Alang ship-breaking units in rough waters

Competition from China, heavy import duty cripple business

Competition from China and higher import duty are pushing the world's largest ship-breaking yard at Alang into crisis.

The yard is facing competition from China's modern yards and the industry has to pay an import duty of 15 per cent on ships brought for breaking. This is the highest duty in the world.

"If the industry works with full capacity of five million tonne, it could generate revenue of around Rs 9,000 crore, while this year Alang's ship breaking industry is trying hard to cross the Rs 1,800 crore mark," Vippin Aggarwal, secretary, Gujarat Ship-Breakers' Association, said.

The capacity of the yard is over five million tonne a year, but so far it has achieved its best tonnage capacity of three million tonne in 2000, while the industry was at its peak.

This year, with the increased prices of ships from $250 per light displacement tonnage (LDT) to over $400 per LCD has forced the industry to operate below 25 per cent of its capacity level and the tonnage capacity is expected to be utilised below one million tonne this year.

The turnover of the ship-breaking industry at Alang is expected to be reduced to Rs 1,800 crore this year from Rs 4,000 crore in 2000 due to increase in prices of ships, high duty and low capacity utilisation.

In India, the industry has to pay an import duty of 15 per cent on the ships brought for breaking, while the import duty is 7.5 per cent in Bangladesh, five per cent in Pakistan, and zero in China.

"With the high import duty, the cost of procurement of ships for breaking goes over 15 per cent and our competitors like Bangladesh, Pakistan and China have an edge over us," said Aggarwal.

To save the industry, the Gujarat Chamber of Commerce and Industry has urged the central government to roll back the basic import duty on ships brought for breaking from 15 per cent to five per cent. The chamber has also demanded re-imposition of countervailing duty of 16 per cent on ships imported for breaking, to avoid unhealthy competition.

"Due to hike in import duty, ship breakers in Gujarat are in a very difficult situation while competing for procuring ships in the international market. Our major competitors are ship breakers from Bangladesh, Pakistan and China, who have an upper hand. The increase in import duty has crippled the Indian ship breakers," said Chinubhai Shah, president, GCCI.