Alang Shipbreaking Industry Struggles Despite Government Support
The Alang shipbreaking industry in Bhavnagar district, Gujarat, is facing a major crisis, despite significant efforts by the central and state governments. This industry, responsible for 98% of India’s ship recycling, is currently in a slump due to international factors beyond its control.
The Toughest Times in 41 Years
Alang’s shipbreaking industry has been around for 41 years, but this current downturn is considered its most challenging period. Both the central and state governments have implemented unprecedented relief measures to revive the industry, but success hinges on international forces.
Ship Owners Are Keeping Their Ships Afloat
The root cause of the problem lies with ship owners. Traditionally, ship owners would dismantle their old vessels after a certain age. However, the current situation has led them to prioritize repairs and keep their ships operational in the water transport sector. This reduces the number of ships available for dismantling in the international market.
Competition and Weak Steel Market Add to the Woes
Even for the limited number of ships available for breaking, Alang faces stiff competition from shipbreaking yards in Bangladesh and Pakistan, who are willing to pay higher prices. Furthermore, the current weakness in the Indian steel scrap market adds another layer of difficulty.
International Factors Affecting Shipbreaking
The global shipping industry is experiencing a significant rise in freight rates. This has incentivized ship owners to repair their aging vessels and continue using them for voyages, rather than sending them for dismantling.
Government Initiatives to Revive the Industry
The central government has taken steps to support Alang by removing the 2.5% import duty on ships arriving for breaking. Additionally, the Gujarat Maritime Board (GMB) of the state government has waived off housing cess and substantially reduced plot development charges. These measures aim to make Alang a more attractive destination for shipbreaking.
Impact of Red Sea and Panama Canal Issues
The ongoing conflict in the Red Sea, where Houthi rebels have been attacking cargo ships for months, has disrupted short-distance ship travel. This has forced ships to take longer routes, extending voyages from 15 days to 3 months. The resulting increase in shipping time has further contributed to the rise in freight rates, negatively impacting the Alang shipbreaking industry.
Industry Leader’s Perspective
Hareshbhai Parmar, Secretary of the Ship Recycling Industries Association (India), highlights the complex situation. While acknowledging the government’s support, he emphasizes the critical role of international factors in determining the industry’s future.
Looking Ahead
The Alang shipbreaking industry finds itself in a precarious position. Despite government efforts, international factors beyond its control currently dictate its fate. The industry’s revival depends on a shift in the global shipping market and a decrease in freight rates. Only then will ship owners find it economically viable to dismantle their old vessels, providing much-needed work for Alang’s shipbreaking yards.
One major contributing factor to the industry’s woes is the sharp increase in international freight rates. Ship owners are choosing to repair and reuse their old vessels for voyages instead of scrapping them. In an effort to stimulate the shipbreaking industry, the Central Government had previously eliminated the 2.5% import duty on ships destined for Alang. Furthermore, the Gujarat Maritime Board (GMB) waived the housing cess of Rs 200 per square meter. Plot development charges were also reduced by 50%, from Rs 327 per square meter to Rs 163.50. However, charges for ship resal league on Indian-flagged ships have been increased from Rs 135 to Rs 100.
External factors such as conflicts in the Red Sea and congestion in the Panama Canal have compounded the industry’s challenges. Ongoing attacks by Houthi rebels on cargo ships passing through the Red Sea have disrupted short-water routes, forcing vessels to take longer detours. The backlog in the Panama Canal has further exacerbated delays, extending water journeys from 15 days to 3 months. Consequently, freight rates have skyrocketed, dealing another blow to the shipbreaking industry.
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