ISLAMABAD, June 19: Pakistan has decided to revitalize its ports and shipping sector by upgrading the Karachi Port, Port Qasim and the Pakistan National Shipping Corporation (PNSC) with an investment of about Rs120 billion.

It also intends to introduce a Merchant Shipping Act to provide facilities to Afghanistan and Central Asian Republics and capture their transit trade.

A senior government official told Dawn on Sunday that a decision had been taken in principle at the top level and relevant agencies had been asked to start implementation immediately.

He said port facilities, although sufficient for the time being, could face capacity shortages after two to three years while merchant fleet of the Pakistan flag-carrier, PNSC, was really in a bad shape at present.

To start with, about Rs13 billion are being planned to be spent on PNSC to import six second-hand Panamax or Handymax vessels at an estimated cost of $18 million each. Similarly, four second-hand crude oil tankers would be imported at an estimated cost of $25 million each.

The sources said the government had estimated it would be investing about Rs75 billion on Karachi Port’s upgrade. Of this, the federal government would provide about Rs17 billion and the rest would be arranged through private sector financing. Another Rs18 billion would be spent on improving the Port Qasim, with the private sector injecting Rs14 billion.

This has been planned on the forecast that general cargo traffic would increase by 51 per cent, dry cargo by 75 per cent, liquid bulk by 43 per cent, iron ore and coal by 140 per cent and containers by 76 per cent during the next five years.

The federal government has come to the conclusion that the PNSC requires immediate refurbishment because its ships are outdated and do not suit modern trade, the sources said.

It has also failed to acquire vessels for either the dry cargo trades or container or feeder trades and except crude oil, Pakistan’s whole trade is being handled almost entirely by foreign ships.

After nationalization in the 1970s, the PNSC fleet has dwindled from over 50 vessels to just 13, and recent efforts by the PNSC management to procure an oil tanker have failed to materialize.

A new shipping policy, currently in preparation stage, would address two main issues. First, the inability of the PNSC to call at Indian ports for third-country cargo excludes one of the largest markets for the country. Secondly, the inability of the Pakistani ship owners to arrange financing from local banks, lack of confidence and procedures to have their mortgages registered and laws of foreclosure have also kept foreign banks away from the market.

Now the government has decided to immediately introduce a Merchant Shipping Ordinance and allow Pakistani ship owners to act as if they are located in export processing zones, thus enabling them to arrange international finance and to have their banks register a mortgage in Pakistan.

Similarly, the local banks would also be encouraged to extend financial assistance to potential ship owners and give clear rights to banks and financial institutions, both local and foreign, to foreclose on ships in the event of default of loan agreement by ship owners without having to obtain a court order.

The government also plans to amend bilateral shipping agreements having cargo reservation clauses to enable national and third-country flagships to call at ports and carry national trade. There is also a need to institutionalize the role of freight forwarding agencies for efficient movement of cargo, the officials said.

The navigational channels at the Port Qasim and Karachi Port would be further deepened, widened and improved to ensure full-time night navigation. In case of Gwadar also, all port operations would be done through private sector.