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Rs 4 bn lost annually due to duty hike on unserviceable ships

ARSHAD AWAN

KARACHI, Jan. 13: The government decision to increase customs duty on unserviceable ships by 50 percent has paradoxically resulted in an annual loss of Rs. 4,000 million to the exchequer according to some knowledgable sources.

"The decision was taken in haste in the last budget without regard to industry interests and without taking shipbreakers into confidence," a private contractor, Asadullah Jan said.

In the federal budget 1999-2000 the then government of Nawaz Sharif had increased the duty by Rs. 500 on per light displacement tonnage (LDT) from Rs. 1,000 to Rs. 1,500.

Jan said the increase in duty has severely damaged shipbreaking industry.

"It is out of question that under such heavy taxes and customs duty the business can flourish in the country. Shipbreaking business is no more viable business," Jan said.

Ch. Aminullah, another contractor, said the shipbreaking industry closure in Pakistan had benefited the neighbouring India and Bangladesh where the duty structures were favourable to the business.

"Once Asia's second biggest industry after Taiwan in seven years shipbreaking in Pakistan has gone haywire is the question which has puzzled industry worldwide," Aminullah said.

He said the situation could be judged by the fact that before September 1999 only two small ships of 1,000 LDTs had been imported for breaking as against earlier average of 140,000 tonnes per month when the business was at the peak.

According to a survey, the total impact of the taxes and duties on the industry was 30 percent before the budget and after the budget it has increased to 40 percent.

"The increase in customs duty has not only affected shipbreaking industry, but put direct pressure on steel re-melting and re-rolling industry as these two industries in a large portion rely on unserviceable ships' scrape," Aminullah said.