ADB examines ways to boost Bangladesh-India rail cargo link

Black_cats · Jul 5, 2023

ADB examines ways to boost Bangladesh-India rail cargo link

Infographic: TBS

Infographic: TBS

The Asian Development Bank, a long-time partner of Bangladesh in improving railway infrastructures and promoting sub-regional connectivity, now turns its eye on rail-based cargo movement between India and Bangladesh.

The lender has already initiated a study to identify infrastructure gaps, propose technology-based solutions for cargo and container movement, and recommend regulatory reforms to facilitate freight train operations between the two countries.

Also, the study, under its South Asia Subregional Economic Cooperation Programme, will explore the potential for transit cargo to and from Nepal and Bhutan, benefiting all stakeholders.

The ADB's latest study aimed at quantifying the benefits of rail-based cargo and container movement between India and Bangladesh.

3 Categories of rail traffic

An ADB mission has already met with Bangladesh Railway and National Board of Revenue officials on 23-25 May and discussed the prospects of three categories of railway traffic between the two neighbours: bilateral trade, Bangladeshi and Indian traders using rail network and ports of each other's country, and Indian domestic cargo movement between the North East and the rest of India transiting through Bangladesh.

Dhaka suggests inclusion of Nepal, Bhutan

In response to the proposals, Bangladesh officials, while highlighting the importance of connectivity with India's northeast, suggested if Nepal and Bhutan could be incorporated in such a rail cargo network. The study team was advised to come up with a proposal for a transit fee to be applied on rail-based cargo that should be justified and acceptable to stakeholders on both sides of the border.

The outcome of the study will be a clear "go-no go" analysis of the concept of rail-based cargo movement and containerised rail movement and find their feasibility for different products, different origins and destinations, prepare a comprehensive list of enabling infrastructure projects and regulatory intervention that is required, reads an ADB document.

During the meeting, the Bangladesh Railway has proposed that the ADB study should provide recommendations on the pipeline of projects that can bring in transport and logistics efficiency in India – Bangladesh trade with a special focus on containerised movement by rail.

The new rail route opening via the Padma Bridge also needs to be covered by the study, it was suggested in the meeting, attended by railway senior officials including its director general.

The study should come up with a roadmap beneficial for Bangladesh, Bhutan, India and Nepal, officials said, emphasising the importance of restoring old links and addressing missing links in India to enhance regional transit connectivity.

SM Salimullah Bahar, Chief Planning Officer of the Bangladesh Railway, said they suggested ADB include some more issues in the study.

He expressed optimism about securing ADB financing for the rail-based cargo movement project.

ADB likely to fund

An official at the Economic Relations Division (ERD), who wished not to be named, said the ADB is not only doing the study on the rail cargo link, it will fund the necessary infrastructures after the study. "The ADB is promoting regional connectivity as well as regional trade. It is hoped that the agency will invest in expansion of trade through railways," the official said.

"The new study will determine which infrastructures will be needed for introducing cross-border rail cargo-based trade and what will be the cost. On the basis of the study, ADB will decide its lending programme," the ERD official added.

The final report of the mid-term survey is scheduled for submission in September this year, according to the ADB document.

The study also aims to assess the infrastructure status at interchange points, such as Benapole, Darshana, Rohanpur, Birol, and Burimari, and identify gaps in the existing railway network. Upgrading loop lines, sidings, container handling and storage infrastructure, and goods sheds at key stations are among the proposed recommendations. The study will also explore additional commodities that Bangladesh can export to India, Nepal, and Bhutan.

The ADB team believed that the Electronic Cargo Tracking System (ECTS), being used in the India-Nepal containerised movement, can well be replicated in such an arrangement between Bangladesh and India.

Analysts and businesses said the rail-based cargo movement initiative between India and Bangladesh holds immense promise for both countries. With existing railway infrastructure and the ongoing efforts of the ADB, this mode of transportation has the potential to unlock new opportunities and foster stronger economic ties between the two nations.

Dr Mostafa Abid Khan, a former member of the tariff commission, has said rail cargo-based trade links with India have been in talks for long. Though a small quantity of merchandise trade is now being carried by rail cargo, there is a scope for expansion.

"If there is more trade through rail cargo, the cost will come down both at import and consumer levels. This will cut export-import time, which will benefit both countries," he said.

But which routes would be suitable for rail cargo trade need to be determined through study and customs points developed accordingly, the trade policy analyst said.

If regular rail cargo trade is introduced, it will widen the scope for transit through Bangladesh in future, he added.

Railway officials informed the ADB mission of the interest expressed by some apparel and other commodity exporters in using Indian Ports (Mumbai Nava Sheva and others) for exporting to third countries to take the benefit of direct connectivity without transshipment, as offered by India to Bangladesh.

NBR grants permission to trains to India

Until November 2022, rail trade between India and Bangladesh heavily favoured India, with one-sided transportation. However, on 4 November last year, the National Board of Revenue granted permission for trains carrying Bangladeshi goods from Benapole to make return journeys into India, marking a significant shift in trade dynamics.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), feels that full-fledged operation of rail cargo trade will benefit both Bangladesh and India, as it will relieve traders of hassles in land port-based trades.

"Now a small volume of products are shipped through rail from India, which is very negligible compared to the total imports from India. But there is hardly any export from Bangladesh being transported by rail," the apparel sector leader said, stressing that there should be arrangements for export-import through rail in the interest of the economy.

Rail cargo-based trade links can be introduced on the priority basis through four routes--Benapole, Darshana, Hili and Akhaura, said Hatem.

Unilever wants raw materials import by train

Unilever Bangladesh, which depends on around 40% of its raw materials on India, had been trying for over two years to convince both Bangladesh and India to allow the import of bulk raw materials by train.

"Why does Bangladesh not use the railway as a means of carrying raw materials in bulk? It can unclog the roadways," Kedar Lele, then CEO of Unilever Bangladesh, told The Business Standard in an interview in July 2020.

Finally, it happened in July two weeks ago as a cargo train came from India, where Unilever Bangladesh brought in nearly 1,200 tonnes of much-needed raw materials. Unilever imported raw materials in 22 bogies, taking 60 trucks off the roads.

In support of the RMG and textile business in Bangladesh, for the first time, 468 tonnes of cotton yarn was transported to Benapole by rail in the same year. As a result, bilateral trade via rail has recorded an unprecedented year-on-year growth of 130%, according to the Indian High Commission in Dhaka.

No transit fee

Dr Mohammad Yunus, senior research fellow at Bangladesh Institute of Development Studies (BIDS), also believes rail cargo will reduce cost of business which will benefit traders of both countries.

Asked about the railway's proposal for applying transit fee on rail-based cargo, the economist said as per the World Trade Organisation (WTO) rules, no transit fee can be applied. Instead, a long-term marginal cost is charged to compensate for the damage, if there is any, during movement of Indian cargo trains through Bangladesh's territory, he said.