The government is blaming a global financial slowdown and cost-cutting measures by shipping companies for missing its target of doubling ship recycling capacity in the country by 2024. As a result, they have decided to put these plans on hold and focus on a new five-year plan to revive the industry. The main aim is to reduce dependence on a single industry and explore diversification opportunities.
According to senior officials from the Ministry of Ports, Shipping, and Waterways, the unexpected global economic slowdown, particularly in European countries and the US, along with reduced capital investments by major shipping companies, have led to a slower execution of the government’s original plans.
In the budget for 2021-22, the government had announced its intention to double ship recycling capacity by 2024. However, as of now, there has been a significant decline in ship recycling capacity in India since 2021-22, with no large ships arriving at the Alang shipbreaking yard in Gujarat in almost two years.
In response to the current situation, the government is not completely abandoning its plans for Alang’s shipbreaking yard. Instead, it is engaging in discussions with shipbreaking units to increase their capacity over the next five years and also considering incentivizing compliance with European Union regulations. Additionally, they are exploring the establishment of vehicle scrapping centers to explore new possibilities.
To improve the financial health of shipbreaking units in Alang, the government is considering various measures such as tax incentives, long-term loans, and a production-linked incentive scheme.
The Alang yard is a significant player in India’s ship recycling industry, employing over 15,000 workers directly and many more indirectly. The Gujarat government has recently announced a financial support package for the revival of the Alang-Sosiya Ship Recycling Yard, including waivers in housing surcharge and development charges, as well as reduced fees for Indian-flagged ships to be recycled.
One of the major reasons for the slowdown in activity at Alang is the rising competition from neighboring countries like Bangladesh and Pakistan. Companies in those countries receive compensation from their governments during ship recycling bidding, allowing them to offer higher prices than Indian companies.
The ship-recycling industry operates through tenders, where shipbreaking yards buy ships from shipping companies and salvage valuable materials from them. However, higher fixed costs and a dwindling number of ships arriving have made the business unsustainable for some companies in Alang.
Moreover, Indian shipbreaking yards are facing challenges in complying with European Union norms, as they are currently smaller in size than what the EU requires. There’s a need to merge smaller yards to meet these standards and create larger, compliant facilities.
To become EU-certified, Indian shipbreaking units must also establish facilities for handling hazardous waste, set up a separate area for breaking and segregating steel, and provide medical, training, and hygiene facilities for workers.
Overall, the government’s decision to pause its initial plan and work on a new five-year strategy shows its determination to revitalize the ship recycling industry and reduce its reliance on a single sector for economic growth.