The ship breaking industry is seeking tax relief from the federal and provincial governments to avoid complete collapse at a time when a number of industries are already passing through tough phase due to the coronavirus pandemic.
The survival of ship breaking industry is also vital for the success of Prime Minister's package for the construction industry and economic revival of the country. Double taxation on ship breaking industry is harming the growth of one of the largest sectors in the country.
During this initial five months of this year there were hardly 10 ships of all Light Displacement Tonnage weight is approximately is 20,000 tons. The last ship was arrived in April and there is zero ship in May due to the lock down in view all. Another reason of slow arrival of ships is higher taxation that is directly hurting the ship breaking industry.
Dewan Rizwan Farooqui Chairman Pakistan Ship Breakers Association (PSBA) told Business Recorder that ship breaking industry is the largest industry of Balochistan province and supply raw material in the shape of Re-Rollable plates to the steel Re-rolling industries who manufacture steel bars which are primarily for use by common man for smaller homes and scrap to the melting industry that produce steel billets.
He informed that the industry has excellent infrastructure at Gaddani with 2 million tons capacity in normal time and providing employment to 20,000 workers direct and some 0.1 million of indirect employment. The industry is not only providing value added raw material to the domestic industry but also saves huge foreign exchange by providing import substitute to steel industry.
Working in normal capacity the industry provides some 1.6 million tons or more of steel Re-Rollable and Re-Meltable scrap to the domestic industry, besides contributing some Rs 16 billion in shape of taxes and duties to the national exchequer during normal times, he said.
"Now the production of the ship breaking industry has been reduced to hardly 10 percent as this industry is suffering due to neglect by the Finance ministry and Federal Board of Revenue (FBR) since last couple of years," he added.
Rizwan informed that in the last budget 2019-20 sales tax special procedure Rules for the ship breaking industry were abolished and now the industry is compelled to pay huge increase in sales tax both at import stage as well as at time of production. Despite government commitment of withdrawal, the industry is compelled to pay huge amount of value addition in shape of further 10 percent sales tax at production stage.
"We have been making several representations to the federal government and FBR requesting for withdrawal of 2 percent additional custom duty, reduction of sales tax to 12 percent, reduction of income tax to 1 percent from the present 4.5 percent. This 4.5 percent income tax on the total value of ship and taxes are exorbitant," he added.
He demanded that exemption should be allowed from section 8B of sales tax as this is additional burden on ship breakers to pay every month against actual liability.
As ship breaking is one of the major stakeholders in the steel sector, the government must take immediate steps for the sake of revival of this one of the highest source of employment and revenue.
The provincial Government has last year imposed 1 percent (600 Rs per ton) infrastructure cess and Rs 300 tonnage fee charged which has been increased by 600 percent from the original Rs 50 per ton few years ago.
Rizwan has hoped that the government will takes up industry problems seriously and rescues this important industry from total collapse particularly at this juncture when major industries are facing difficulties due to the pandemic in the country.
The closer of this industry may increase employment rate all over the country and particularly in Balochistan.
"Our industry is one of the most effected and Gaddani has become like a ghost town with close down of almost everything and workers and others associated with ship breaking without any source of livelihood," Chairman PSBA maintained.
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