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Shipbreaking industry

During last 3 months only one ship of 10039 (LTD) was imported

Sep 25 - Oct 01, 2000

Pakistan Shipbreaking industry was at the apex, when more than 100 companies were operating in the country. But during the last decade the industry came on the verge of disaster and absolutely collapsed. Gadani shipbreaking yard which was considered biggest and best shipbreaking centre has come to its feet due to increase in international prices and high duties and levies.

Talking to PAGE, Pakistan Shipbreakers' Association said, during its boom period Gadani shipbreaking yard was earning huge profits and rendering employment to thousands of people and giving billions of revenue to the national exchequer in the form of taxes. But now the pathetic condition of industry is obvious from the fact that during last 3 months only one ship of 10039 (LTD) was imported. The industry which was meant to provide jobs to thousands of people is now having capacity only for only 2000-2500 persons. High tariffs and import duties has rendered our locally dismantled iron scrap uncompetitive which was cheaper in case of import.

The losses do not end up here, the most noticeable fact is the rusting and damage of millions worth machinery at Gadani due to atmospheric blow and sea winds. If the losses are piled up then figure goes up to billions mark. On the other hand increase in the prices of old ships from $130 to $160 per tonne has further worsen the situation which was likely to improve after some steps by the government, says Shipbreakers Association.

At present the shipbreaking activities at Gadani are almost inconsequential. In past political involvement of the governments in the industrial sector also a main cause of deep recession in shipbreaking industry. In its peak days some political decisions were taken to protect the interests of steel melting industry as high duties were imposed which actually turned a profit generating unit into sick one.

It is important to notify that India and Bangladesh are leading in shipbreaking industry than Pakistan which is standstill. In India shipbreakers are purchasing old ships from international markets at higher rates because India has more consumption of scrap than Pakistan. Presently India is the leader in this regard where annual shipbreaking figure has touched the mark of 3 million tonnes, followed by Bangladesh with 1.5 million tonnes. While in Pakistan shipbreaking industry almost collapsed due to the high rate of import duties. Despite having the capacity and suitability Pakistan is lagging far behind which was in the leading position in 1980s.

Discussing the major problems faced by shipbreaking industry at Gadani, Association sources said that duty structure should be rationalized and formulated in order to accommodate with the international changes in prices. The duty structure in India and Bangladesh is between 5 to 10 per cent , while locally it is about 40 per cent inclusive income tax on the import of old ships for breaking.

To rescue the shipbreaking industry at Gadani the duty structure should be revised, the ratio of import duty on old ships should be at par with the shredded scrap, which is currently available at $110 to $115 per ton, sources said. In order to revive the shipbreaking industry government should take immediate measures like reducing the taxes and provisions of loans from banks to the shipbreakers. Government should also take notice of the unavailibility of basic resources and facilities at Gaddani to the workers.

Pakistan's shipbreaking industry is absolutely capable of meeting the annual demand of steel melting industry and also a big source to earn foreign exchange for the country. The industry which had more than 100 shipbreaking companies has come down to hardly dozen or less during recession. Association showed its optimism regarding the attitude from present government as it does not seem to have any political interests. Sources further said that present government has given importance to this issue in federal budget by revising taxes on shipbreaking industry from Rs1500 per tonne to Rs 1000 per tonne. But increase in prices in international markets has stopped the rapidly changed situation.

Now to end the recession government should bring down the tariff structure at par with the neighbouring countries and the ratio of imported old ships should be at par with the shredded scrap. Higher duty has been the main reason of dropping the revenue generating unit to an all-time low.

Shipbreaking industry in Pakistan is absolutely capable to generate revenue, employment and foreign exchange but it demands high attention and measures from the government. Rehabilitation of a sick unit does not only benefit a industry itself but whole country and society. In case of shipbreaking there is no need to develop basic infrastructure only prudent policies and plannings can revive back the golden days of shipbreaking industry in Pakistan.