thousands
of labourers in the industry.
Suleman Ahmad Jiwani, chairman, Pakistan Shipbreakers
Association, has sought the support of the Federation of Pakistan Chambers of Commerce and
Industry to take the issue at the high level to solve shipbreakers' problems on top
priority basis to save the industry from complete collapse.
It may be recalled that in the federal budget for fiscal year
1999-2000, a duty of Rs 500 per tonne has been imposed on the shipbreaking industry.
Previously the total impact of customs duty and taxes on shipbreaking industry was about
32% which jumped to 40% after the imposition of this duty. It also resulted in widening
the difference between the shipbreakers and the re-melters to Rs 1,500 per tonne at
present to have a disastrous impact on shipbreaking.
This has happened despite the fact that a reduction in duty on shredded
and bundled scrap to Rs 500 per tonne had been agreed between the association and Steel
Melters Association in February. This had increased the differential between ships for
breaking, shredded and bundled scrap from Rs 500-1,000 which at present has soared to Rs
1,500, which has rendered the shipbreaking industry incompetitive with the shredded and
bundled scrap. In addition, Pakistans main competitors, Bangladesh and India have a
significantly lower tariff structure which has made Pakistans industry unviable in
the domestic and international markets. In the past two months, only two small ships
having LDT of about 1,000 tonnes have been imported for scrapping as compared to normal
imports of 130,000 to 140,000 tonnes per month.
The shipbreaking industry is in crisis, Jiwani says, and it is fearing
a bleak and grim future primarily because of the increase in duty. In addition, Pakistan
Steel Mill has also reduced the prices of billets recently from Rs 500 to Rs 1,000 per
tonne further hurting an already incompetitive shipbreaking industry.
Jiwani further said that for over 18 months the PSBA had been asking
for removal of the anomalies created by several SROs issued in a period between December
1997 and September 1998.
These SROs are not workable in their present form and have added to the
numerous problems and difficulties in the day-to-day transactions required to be made by
the shipbreakers. The anomalies must be done away without any further loss of time, he