Business Standard – Alang ship breakers slip with the rupee

Written by Vimukt Dave

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18 October 2015 - There are concerns amid caretakers, workers and even bankers on Alang, till recently world’s largest site for breaking up and disposing old ships. Work has dwindled substantially and daily wages have declined from Rs 350 in better times to Rs 250.

A branch manager of a public sector bank says he doesn’t have much to do, except for dealing with pestering co-workers who are seeking a half day’s leave. His workload has halved in recent years.

Alang, 60 km away from Bhavnagar city, was developed by the Gujarat government in 1982. At the time, 46 plots for ship breaking were active and this gradually rose to 170 plots, of which 135 were owned by ship breakers and 35 were with the Gujarat Maritime Board (GMB). Ships from 3,000 tonnes upward came for dismantling; the biggest one, a few years earlier, was 85,000 tonnes.

Situation
However, in the past two years, 100-odd units have closed; a little over 30 remain. An estimated 25,000 workers of an earlier workforce of about 35,000 have left for their hometowns in Uttar Pradesh, Odisha, Bihar and Jharkhand. The remaining ones are working for half a day.

Mohan, who is from Jharkhand, said, “We have no choice but to wait. There is no job for us in our hometown and we are staying here so that we can earn something. However, it is not sufficient to maintain a family.”

What is causing this situation is the rupee’s devaluation against the dollar in recent years. This had reduced shipbreakers’ global competitiveness in bidding for shipbreak contracts. The rupee is down from Rs 55 to a dollar in 2013 to Rs 65.19 in 2015 (as on Tuesday), down 18.5 per cent.

As a result, the numbers of ships arriving at Alang for breaking have fallen from 40-45 a month around two years earlier to 15-20 a month. As against 212 ships during January to August in 2014, the period this year saw 143 arrived for breaking. “We have to pay more in rupee terms to buy ships. And, fluctuation in the rate against the dollar has restricted us from taking risks (ship breakers pay the money over a six-month period),” said Ramesh Mendpara, vice-president of the Ship Recycling Industries Association of India (SRIA). Bangladesh and Pakistan are bidding at better prices as their currencies have not devalued much against the dollar.

Also, there is lower demand for steel and this is hurting re-rolling mills. Ramesh Aggarwal, director of Hooghly Shipbreakers and secretary of SRIA, said: “Demand for ship scrap from steel re-rolling mills is very dull because of the weak steel market in India. Around three per cent of total steel consumption of India comes from ship scrap.”

According to industry sources, cheaper exports by China has affected most in the industry. “We are mainly dependent on the real estate and infrastructure industries, and both are not doing well. Imported steel from China at Mumbai port costs Rs 26,000 a tonne, while Indian steel is Rs 32,000 a tonne.” said Haresh Patel, president, Sihor Steel Re-rolling Mills’ Association.

At site
A branch manager of a leading public sector bank at Trapaj village in this region said, “We have many accounts of workers here. They usually use it for transferring funds to their family in the hometown. Transactions of late have declined by 50-60 per cent, as many workers have left.” Many labourers stay at Trapaj, around three km from Alang.

The Ship Recycling Industries Association of India says it is trying to convince ship breakers to hedge the rupee’s value on a bank letter of credit. Says Aggarwal, “It will help us to reduce losses. Most ship breakers have agreed (to consider doing so).”

Living conditions of the labourers are appalling. Most pass the night at the workplace or live in tents by the roadside. A labourer has to go miles to avail even basic medical facility.

A supervisor of a plot said, “We need to take workers to Bhavnagar, 60 km away from here, in a medical emergency. Connecting roads are not good, which creates more trouble.” A primary health centre is about three km from Alang.

Those in the industry say they plan to construct a housing colony at Alang, with GMB. The state government has allotted land within the breaking yard where a housing colony for 1,000 workers will be built by SRIA and GMB. It will cost Rs 20 crore, of which 55 per cent will come from the industry.

“Apart from daily wages, we are giving medical expenses and provident fund to our workers,” claimed Aggarwal.