Government says eliminating
duty will hurt primary manufacturers of iron and steel
The Centre has rejected a demand from
Gujarat, which leads in ship re-cycling, to give an impetus to the sector by
abolishing the 2.5% Basic Customs Duty (BCD) levied on ships imported for
scrap.
The state government’s proposal was turned
down by the Centre saying such a move will, among other things, harm primary
manufacturers of iron and steel because items obtained from the scrap generated
from breaking up of ships will compete with the products manufactured by them.
According to the state government, the 2.5%
BCD — levied on vessels and other floating structures for breaking up — needs
to be eliminated as India’s major ship breaking industry competitors such as
China and Pakistan do not impose any customs duty on scrap for ship breaking
industries.
Incidentally, there is also a 2.5% BCD on
melting scrap of iron or steel (other than stainless steel).
35% global share
India accounted for around 35% share globally
in 2014 in ship recycling — the main method of disposal of old ships — in terms
of tonnage of ship.
Within India, Gujarat is the leader in the
labour-intensive segment as over 90% of ship recycling in India takes place at
Alang-Sosiya Ship Recycling Yard.
The yard, developed by the Gujarat Maritime
Board in 1982, provides direct and indirect employment to over 1.5 lakh people.
So far, the yard has helped recycle more than 7,000 vessels and generate 54
million LDT (Light Displacement Tonnage) steel, the Gujarat government said.
It added that the ship recycling sector
fulfils about 2% of the country’s steel demand, besides saving substantial
amount of natural resources (as it helps reduce the need for iron ore mining),
foreign currency requirement (as it leads to a decrease in imports of iron ore
and steel) and reduction in the carbon footprint.
The Centre, in a recent meeting, pointed out
that in 2015, following repeated requests of the steel ministry, the BCD on
plates of iron and steel, Hot Rolled (HR) coils and Cold Rolled (CR) coils was
increased from 5% to 12.5% in two stages.
Domestic steel makers
The move was aimed at protecting domestic
steel makers in the backdrop of the decline in prices of these items as well as
surge in cheap imports of iron and steel. The Centre said with that duty
increase, the ‘duty differential’ between iron or steel scrap and products
obtained from such scrap went up to 10%.
It said, therefore, reducing the BCD on
ship-breaking further from 2.5% to zero will “disturb the rationalisation in
rates between vessels and other floating structures for breaking up and melting
scrap of iron or steel (other than stainless steel).”
Eliminating the duty will also increase the
‘duty differential’ (to 12.5%) between ships for breaking up and products
obtained from the scrap generated after their breaking up — that is plates of
iron and steel, HR Coils and CR Coils. Due to all these reasons, “there is no
economic justification” for abolishing the BCD on ships for breaking up, the
Centre said.
‘Ship-recycling policy’
The Gujarat government said it had in January
2016 announced a ‘ship recycling policy’ to encourage the segment, promote
eco-friendly industrial activity at Alang-Sosiya, as well as to help it tide
over the slowdown experienced during 2011-15, when there was a 50% fall in the
number of ships dismantled and tonnage.
The State said the factors that hurt the ship
recycling industry include rupee depreciation and high volatility against the
U.S. dollar leading to ship breakers postponing their purchases (imports of old
ships), lower increase in steel prices in India as well as competition from
countries such as China, Pakistan and Bangladesh.
Source:
the
hindu. 03 February 2017
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