Realising the full potential of India-Bangladesh transit

The transit issue has been an apple of discord between Bangladesh and India for a long time. Criticism has been on the rise since the long-term agreement of 2010 for the transportation of goods to the northeastern states of India using Bangladesh as a corridor. The imposition of a nominal tariff for road use in 2016 added further fuel to the fire of criticism. During Sheikh Hasina's visit to India in 2018, an agreement was signed to allow the transportation of goods to the northeastern states by road using Chittagong and Mongla sea ports. 

However, despite lengthy negotiations, talks regarding using India as a corridor for transporting goods to Nepal and Bhutan were not making much headway. Finally, in the joint statement after the meeting with Narendra Modi on the second day of Sheikh Hasina's visit to India last month, India has offered duty-free transit via its territory for exporting goods to Nepal and Bhutan through specified land customs stations, airports and seaports.

If transit through India is implemented, Bangladesh will be able to trade with Nepal and Bhutan with more ease. Apart from land, Bangladesh can also use Indian airports to transport goods.

History of India-Bangladesh Transit

India has been getting transit through the water and land routes for a long time. Before independence, India enjoyed sea transit through what was then East Pakistan. However, it was suspended after the Indo-Pak war in 1965. In 1972, for the first time after our independence, the Protocol on 'Inland water transit and trade' was signed. Under this protocol, Indian ships can import and export goods to Bangladesh using Bangladesh's important waterways and ports.

An agreement was first signed between the two countries in 2015 for the use of multi-modal transit for the regular transportation of goods to the three northeastern states of India via Bangladesh. 

The agreement also calls for connecting Kolkata and Murshidabad with Assam, Tripura and Meghalaya using four multi-modal transit routes by rivers and roads. Using India's own territory, 1,600 kilometres must be covered to transport goods from Kolkata to Tripura. Instead, the goods can reach Agartala by travelling only 400 kilometres using Bangladesh's water and land routes. The tariff for carrying goods on this route has been fixed at Tk192 per ton. However, Bangladesh's income per ton of products, including security and seaport shipping charges, is Tk 277. After taking only 17 consignments on this route till 2020, the transportation of goods on this route has been stagnant for a long time.

Later, during the Prime Minister's visit to India in 2019, an SOP was signed between the prime ministers of the two countries on the outline of transit-transhipment for carrying freight to the northeastern states of India using Bangladesh's Chittagong and Mongla seaports. The total charge, including scanning, security, document processing and miscellaneous administrative charges, had been fixed at Tk554 per ton for these four trial runs. Since 2020, the opportunity was given to make trial runs on four routes from Chittagong/Mongla Port through Akhaura, Tamabil, Shyola and Bibirbazar land ports.

Finally, during Sheikh Hasina's visit in September this year, India sought a transit route from West Bengal's Hili to Meghalaya's Mahendraganj through Bangladesh. At least a 10 km bridge needs to be constructed for using this route. In the same meeting, Bangladesh sought the opportunity to establish rail communication with Bhutan through the newly inaugurated Chilahati-Haldibari rail route. 

In 2021, Bangladesh exported 52 thousand metric tons of fertiliser to Nepal through a transit by Rohanpur-Singabad and Birol-Radhikapur. Similarly, India has received several short-term transit facilities based on immediate needs.

Scope of benefit in transit

The transit agreements will help improve bilateral relations between the two neighbouring countries as well as increase Bangladesh's trade with India, and make the transportation of goods easy and affordable. Bangladesh has the opportunity to generate income from taxes and duties the private sector too can benefit from. Bangladesh will get revenue from goods transportation fares and port service charges. In four years, the government has received Tk36 lakh from 17 consignments through the Kolkata-Ashuganj-Akhaura route. 

Last month, the total income of the government and private sector from the shipment of goods from Kolkata to Assam using Chittagong port was more than two lakhs. Bangladeshi contractor companies and ships are involved in carrying goods by waterways. 

Bangladeshi company Anbis Development Limited was associated with moving most of the shipments from Kolkata to Ashuganj. Bangladeshi ship MV Trans Samudera transported two consignments using Chittagong port. Bangladeshi ship MV Rishad Raihan delivered the only consignment of Indian goods from Kolkata to Mongla port. 

Bangladeshi vehicles will carry the freight to the Indian border by road. As a result, there is enormous potential for income from the private transport and service sector through transit.

What to do

Along with income, the pressure of additional products and vehicles requires additional spending on infrastructure and human resources. Due to a lack of adequate infrastructure facilities, Indian businesses are not showing interest in carrying goods via the Kolkata-Ashuganj-Akhaura route, despite the minimal cost. 

At that time, the government came under attack from various critics for signing a contract for transit at a low cost. Since then, only 17 consignments of goods have been transported using the Kolkata-Akhaura route in the four years since the inauguration of the transit, till July 2020. 

India has not taken any transit on this route for the last two and a half years. As the Ashuganj port is not of international standard and lacks an advanced container depot, warehouse, adequate staffing etc, it is believed that Indian businesses have lost interest in using this port. As a result, even though the government is spending money on the maintenance of this port, it is getting damaged due to lack of use. 

On the other hand, Bangladesh Railway is constructing a new dual-gauge railway line from Ashuganj to Akhaura at the cost of Tk 477 crore 81 lakh to establish a direct rail link between Kolkata and Tripura. The government should consider the cost-benefit ratio as the infrastructure shouldn't be a white elephant. However, the transit fee will have to be rescheduled to keep pace with infrastructure improvements.

The development of port infrastructure, expansion of facilities, ease of road connectivity and increased use of digital technology in customs and duties collection are required to take advantage of the transit agreement with India. Spending on infrastructure development will increase the potential of foreign exchange earnings and simultaneously improve Bangladesh's transport and communication systems. It will simultaneously expand the country's internal communication system and trade.

Besides, if Nepal and Bhutan get the opportunity to import goods through Bangladesh's Mongla port using India's corridor instead of Kolkata, their transport costs and transit fees will also be reduced. As both parties have benefits, the interest of Nepal and Bhutan in importing Bangladeshi products will increase, and the volume of Bangladesh's exports to the two countries will rise significantly due to ease of transportation. It will increase sub-regional cooperation and linkages with India, such as the Integrated Economic Partnership Agreement, BBIN, which will play a role in expanding international trade.

Abdullah Sadi is a Bangladeshi PhD researcher at Boston University, UK. He is conducting his doctoral research on South Asia's political economy and international politics.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.