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Shipbreakers fear collapse of industry

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  8. FACTS

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, Pakistan’s main competitors, Bangladesh and India have a significantly lower tariff structure which has made Pakistan’s 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 stressed.