The Pakistan Ship Breakers Association (PSBA) has urged the government to introduce tax and tariff reforms in the upcoming federal budget of 2026-2027.
The association warned that Pakistan ship recycling industry is losing its competitive position because of rising imports of cheap steel scrap and increasing tax evasion in the steel sector.
According to the PSBA, the ship recycling industry in Gadani, Balochistan, provides direct employment to more than 25,000 skilled and unskilled workers. During peak periods, it also supports up to 500,000 jobs across Pakistan.
The industry contributes more than PKR 16 billion annually to the federal government and generates additional revenue for the provincial government.
The association has requested higher customs duties and regulatory taxes on imported re-roll able scrap. It believes that low cost imported scrap is hurting the local market by competing unfairly with ship plates and scrap produced by domestic recycling yards. The PSBA said restricting such imports would help protect jobs and strengthen Pakistan related industries.
PSBA also called for stricter monitoring of steel scrap and steel product imports through land routes. It claimed that some importers avoid taxes through under invoicing, false declarations, and misuse of industrial import concessions. According to the association, these practices result in major revenue losses for the government.
On taxation matters, the PSBA requested changes to sales tax rules for ship breaking activities. The industry is currently taxed on the assumption that 85% of its output is re-roll able scrap.
However, the association said the actual production mix includes both re-roll able scrap and heavy melting scrap. It suggested recognizing production as 50% re-roll able scrap and 35% heavy melting scrap to ensure a fairer tax assessment system.
The association also asked for full sales tax refunds on exported scrap produced through ship recycling. It noted that global steel manufacturers are increasingly using recycled scrap instead of iron ore to reduce carbon emissions.
The PSBA said tax refunds would improve export competitiveness, attract investment, increase foreign exchange earnings, and create more employment opportunities.
In addition, the association urged the government to closely monitor ships imported for dismantling. It warned that accepting vessels under sanctions from the United States, the United Nations, or the European Union could expose Pakistan banking system and ship recycling sector to secondary sanctions and damage the country international standing.
The PSBA highlighted that local ship recyclers are investing heavily to meet the requirements of the Hong Kong International Convention for the safe and environmentally sound recycling of ships.
It described ship recycling as an important source of green steel that helps lower carbon emissions. The association added that the industry could help Pakistan benefit from future carbon credit markets while supporting sustainable industrial growth.
