Written by Avinash Nair
24 January 2016 – At a time when the world’s largest ship-breaking yard at Alang fights for survival, a new ship recycling policy announced by the Gujarat government has come in for criticism from shipbreakers who are staring at a possible increase in expenditure in form of rentals and fees.
Though the new notification makes it flexible for shipbreakers to resize, realign and readjust their plots as per the requirement and size of ship, the bone of contention has been the proposed increase in government charges that stands raised by as much as 35 per cent. Members of the Ship Recycling Industries Association (SRIA) said the increase in fees is untimely, considering that business at Alang is currently at a six-year-low. The shipbreakers, however, did not oppose the provisions that make them accountable for any possible environmental damage that old ship might create and the increase in the compensation paid to families of laboureres in case of fatal accident at work.
“The rates have been increased at a time when our business is passing through a recessionary phase. The charges have gone up by 25-35 per cent and this is a burden on us. A 5 or a 10 per cent hike would have been bearable. We will find it difficult to pull through. Survival will become difficult,” said Chetan Patel of Shree Ram Group of Companies, one of the handful of shipbreakers who are currently operating at Alang where over 70 per cent of the 160-odd plots are lying vacant for lack of business.
Shipbreakers like Patel are worried about the rise in charges levied by the state government on them through a new notification which is yet to take shape of a “gazette”. In lieu of the serviced land made available to shipbreakers on lease basis, the government through its arm Gujarat Maritime Board (GMB) collects plot rentals, development charges, LDT charges and water charges from shipbreakers.
Though the plot usage period has been proposed to be extended from existing five to 10 years, the development charges has been increased to Rs 270 per square meter from the earlier Rs 200. Similarly, the annual plot rent is expected to rise to Rs 80 per square meter from Rs 60. Both these charges will increase 10 per cent annually.
“We have seen the new policy and it comes six years after the last one expired. Though the overall policy is a balanced one, the increase in charges levied on us is perhaps the most sore part of the policy. What will pinch us further is that some of these charges will escalate by 10 per cent every year,” Ramesh Mendapara, vice-president of SRIA, told The Sunday Express.
Similarly, another proposed levy described as a “recycling charge” imposed on every unit of LDT or Light Displacement Tonnage has been linked to “wholesale price index of steel” for each financial year as released by the office of the Economic Advisor, Union Ministry of Commerce and Industry. Though a favourable step, the shipbreakers felt that the charges rising to Rs 135 per unit of LDT from Rs 100 is “unjustified.”
Members of SRAI also felt the state government’s move to increase the minimum quantum of tonnage that needs to be broken per shipbreaking yard in a five-year period is ill-timed. This has been raised from 10,000 LDT to 12500 LDT.
“Though minimum work that needs to be done, has been bifurcated as per the size of the plots, the increased targets are hard to meet, especially when Alang is passing through bad times,” said shipbreakers. The minimum tonnage of ship recycled at every yard now stands between 12500-25000 LDT for plot sized from 30 meters and less to plots that have a width of 120 meters or more.
Shipbreakers like Mendapara, however, do not have any issue with certain aspects of the policy where the state government has brought about more accountability on pollution related issues. The policy holds the shipbreaker liable for any pollution caused by a vessel that is brought for breaking at Alang and the “entire cost of the remedial measures shall be borne by the permission holder.”
In case of fatal accidents happening at Alang, the shipbreakers have been asked to double the existing compensation. As per the new policy, the shipbreakers have to pay Rs 2 lakh per person to GMB “by way of penalty” (it was Rs one lakh earlier) which will be passed on to a Workers Welfare Fund maintained by the board, and an additional Rs 5 lakh (earlier Rs 2 lakh) to the heirs of the deceased.
The notification also has a clause where GMB can “terminate” the permission given to a shipbreaker and “forfeit” all payments if the ship that comes to be broken is “wrongfully beached” for more than four times. Officials point out that floating objects like a ship can easily breach the perimeters of an allotted plot and the same can be considered as wrongful beaching and will attract a penalty of Rs 15 lakh.
A GMB official on condition on anonymity said the levies at Alang have been increased after a gap of almost 10 years and no formal representation from the SRAI has been received against the provisions in the new government policy.