ISLAMABAD, May 5: Pakistan is seeking immediate and complete removal of War-Risk Surcharge (WRS) on its cargo containers besides full refund of amount so collected since October last by foreign insurance companies following the US attack on Afghanistan, Dawn learnt reliably.

A senior government official in the commerce ministry confirmed that a high-level delegation led by Commerce Minister Abdul Razak Dawood would be leaving for London this week to hold talks with a number of reinsurers, including Lloyd’s War-Risk Committee. Lloyd’s represents around 30 marine insurance syndicates.

“The WRS was unjustified and we want its full refund,” said the official but refused to quantify how much Pakistan had paid to the foreign insurance companies thus far. “We don’t want to indulge in figures. It’s a matter of principle that whatever we were made to pay should be returned to us, whether it’s a dollar or $100 million,” he added.

The minister would be on a week-long visit to other western countries as well, said the official.

An Export Promotion Bureau (EPB) meeting last week also asked shipping lines and their agents to withdraw the war risk surcharge within 15 days. The shipping agents say they have been reducing the rate of WRS since October/November last year and would further cut it shortly.

Pakistan has been very critical of WRS, initially imposed by foreign firms, as neither it was in the war zone nor there was any naval war with landlocked Afghanistan. At one point, estimates of extra cost Pakistan had to bear in the event of WRS was put at $200 million.

Asked as to why the government did not refuse to pay WRS when it was considered unjustified and discriminatory, the official said it might have blocked shipments to and from Pakistan causing heavy economic losses.

He said that things have now settled down and the government could fight back for recovery of dues it paid under duress and in an emergency situation. They (the insurers and shipping lines) had acted in a cartel-like manner to benefit from the emergency situation, he said.

Pakistan has been repeatedly raising the issue at different levels since WRS was imposed on its shipments in October last year and sent various delegations for its withdrawal. The cost of containers passing through the Ports of Karachi and Qasim on one occasion increased to $200 from $75 a TEU (tons equivalent unit) as a result of the surcharge.

The extra premium hit Pakistani exports, particularly of rice and cotton as shipowners were showing reluctance to charter ships to move cargo to Pakistan without war-risk cover after the United States launched attacks on Afghanistan on October 7 last.

Pakistan’s major exports are mostly agricultural goods — cotton textiles, rice and leather. The war-risk surcharges also made imports more expensive and hurt the country’s economy.

The committee in its late September decision had enhanced the war risk insurance rates for ships going to six countries — Pakistan, Sri Lanka, UAE, Syria, Yemen and Egypt. Interestingly, India was not on the list, although the distance between Karachi and Mumbai ports is almost the same. On an average 650,000 containers are shipped to Pakistan annually despite the fact that Pakistan was a frontline state and a US-ally against terrorism.

It may be recalled that even when Pakistani ports, airports and other such installations were under imminent danger of being bombed by the Soviets during the 10-year Afghan war, Pakistan was never declared a war zone area by the insurers and it was business as usual at Pakistani ports.

The economic advisory wing of the finance ministry believes that challenges posed by the Sept 11 events, like decline in exports, industrial production, foreign direct investment, and tax revenues, will create more unemployment and poverty and may affect social sector and poverty-related expenditures.

How far Pakistani exports lost competitiveness in the international market is not known exactly but based on the trend so far observed and the expected developments on global economic front, export target has been tentatively slashed to $8.5 billion against the original budget estimate of $10.1 billion — a loss of $1.6 billion in export.