The sugar and paper industry of Bangladesh are bracing for impact as the government has recently lifted restrictions on the import of nine Indian products through the Akhaura and Nakugaon land ports.
As of December 1 this year, the import of sugar, paper, cashew nuts, generators, broken glass, chocolate, baby wipes, confectionary and bitumen are allowed through both ports.
The paper and sugar industries will take a big hit as local production capacity of both items exceed the domestic demand.
Bangladesh currently has the capacity to produce 10 lakh tonnes of paper per year against the annual local demand of 5-6 lakh tonnes.
In the last fiscal year the country exported paper goods worth $81.7 million, according to data of the Export Promotion Bureau (EPB).
"This is a suicidal decision!" said Ahmed Akbar Sobhan, president of the Bangladesh Paper Mills Association.
Paper importers are already bringing double the declared amount through Benapole and Chattogram, he claimed, adding, "they are flooding the market with imported paper, while at the same time, depriving the government of customs duty. Allowing more imports will only harm the local industry."
On the other hand, the local demand for sugar is 22 lakh tonnes per year, while the production capacity – met by both private and state-owned companies – is around 40 lakh tonnes.
City Group, a leading sugar manufacturer of the country, claimed that allowing sugar imports through these two land ports would result in cheaper products taking over locally manufactured ones.
"Bangladesh mainly refines raw sugar, which is imported from India and China. Since India produces raw sugar, its production costs are much lower. It can sell sugar at lower prices in the Bangladeshi market, outcompeting local firms," said Bishwajit Saha, executive director of City Group.
At present the duty on import of raw sugar per tonne is Tk3,000, while that on each tonne of finished sugar is Tk6,000. An additional 30 percent regulator duty is also included on import of both products.
In the 2018-19 fiscal year, Bangladesh exported sugar worth $1.18 million, according to EPB data.
However, the National Board of Revenue (NBR) denies any significant impact of this decision.
Speaking to The Business Standard, NBR Member (International Trade and Agreement) Khandoker Aminur Rahman, said "Bangladeshi businessmen have nothing to worry about as this will not have any major impact in the local market."
"The nine products approved used to come through the Benapole port but not through the Akhaura and Nakugaon borders," he said, adding that India has also allowed the export of some Bangladeshi products through the two ports.
The government lifted the restrictions after a meeting of the Joint Group of Customs held recently in Dhaka.
Of the products approved, cashew nuts and bitumen are not produced in Bangladesh. The local demand is met mostly by Chinese imports. However, large amounts of bitumen enter Bangladesh from India through the Benapole port.
Till now, Bangladesh has removed restrictions on import of 16 items in two phases.
The state government of Tripura has also called for the withdrawal of restrictions on tea imports as well but Dhaka has refused the request.