Left on its own

There are signs that the ship-breaking industry is ready to show positive results

By Alauddin Masood

Measures for the revival of ship-breaking industry have yielded good results and the prospects for the development of Gaddani Ship-breaking industry now look bright.

A major indicator for the revival of the ship-breaking industry is the number of ships Ñ 64 Ñ brought to Gaddani ship-breaking yard for dismantling during the first six months of the current financial year. After the financial year 2009-2010, Pakistan has received such a large number of ships for the second time during the last two decades.

In addition to providing jobs to thousands of workers directly, the 64 small and medium-sized old ships, which are presently docked at the Gaddani ship-breaking yard, are expected to produce around 400,000-500,00 tons of scrap while the government has received about one billion rupees in customs duty and income-tax.

As compared to last year, the scrapping activity is slow this year because of high prices of ships in the international market, still some 20-22 ship-breakers are working at Gaddani, employing about 8,000 workers on an average salary of Rs10,000 per month.

Once occupying the second top position on the globe after Taiwan, PakistanÕs Ship-breaking industry was virtually pushed to the verge of collapse by vested interests in the mid 1980s; while merely a decade earlier (in the 1970s) it used to handle about 150 ships at a time, providing direct jobs to some 100,000 persons and meeting major demand for steel and steel related material in the country.

In 2007, ship-breaking industry made available 152,260 LSD steel and metal scrap through dismantling of 34 ships of various sizes. In the last 10 years, it had produced 926,067 LDT scrap by breaking 64 vessels of different sizes, and contributed Rs3.53 billion to the national exchequer in taxes and duties. In its hay days, the industry contributed Rs5.3 billion to the national exchequer in taxes in one financial year.

In addition to high quality steel, the dismantled ships also provide cheapest possible material, like copper, brass, aluminum, machinery, generators, boilers, wood and tools of international standard, for meeting the ever-growing demand of the countryÕs fast developing industrial and commercial sectors.

India, Sri Lanka and Dubai benefited the most from the decline in PakistanÕs ship-breaking industry and consequently emerged as regional hubs of ship-breaking because most of foreign clients turned to them.

Measures adopted by the government some five years ago, in particular cut in duties on import of ships for dismantling, had kindled hopes of the revival of this industry as it had started to attract entrepreneurs once again. The steel re-rolling mills in the country received 0.500 million tons of scrap from 75 old ships, which were berthed at Gaddani yard between September 2008 to May 2009 for dismantling.

The present capacity of steel production in the country is about four million tons against a demand of over six million tons and the deficit is met through imports. It is envisaged to raise the steel production to 15 million tons by 2015. Presently, steel production units are working below capacity for want of raw material and slack demand.

Spread along BalochistanÕs Gaddani beach, about 50 kilometres north-west of Karachi, ship-breaking had started in the region much before PakistanÕs independence in August, 1947. However, the industry registered a spectacular growth after PakistanÕs independence, enabling it to gate-crash into the club of top ship-breakers of the world by the mid sixties.

In 1985-86, the industry helped the country in making an annual saving of Rs1,500 million, which would otherwise have been spent on import of iron and steel. It earned another Rs500 million in foreign exchange through the export of surplus ship scrap, second hand machinery, generators, air-conditioners and other equipment. It also contributed to the national exchequer, during that financial year, an amount of over Rs1,035 million in customs duty, sales tax and income-tax.

Before independence, Gaddani beach lacked the necessary infrastructure facilities like carpeted roads and utilities like electricity, potable water, telephone and even arrangements for providing first aid or medical help to the workers. The place was uninhabited and there was an acute shortage of labour as well. Majority of workers were uneducated, unskilled and migratory. Even businessmen, who entered the trade, possessed little knowledge of the industry, but they were infused with self-confidence.

Initiation by countries of a process of replacing their unserviceable WW-II vintage war ships with modern and sophisticated vessels provided an international market for the sale of obsolete ships.

A number of other factors also contributed to the rapid growth of the ship-breaking industry in Pakistan. Among others, these included a growing demand for iron and steel for the countryÕs rapidly developing mills, engineering, and other ancillary industries, which consumed iron, steel as well as other non-ferrous metals.

The disruption of normal trade relations with India following the 1965 and 1971 wars, discontinuity in supply of steel and iron products from PakistanÕs only steel mill at Chittagong after the emergence of Bangladesh, and massive devaluation of rupee in 1972 made import of iron and steel products much costlier. This provided a chance to the ship-breaking industry to meet national demand for raw material.

The years between 1969 and 1983 are considered to be the golden period of ship-breaking industry in Pakistan. It was during this period that the activities witnessed a boom and this industry beat many of its international rivals.