Power minister voices dismay over lack of consultation

ECC for taking Power Division input while collecting shipbreaking sector data for tariff determination

ISLAMABAD':

The minister for power has expressed concerns over ignoring the Power Division while providing electricity consumption data of shipbreaking and recycling processes for tariff categorisation and determination by the National Electric Power Regulatory Authority (Nepra).

The Economic Coordination Committee (ECC) of the cabinet, in a recent meeting, held discussions on declaring shipbreaking and recycling as an industry. It directed the Maritime Affairs Division to consult the Power Division while gathering data of electricity consumption in shipbreaking and recycling for tariff categorisation and determination. The power minister expressed reservations that the Power Division had not been consulted to ascertain the total electricity consumption by the shipbreaking sector, which was essential.

The Ministry of Maritime Affairs recalled that the ship recycling facility at Gaddani, Balochistan had once been the third largest in the world. The sector has largely been operating informally without being officially given the industry status. However, the shipbreaking and recycling sector has been accepted as an industry by the Balochistan Development Authority.

The ministry said that the Federal Board of Revenue (FBR), on the recommendation of the Engineering Development Board, had notified Customs General Order No 04/2022 containing a list of locally manufactured goods for providing exemptions and concessions from duties and taxes under the concessionary regimes/SROs for items not manufactured locally. The Pakistan Ship Breakers Association was the only entity manufacturing re-rollable and re-meltable scrap through ship recycling, adding value and providing direct employment to 20,000-24,000 skilled and unskilled workers at Gaddani, along with indirect employment to scores of women in the surrounding areas.

The ministry explained that the re-rollable scrap was the key raw material for re-rolling to produce construction bars. Owing to its mild steel composition and strength, it has also been the primary raw material for hundreds of cottage industries, operating in Punjab and across the country, producing thousands of tools and hardware items for industrial and domestic use.

It is also used in the manufacturing of wire rods and agricultural implements. The re-meltable scrap (HMS 1&2) is consumed by steel melting furnaces, including large steel manufacturing units, to produce ingots, billets and re-bars.

The ministry added that Pakistan had acceded to the International Convention for the Safe and Environmentally Sound Recycling of Ships 2009, known as the Hong Kong Convention, in November 2023. The convention aims to ensure that ships, when recycled at the end of their operational life, do not pose unnecessary risks to human health, safety or the environment. It deals with environmentally sound recycling of ships, the establishment of safe facilities for hazardous material disposal and the welfare of workers engaged in ship recycling. The Hong Kong Convention was set to take effect on June 25, 2025. Therefore, the formal declaration of ship recycling as an industry was necessary to implement the convention within the given timeframe.

The Ministry of Maritime Affairs requested the Ministry of Industries and Production to initiate the process for granting industry status to shipbreaking and recycling.

The Ministry of Industries responded that there was no specific legal criterion to determine which sector could be declared as an industry. However, as per precedent, each request for such a declaration is submitted by the relevant ministry to the federal cabinet through sharing a summary with the ECC. The Ministry of Maritime Affairs told the forum that a summary seeking the ECC's approval was submitted to the cabinet on March 26, 2025. The cabinet called for obtaining views of the relevant stakeholders, including the ministries of commerce and finance as well as the FBR. These stakeholders supported the proposal.

In light of that, the ministry recommended that the shipbreaking and recycling sector should be formally declared an industry to enhance the local manufacturing of re-rollable and re-meltable scrap and to comply with the standards set by the Hong Kong Convention. The ECC's approval was sought for the proposal, which considered the summary submitted by the Ministry of Maritime Affairs and approved the proposal.