SHIPPING
TIME TO INDUCT TONNAGE

Dependent of foreign shipping companies

By SYED M. ASLAM
May 19 - 25, 2003

The inability of the Pakistani shipping to perform is taking a heavy toll on the national economy in more ways than one. It has made the country threateningly dependent of foreign shipping companies to cater to its sea-borne trade which is costing it a massive two billion dollars a year. It has also contributed in pushing prices of petroleum and products to unaffordable levels for the chagrin of industry, trade and people alike.

Is there a link between shipping and petroleum prices? The General Secretary of Pakistan Merchant Navy Officers' Association, Sheikh Muhammad Iqbal, claims that yes there as far as Pakistan is concerned. "In 1970 the national merchant marine fleet comprised 71 large ocean-going vessels. Thirty-three years later the sole state-owned flag carrier, the Pakistan National Shipping Corporation (PNSC), has a total of 13 vessels the majority of whom have long past their economic lives. PNSC's fleet today includes 10 combi vessels, 2 container vessels and a dilapidated crude tanker, M.T. Jauhar. The sole tanker is lying idle for last three months or so; 2 months in Dubai, one month in Karachi and is presently dry-docking in China for repair.

"However, despite the restrictions to lift crude oil cargoes the PNSC was granted exclusive transportation contracts of crude oil for refineries in the country on prevailing market rates, the AFRA rates either on M.T. Jauhar or on charter. The PNSC is transporting crude oil at around $ 7 per metric ton which is more than twice the AFRA rates which fluctuates between $ 2.5-3 per metric ton. This has been going for last couple of years thus pushing the landed cost of the crude the ultimate price of which is paid by the consumers. A little before the October elections last year the Economic Coordination Committee of the cabinet took notice of this overcharging by the PNSC and allowed PNSC to transport crude oil at 34 WS (World Scale) over and above the AFRA or market rates. The measure was meant to allow the financially strapped organization to keep charging a reduced 33 per cent premium over and above the AFRA rates instead of charging more than double the market rates. However, the PNSC flaunted the order and instead increased an already high prices of crude transportation by an another 33 per cent. The additional burden of transportation of crude is borne by the exchequers and the consumers have to borne the increased cost of petroleum products and fuel."

Sheikh said that the sole crude tanker Jauhar is in a dilapidated state and at presently can carry a maximum of 65,000 metric tones of the crude instead of 70,000 metric tonnes previously. As the PNSC is able to lift only around 2-2.5 million tonnes of the total 6 million tonnes of the crude required annually. The rest of the crude requirement of around 4.5 million is carried by tankers chartered by the PNSC. It is not hard to imagine the price the industry, trade and common people are paying for bailing out the PNSC despite being unable to perform."

Failure to develop the shipping sector also has immense human dimensions and human costs. Pakistan houses a sizeable population of bonafide merchant navy officers as well as seafarers. Thirty-three years ago there were around 2,000 bonafide officers and national marine fleet comprised of 71 vessels. Back then the Pakistani merchant marine officers were not only able to find off-shore as well as shore-based management jobs within the country but also in many other countries including Sri Lanka, Singapore, the Gulf, UK, Australia, etc. The population of merchant navy officers in Pakistan today stands over 12,500 but the off-shore and shore-based jobs for them in the country has been drastically reduced as national fleet today comprises of just 13 vessels. After 9/11 the situation has worsened due to stricter visa restrictions in many parts of the world. The PNSC can hardly absorb 300 seafarers, both officers and crew.

"There was a time when over 2,500 officers were able to find gainful employment of foreign shipping lines. Even prior to 9/11 over 1,600 officers were working abroad but today just about 500 officers are working on flag of convenience ships outside the country. In addition, the shore-based jobs in many countries including the US, Singapore, Italy, etc., have been dried up almost totally."

Despite many heavy subsidies, financial restructuring, and privileges including the right of first refusal and exclusive rights of lifting cargoes, such a crude, the 13-vessel PNSC fleet is feared to shrink even further in the next few years, particularly once the stricter maritime security laws come in force. Failure to induct new tonnage would deliver a severe blow to an already ailing shipping in Pakistan.

It is also imperative to find out why the Pakistan Merchant Marine Policy-2001 has failed to attract private investment in shipping particularly as it deregulated the shipping sector to provide level playing field to both the private and the public. In addition, the matter of closing up of the employment opportunities for the Pakistani officers and crew overseas should also be taken up by the government in the larger interest of the country and shipping.