Majyd Aziz: Making Karachi Port User-Friendly

Cargo_2011_2012Pakistan is fortunate to have three major ports, namely, Karachi, Port Qasim and Gwadar. Moreover, a fourth port at Keti Bandar is also envisaged. Karachi port provides round-the-clock easy and safe navigation to tankers, modern container vessels, bulk carriers and general cargo ships up to 75,000 DWT (or dead weight tonnage). Karachi Port has 30 dry cargo berths (13 on West Wharves, 17 on East Wharves) and 3 liquid cargo handling berths (POL, meaning “port of loading“, and non-POL) and the Karachi International Container Terminal (KICT) that is privately owned and operated with fully equipped modern technologies. Over 1700 vessels call at the Karachi Port annually while operational capacity is about 3500 ships. The Karachi port’s cargo handling is available here

There is ample scope of enhancing the operational activities of the Karachi port and it is incumbent upon the port authorities, the port operators, and the port users to ensure that this major port of Pakistan is operating at its optimum. Pakistan’s imports and exports have increased substantially in the past few years. This has led to a dynamic enhancement in activities at both the Karachi port as well as Port Qasim. The country’s third port at Gwadar is there to complement the existing ports. However, the foreign operators responsible for marketing and running Gwadar port have been unable to attract business. Although there has been significant introduction of sophisticated and high tech machinery and equipment at the ports, there is still lots to be done. There is an imperative need to attract more investment as well as inducing the cargo handlers to bring in more sophisticated technology. Nowadays, due to abnormally high volume of commodities such as wheat and other foodstuffs as well as coal, sugar, chrome ore, clinker and cement, the efficiency and infrastructure of the ports are under tremendous pressure.

At present, most of the port-specific equipment and machinery attract duties and sales tax. Nowadays, with the diminishing value of the Rupee, the prices of these equipments have become prohibitively high. However, notwithstanding the fact that cost is increasing, the government levies duty at today’s prices. This has impacted on the feasibilities of the various projects resulting in abandonment of facilities as well as portraying the country’s image as a low profit center or as an insensitive decision making environment.

The objective of the government is to offer appropriate facilities, with minimum hassle, and at comparable prices. The emphasis should be on providing excellent service at better prices. Therefore, it is submitted that a paradigm shift is essential and that the cost of handling and other charges at the ports be made pragmatic keeping in view the difficulties faced by Port users.

It is, therefore, suggested that in order to boost port traffic, in order to maximize the potential of these ports, and in order to attract substantial foreign investment and acceptance of the port as an important destination, it is proposed that the import duties and other levies on port and shipping equipment be zero-rated and that there should be no frontloading in any manner whatsoever. This measure would provide a tremendous boost to the shipping industry and that it would ensure remarkable investment in this sector.

Another example of unnecessary charges is the “light dues” which are based on net registered tonnage of the vessels as per Section 10 of Lighthouse Act 1927 on ships calling at Pakistani Ports. The rates were Rs 0.50 per NRT (or net register tonnage) but some five years ago; these were raised to Rs 3.00 per NRT and recently further raised to Rs 7.00 per NRT. The “light dues” are imposed without any improvement, replacement, or modernization of the Lighthouse. The dues are collected by Customs on behalf of the Mercantile Marine Department. As an example, a ship with a load of 27,000 NRT has to pay approximately US$ 2000 which adds to more than Rs 5.00 per tonne of cargo. These “light dues” unnecessarily increase the cost of the commodity by US$ 1.00-1.50 per metric tonne. It is estimated that the annual “light dues” are between Rs 900 to Rs 1000 million.

Rising to 28 m (91 feet), the lighthouse at Manora Island near Karachi port is the tallest lighthouse in Pakistan. In 1889, the British built it to assist trade vessels approaching Karachi harbour. The light of this lighthouse is prominent from up to 20 nautical miles away on a clear night. Its focal plane is 148 feet high. Unfortunately, the lighthouse has neither been modernised, repaired or even well-maintained inspite of the huge collection of dues.

Furthermore, all these high port tariffs and exorbitant dues result in heavy monetary surpluses for the ports. This encourages the government, the port authorities, and the concerned ministry to generously utilise these funds to build flyovers, underpasses, water fountains, and other non-port related edifices and also donate huge amounts for various causes to obscure organisations. Actually, it is trade and industry, as well as the consumers, who are paying for this entire extravaganza without realising the added cost in freight due to these dues, tariffs, and levies. There is no private sector monitoring and even the port’s trustees are not concerned with this front-loading which is costing billions for trade and industry. There is a Lighthouse Advisory Committee but it rarely meets.

It is also pertinent to note that the Port dues are dollar-based and so with the depreciation of the Rupee, the ports make windfall profits with the result that this bonanza is diverted to non-port activities. The Trustees as well as representatives of trade and industry, especially,  Federation of Pakistan Chambers of Commerce & Industry (FPCCI), Karachi Chambers of Commerce and Industry (KCCI), Overseas Investors Chamber of Commerce & Industry (OICCI), Karachi Contractors Association (KCA), etc should insist that the financial surpluses are not used for donations, giveaways, and building non-port structures. It is proposed that port charges should be bifurcated into local and foreign allocations. Local charges should take into account the salaries, overheads, maintenance and repairs, and other auxiliary expenditures. The foreign component should be based on the foreign exchange involved. This should help save billions for trade and industry.

It is ironic that while funds were being diverted to non-port activities, the berths at KPT were in shambles and inoperative. Even today, berths 3, 14, 15 and 16 are under repairs and still not operational. Moreover, whenever foreign goodwill ships come into the port, security concerns and other exigencies hamper the workings of the ports and Pakistan’s foreign trade is disturbed. There is also the imperative need to check and monitor the efficiency and productivity of the various Port equipments such as tug boats, pilot boats, dredgers, etc. Large amount is wasted in maintaining and operating these equipments.

The culture of strikes and closures are affecting movement of cargo from the ports. The 12-day strike in December 2012 by the transporters and truck owners should be an eye opener for the government as well as trade and industry. This resulted in huge demurrage charges, loss of export orders, markets running out of imported goods, and negative image around the world. The government did not react to the strikes and it was after nearly two weeks that the government took cognizance of the strike and negotiated the end of the strike. It is proposed that political parties and religious organisations should allow ports to perform so that the country does not come to a halt. Pakistan is probably the only country where business related cargo, especially export cargo, is not allowed free movement during strikes and protests.

It is my hope that the ports of Pakistan should become the centres of trade through global shipping. The private sector should be fully involved with policymaking and decision making stages so that the ports of Pakistan become attractive for international shipping lines.

The author is former President, Karachi Chamber of Commerce and Industry.


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Filed under Discussion, Karachi, Legislation, Pakistan

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