High duties hurt Alang prospects

None of the 100 ships scrapped following the IMB order will come to the ship breaking yard

The stringent environment laws and high Customs duties have made the Alang ship breaking yard unattractive for shipping entities.

None of the 100 ships that are to be scrapped following a recent International Maritime Board (IMB) decision will arrive at Alang. They will instead go to ship breaking yards in China, Pakistan and Bangladesh, where the norms are not that stringent.

Customs duty is zero per cent in China, five per cent in Pakistan and Bangladesh, and between eight and ten per cent in India.

The IMB recently ruled that 100 ships built before 1977 should be scrapped.

"Hardly any ships comes here for breaking because of the strict government procedures and rigid environmental norms. Once world's largest ship breaking yard, Alang is now on the verge of closure," said Nitin Kanakiya, joint secretary, Ship Recycling Industries Association (India) (SRIAI).

"Countries like China, Pakistan and Bangladesh will benefit from the IMB decision to scrap 100 ships built before 1977. No ships will come to Alang as we are no longer internationally competitive as compared with our neighbouring countries," said a leading ship breaker at Alang.

The ship breaking yard at Alang, which was the world's largest ship breaking yard from 1994 to 2001, has been passing through an economic crisis. It has already slipped to the number four position and at present only 20 of the 177 units in the yard are operational. Ship breaking yards at China, Bangladesh and Pakistan do more business than Alang.

The SRIAI is also not happy with the Gujarat Maritime Board's (GMB) decision to extend the land lease, which expired on September 10 last year, by only one year. The association had sought an extension for at least five years, without any premium. The GMB had initially given 173 plots on lease to the ship breakers for 10 years.

If the extension of leased period is not further extended, the industry would have to pay charges to the tune of Rs 25 crore per unit on an annual basis, he added.

"We demanded that the minimum LDT (light displacement of tonnage) criteria be reduced from 10,000 tonne to 5000 tonne per year and amalgamation of a block of three years and a block of one year to make four years for a minimum LDT of 40,000 in the existing lease period," said Kanakiya.

Another problem for the Alang yard is the fact that steel consumption in India is lower than China and India does not use much of the steel from the shipping breaking industry. Even in terms of steel consumption, India's steel consumption is pegged at around 35 million tonne as compared with over 100 million tonne in China.

Bangladesh's ship breaking industry provides 90 per cent of the steel for consumption, while India consumes only 10 per cent of the steel from the ship breaking industry.

As far as tonnage is concerned, the yard has been showing a negative trend since the last two years owing to the hike in Customs duty on ships brought into India for breaking.

Alang has a tonnage capacity of five million tonne, but has achieved a tonnage of just 3.04 million tonne when the industry was at its peak.

In the last financial year, the industry's tonnage has just crossed one million tonnes, which seems a remote possibility in the current fiscal.