‘SRIA honors its commitment of Green Recycling of each and every yard at Alang’

Jivrajbhai Patel,
President, Ship Recycling Industries Association (SRIA) India
Alang in India as accredited as the favourable destination for ship breaking & recycling activities worldwide, along with safeguarding the concerns of environment and safety according to IMO convention and Hon. Supreme Court guidelines. Jivrajbhai Patel, President, Ship Recycling Industries Association (SRIA) India, expresses his opinions about the world’s largest ship recycling yard’s various facets in an exclusive interview with SMP World. Excerpts….

As the ship breaking & recycling industry is labour intensive, how has Alang been tackled the factor successfully over the years to become the world’s largest ship recycling yard?
Alang is a rare destination with such high intertidal gradient, comprises of approximately 10-km long sea front on the western coast of the Gulf of Cambay. Thus Alang is a God’s Gift to India for ship recycling purpose. Rather than calling it Ship Breaking we call it Ship Recycling Industry. The end of life of the ships after recycling is converted into buildings, bridges and other umpteen structures, hence give re-incarnation to the ship.

This industry provides direct employment to the tune of 30,000 workers and indirect employment to lakhs of workers, by way of rolling mills, scrap traders, oxygen gas plants, transporters and real estate market. Although this industry generates about of Rs 2500 crores revenue to the ex-chequers of state and national governments.

Ship Recycling industry is Labour intensive. However, the survival of the ship recycling depends on the availability of Labour. There is an advanced scope of machinery, mainly in material handling. Thus, Ship breakers need very little sunk capital or physical assets. The competitive intensity in the business is high owing to low entry barriers with respect to capital and technical intensity.

Alang has been faced a stiff competition from Asian countries like Sri Lanka, Bangladesh, Pakistan & China due to their certain natural, regulatory and cost advantages. What are the initiatives taken by SRIA to keep the growth momentum?
SRIA keeps on representing to Government of India, to bring down its taxes as Bangladesh, Pakistan and China are having an upper edge because of moderate taxes on Ship recycling. Moreover, in India, we have domestic competition with Secondary Steel Manufacturers and Main Steel Plants.

The other advantage of Alang is its unique geographical features, including a high tidal range, wide continental shelf, 15 degree slope, and a mud free coast, are ideal for any size ships to be beached easily during high tide. This factors are not mostly seen any of Asian countries involved in this business.

Further, Alang enjoys an edge amongst these countries owing to appropriate wind & tide conditions. In comparison, Gaddani in Pakistan and Chittagong in Bangladesh, the two main other ship breaking centres, are characterised by strong winds and strong tides respectively which make them more suitable for demolition of larger vessels; while in China, ship breaking activity is interrupted periodically during monsoon season due to the tycoons on the seacoast.

How have the factors like - depreciation of rupee, huge volatility on the local scrap steel prices or increase in interest and regulatory system - been affecting the industry in India?
USD-Rupee exchange has been very volatile and big damaging factor in recent years. In spite of a healthy growth in operating income in recent years due to increased availability of ships for dismantling, Indian ship recycling industry faced a low profitability margins due to the continues rupee depreciation, which has increased the cost of purchase of ships coupled with decline in realisations of the end product, i.e. steel melting scrap, due to slowdown in steel consuming sectors.

The ship is bought on Usance LC for period of 180 days to 360 days. The Ship is cut and delivered mostly, and USD is still open, so there is no corresponding effect available to the importer. Interest for such Usance LC has not been any issue for our Industry.

Regulatory risk remains high for the ship breaking business in India. The Supreme Court of India has recently passed an order requiring stricter implementation of ship breaking norms in view of the environmental and health hazards. This as well as any other proposed regulation could entail event based risks for Indian ship breaking operators’ and may affect their competitiveness against players in other competing countries.

The ship breaker has to first pay the earnest money of about 10 per cent of the ship’s value in order to bring the ship to the national anchorage point/high seas. The ship breaking activity in India is regulated at various levels and beaching can be undertaken only after clearances from customs authorities (Customs authorities and Safety Directorate), pollution control authorities (like Gujarat Pollution Control Board), the department of explosives or the Atomic Energy and Radiation Board and the maritime regulator (like Gujarat Maritime Board) have been obtained. Further, regulatory authorities like GMB conduct regular monitoring activity to oversee the compliance of ship breaking rules and regulations during demolition and disposal. On an average it takes around a month to get the regulatory approvals and subsequently the average time to break a 5,000 LDT ship is around three to four months.

Ship Recycling activities involve both Economy and Ecology keeping in mind towards ‘Green Ship Recycling’. How has Alang safeguarded these values in keeping mind with IMO convention and Hon. Supreme Court guidelines for the unnecessary risks to human health, safety and to the environment?
Alang has seen a major changeover as far as environmental protection and safety standards are concerned. The concept of “Green Ship Recycling”, focusing on the safety of workers, has come into existence on implementation of directions by the Hon. Supreme Court of India and now, Ship Recycling Code 2013; based on guidelines in line with IMO convention.

Ship Recycling Industries Association (SRIA) is the largest Association working for the welfare of owners and workers of Ship Recycling Yard. The Association not only safeguards the interest of Ship Recycling activity, it also promotes ‘Green Recycling at Alang’. Ship Recycling Industry Association (India) honors its commitment of green recycling of each and every yard at Alang.

The workers are imparted proper training for their respective jobs and no worker is allowed to work without proper training. The strict compliance for non-employment of children in the ship breaking activities is observed.

It is a recycling industry and hence, saves on natural resources. Ship Recycling rather helps in maintaining ecological balance. So this industry is eco-friendly.

According to you, how does the 2009 Hong Kong convention impact the Indian ship breaking & recycling industry? And how is SRIA implementing the convention towards the purpose of Green Ship Recycling?
Ship Recycling Code 2013 is a stronger and rich in terms provisions of safety and environment, in comparison to the provisions of HKC 2009. Implementation of HKC 2009 brings unnecessary foreign interventions. We have requested the Government not to ratify HKC-2009. We already have our Ship Breaking Code 2013 to regulate the safety and environment concern.

Our ship recycling industry is ready to further strengthen the rules and regulation in the interest of Safety and Environmentally Sound Ship recycling Activity by Domestic regulation such as “Regulation 2003” or ‘Ship Breaking Code”, but not by foreign interference and unilateral conventions such as HKC-2009.

According to you, how will the recent Budget affect the Shipping Industry as a whole and how do you evaluate the interim Budget for the Ship breaking & recycling industry (Pros and Cons)?
Shipping Industry of India has a crucial role to play in Indian economy. While comparing the largest steel making countries in the league India enjoys the 4th position among five leading countries that includes China and Turkey. These countries dominate world’s Ship Recycling Industry.

Indian ship recycling industry provides employment for almost 5 lacs of people directly or indirectly. Ship Recycling activities generates revenue/taxes to the tune of Rs 1800 crores for the Central government, additionally Rs 700 Crores to State government. Alang ship recycling yard produces approximately 3.00 million tonnes of steel annually, without use of power, receding natural resources such as iron ore, coal and water.

So the industry has a major role in the economic development of the state and nation as well; hence in the time when the dollar at peak height, the industry was in a difficult situation of financial crunch, the announcement by government for reduction in the custom duty from 5 per cent to 2.5 per cent on Ships imported for recycling has given it the timely aid and made it competitive internationally. However, supply of ship remains less then demands, hence Ship prices has gone up by USD 12-15.