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Indian transhipment duty waiver will amount to betrayal of people

BanglaBhoot

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IT is hardly surprising that India has sustained its pressure on Bangladesh to waive duties on transportation of cargoes from its west to northeast. According to a report front-paged in New Age on Tuesday, which quoted an official of the Indian High Commission in Bangladesh, the Indian high commissioner, Rajeet Mitter, iterated the request during what he termed a ‘routine call on’ the foreign secretary on Monday. Earlier, the Bangladesh customs authorities obstructed two Indian vessels, which were carrying goods from west to northeast India, from entering into Bangladesh territory after they had declined to pay transit fees. It is not unlikely that New Delhi would continue to exert pressure on Dhaka to secure the waiver.

What is also likely—and disquietingly so—is that the Awami League-led government might acquiesce to New Delhi’s request—demand would, perhaps, be more precise—sooner than later. Needless to say, the indications are too many to overlook.

It all began with the visit of the foreign minister to New Delhi in September 2009 when Bangladesh agreed to provide India access to Ashuganj port to facilitate ‘transport of over-dimensional consignments for the Palatana power project in Tripura’ as a ‘one-time’ deal. Then in January 2010, during the visit of the prime minister, Sheikh Hasina, to New Delhi, the two countries agreed to declare Ashuganj in Bangladesh and Silghat in India as ports of call. Later, in April, at a joint meeting, both sides agreed that Bangladesh would collect duties under her customs laws and, subsequently on May 31, amended the ‘Protocol on Inland Water Transit and Trade’ and added Ashuganj and Shilghat as ports of call. Bangladesh also eventually allowed multi-module transit to India after adding Ashuganj as a new transhipment point between the two countries. As per the new arrangement, India can now carry its goods not only by waterways but also by roads and rail transports from one part of its territory to the other through Bangladesh.

As the government accommodated one Indian request after another, its key functionaries and crony ‘intellectuals’ and ‘experts’ trumpeted that Bangladesh stands to gain substantial benefit from transhipment of Indian goods, and that the annual revenue could be in the vicinity of Tk 20,000 crores, although a senior economist of the Bangladesh Institute for Development Studies, an associated research organisation of the state, showed that the annual revenue earning could at best be Tk 210 crore but most probably to the tune of Tk 70 crore. It now seems that, if India has its way, Bangladesh may as well say goodbye to any possibility of gaining any monetary benefit from the transhipment deal. Such a grim possibility could very well be closer to becoming a reality as none other than the prime minister’s adviser on economic affairs has recently requested the Internal Resources Division to waive charges on Indian vessels plying through Bangladesh river networks.

While we may criticise India for putting pressure on Bangladesh for undue advantages in bilateral trade, it will be difficult to fault it for relentlessly trying to advance its own interest. The same, unfortunately, cannot be said of our government’s actions or inactions; after all, it has so far shown an inexplicable and, needless to say, inexcusable readiness to compromise on Bangladesh’s interest, not only economic but also geo-strategic. The government needs to realise its apparent eagerness to please its Indian counterparts is tantamount to betrayal of the people, who, as the constitution says, are their real masters.

Editorial
 
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Dr Mustafizur Rahman currently the Executive Director at the Centre for Policy Dialogue (CPD), is also a member of the Panel of Economists for the Sixth Five Year Plan. He was recently selected as a member of the National Task Force to monitor the impact of the global financial crisis on Bangladesh. He gave his views on the recently signed Bangladesh-India deal to The Daily Star....

DS: How do you see the India-Bangladesh deal?

MR: From the economic perspective, there is potential for Bangladesh to gain from the deal. India remains a major trading partner of Bangladesh. In 2007-08, we imported about $3.3 billion worth of goods from India. In spite of global economic meltdown, in 2008-09, Bangladesh imported $2.8 billion worth. On the other hand, we exported about $360 million worth of goods in 2007-08 and in spite of financial crisis we exported $275 million worth in 2008-09.

There are three aspects where Bangladesh has the possibility of gaining something from the deal. They are: trade cooperation, connectivity cooperation, and infrastructure cooperation.

I see these areas originating from this pact. Lets start with trade.

Trade cooperation: There is an understanding that India will reduce the negative list; 47 items will be excluded. India started the negative list with 770 products under Safta in 2006. However, there was a decision that every three years there would be a reduction in the negative list under Safta. For Bangladesh, India started to reduce it at a faster pace. They reduced 480 items from the list. Then they reduced further. Now there are 260 items from which they are going to reduce an additional 47 items.


The second point is non-tariff barriers (NTBs), which is a major impediment. As per the discussion, India will also reduce NTBs. India has said that it will strengthen the BSTI, which is a good move. India is already contributing to strengthening BSTI; so, the move will contribute to capacity building of product standardisation that will help to reduce some of the NTBs as well.

However, it would have been better if a "framework agreement for mutual recognition of standard" could be signed between BSTI and BIS.

As we have not yet signed the deal between BSTI and BIS, what will ultimately happen to reduction of the negative list?
think that India perhaps wanted to strengthen BSTI and then go for this mutual recognition. Since the deal has been signed, I think this thing will be expedited.

The NTBs on Bangladeshi products may be removed. Those are now being exported under zero tariff benefits; but 10% of the duty at the Indian border point has been waived for eight million pieces of garments exported from Bangladesh to India under a special scheme.

There are also 8% to 13% other duties, including excise duties (4% to 8% on import duty and MRP), secondary and higher secondary duties (3% customs duty), and special additional duty (SAD).

Although Bangladesh has been enjoying 10% waiver on duties at Indian border points as most favoured nation (MFN), there are other duties that add up to 8% to 13% for various types of apparels. This is also one barrier, but these duties are also applicable for Indian inter-state product transaction.

SAD amounts to 4% on all duties paid, which is yet to be settled. Since they said that they would remove NTBs, duties like SAD, which are not related to standardisation, will expectedly be removed in the spirit of the deal that has been signed.

Connectivity: We can explain the connectivity opportunity in two ways: connectivity for exporting goods and services, and the other is reducing cost of imports. Connectivity can stimulate these things.

Connectivity with Nepal and Bhutan will be an advantage. We can use our transport services and port services by utilising under-utilised ports. We can utilise the excess capacity of the upcoming Newmooring container terminal.

All parties, even opposition leaders, also said that there was excess capacity in our ports. This could be export of services.

Bangladesh can earn Tk.15 lakh by handling a 700-container cargo at the Chittagong port. Mongla port has become redundant. It could get rejuvenated now.

What has been interesting recently is that Bangladesh's export to India is increasing. In 2002- 2003, our export to India was worth $60 million. In 2003-04 it was $66 million. In 2007-08, it rose to $358 million and in 2008-09 it was $277 million. So there are new export items going to India now beyond our traditional export items -- raw jute, fertiliser, jute goods, fish, and frozen foods. The new items include plastic, melamine, batteries, juice and foodstuff, and cement.

Can you give us any other example of the way Bangladesh is going to allow other countries to use its ports ?
There are many similar examples in the world. The port of Rotterdam is the largest port in Europe, serving more than seven to eight countries in Europe.

But a massive investment might be required for Bangladesh to upgrade the ports. How we can manage the money?
I am coming to that point.

Do you think Bangladesh will lose its existing export market to north-eastern Indian market?
In 2007-08, Bangladesh imported $84 million worth of goods from the north-east and exported $30 million worth, which is a nominal amount of total trade with India. In the same year, Bangladesh's total export to India was $358 million worth and import from India was $3.3 billion.

So the argument is that north-east states contribution to the total Indian GDP and per capita income has been declining in last few years because it is a backward region and its capacity to purchase and capacity to import are also very low.

In 2007-08, Bangladesh exported $14 billion worth of goods. So, compared to that, $30 million export to north-east region is peanuts. So my argument is that if the north-east develops economically through this greater connectivity, and its standard, its income and purchasing power increase, then exports from Bangladesh will go up. Bangladesh's chance of exporting to north-east will remain because of its geographical proximity.

We can also formalise the informal cross-border trading. If Bangladesh develops its supply side capacity, then the north-east market will remain for Bangladesh.

How will the Indian north-east develop?
The Indian government is going to set up a 750 MW power plant in the north-east, which was not possible earlier because of the difficulty in carrying equipment to the site. The north-east's backwardness will be removed through connectivity under the deal; so, more investment and more demand will be created in the north-east. Bangladesh can even invest in the north-east. And, if the north-east gets access to Chittagong port, they can export at a competitive price.


For example, If India's businessmen now spend Tk.15 to carry goods to the north-east, they will use Bangladesh's infrastructure if the cost goes down to Tk.10. And here, if Bangladesh's port charge is Tk.7, Bangladesh should charge Tk.10 to India. So the pricing mechanism also has to be win-win.

Since we import a lot from India, it is possible to supply goods to consumers at an affordable price. Many entrepreneurs import raw material. It is also important for many exporters, because they import fabrics for exportable product.

The import from India increased in last few years because India became competitive. So, trade diversion favouring India occurred. Now, because of better connectivity under the deal, cost of import will also come down for Bangladesh.

If there any scope for Bangladesh to develop its infrastructure under the pact?
We import more from India than India imports from us. Under the deal, $1billion will be utilised for infrastructure development, including port and broad-gauge railway.

It is very important to identify the areas that will be developed under the $1billion package. If we also invest, along with the $1 billion, our import costs can be minimised.

If we can reduce even 10% of import costs, it will be equal to our total exports to India.

All the infrastructure development with $1 billion will have to be completed through concrete projects. These projects should be priorities because, in terms of required investment, $1 billion is peanuts compare to what we need.

So we have to identify the areas in which we can gain maximum benefit.

Infrastructure is not ready, yet, to carry goods from north-east to western India. It will be better for Bangladesh to go for transhipment business to carry Indian goods on that route.

If Bangladesh provides the transportation service, it will be better. The deal does not mention anything about the transportation system. So, there is lots of homework that needs to be done in order to take the spirit forward.

We should work more so that our trucks can carry the goods. In terms of costs, if Bangladeshi trucks can provide cheaper service, India businessmen will seriously think about it.

We should explore the deal more so that Bangladeshi entrepreneurs can get the business from the connectivity. If Bangladesh takes a large part of the transport business under the deal, it would maximise the benefit from the deal.

Will it create any problems in loading and unloading?
It could happen two ways. Indian trucks will carry goods to border point, then Bangladeshi trucks will carry them to the port; or Indian trucks carry the goods directly to the ports. Another thing that can happen is that that Bangladeshi trucks will enter India and carry all goods to port and other points. This will reduce cost of carrying goods as a whole.

So there are several options: Indian trucks at border transport to Bangladesh, Indian trucks through Bangladesh to ports, under which Bangladesh gets less benefit. If we get trucking business, maximum benefits will come to Bangladesh.

This transportation could be on sharing basis. Suppose there could be an agreement under which Bangladesh and India both can share in carrying goods. So, all the options should be examined so that we can maximise our country's benefits.

What could be the deal with Bhutan and Nepal?
Our trade with Nepal and Bhutan is very limited. But if they are allowed to use what has been agreed, they will trade with third countries through Mongla and Chittagong port, which will also give business to our two ports.

Is there any possibility that Bangladeshi traders will not get enough slots to use the ports after these three countries start utilising the ports?
We should look at this agreement as a business. If we can earn $3 by spending $1 then we should go for capacity expansion. As of now, it will not create problems, as there is excess capacity.

Opposition leader Khaleda Zia said that Mongla and Chittagong port has excess capacity of 60 percent, and 40 percent respectively, while the prime minister said that it was 90 percent in Mongla and 40 percent in Chittagong
That is not the issue. The issue here is that if we invest and earn then we can expand.

Do you think only enhancement of port capacity is enough?
Of course not. We will have to so many things to do, from logistics to transportation. If we fail to give affordable services, India could continue using existing routes. If the cost in Chittagong and Mongla remains high, India will not use them. Our intention should be to lower price so that India is attracted by the offers to shift its routes.

At this moment, what should the Bangladesh government do?
It will be very challenging to materialise what we have discussed. The political spirit of the deal now remains. But when it is implemented at the bureaucratic level, lots of options need to be decided: should we go for infrastructure development for giving transit to Nepal and Bhutan, or we should develop the ports first, etc. To implement the projects, priorities should be identified.

We should speed up BSTI strengthening projects to go for mutual framework agreement. The Indian prime minister is expected to visit Bangladesh. So, at that time, the deal should be signed on priority basis.

We have rail connectivity already. So, initially, it is possible to connect with railway; but development of a broad-gauge line between Akhaura and Tripura should be started.

You were talking about railway. Do you think by implementing the rail transit, Bangladesh railway will recover from being a loss-making concern?
Yes, there is a big potentiality. If we can take the cheapest cargo movement business, railway obviously performs better. It will be easier if containerisation of cargo can be ensured.

What should the government do at this moment to follow the pact?
Follow up is very important. I heard that the government is following it up by forming some committees. A high-powered taskforce should be formed to prioritise what to do. And here our national interest should be the top-most consideration.

Among India’s neighbours, Bangladesh occupies a
special position—not only because of India’s role in
its liberation but because geographically, too, it sur-
rounds Bangladesh from three sides.
 
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Everybody pays transit fees. The Russians pay Ukraine for the gas that it sends thru Ukraine.

Nato is paying Pakistan, Russia, Central Asia for Nato supplies.


Stop whinning and pay up !!

Or ofcourse they can contninue to enjoy the long adventurous ride around Bangladesh !
 
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If I'm not wrong we do have the power to cancel the route at any time because of domestic interest :P
isn't it?
 
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Charges imposed from this fiscal

The National Board of Revenue yesterday cleared its position to The Daily Star regarding India's demand for a waiver of transit and transhipment fees for Indian cargoes and transports, saying the fees have nothing to do with the Protocol on Inland Water Transit and Trade signed by the two countries in 1972.

India has been claiming that the transit and transhipment fees imposed on its cargoes and transports does not conform to the IWTT protocol.

The Bangladesh NBR officials said the fees were imposed this fiscal year on all foreign cargoes and transports in transit, through issuance of a circular to generate revenue.

Foreign ministry officials also said the protocol does not prohibit Bangladesh from imposing any fee. Leaders of major business chambers of Bangladesh termed the Indian demand irrational.

The issue resurfaced last week when the Indian high commission intensified its efforts to persuade the Bangladesh government to concede to its demand, after two Indian cargo vessels had been denied transit and detained by the Bangladesh customs at Sheikhbaria in Khulna, until those paid the transhipment fees in Bank Guarantees.

"We want to make it clear that the imposed transit and transhipment fees do not conflict with the Protocol on Inland Water Transit and Trade. The protocol allows India to use Bangladesh territory for transporting goods. The protocol describes how and which route Indian vessels can use. The fee that India has been paying annually under the protocol so far, is paid to the shipping ministry for maintaining river navigability," Member (Customs) of NBR Hussain Ahmed said.

The Bangladesh government fixed Tk 10,000 fee for each cargo container in transit, and Tk 1,000 for each ton of bulk goods.

The present government put emphasis on connectivity to enhance regional trade, and to generate 'incremental gain' from that, Hussain Ahmed said.

NBR is now preparing a summary note on the issue for the finance minister, who is scheduled to return home on October 19 from a trip to the US. The minister will inform the prime minister about the matter, as the Indian authorities have approached her as well with the demand for a waiver.

An official of the Bangladesh foreign ministry told The Daily Star, it is true that there is no mention of transit and transhipment fees in the IWTT protocol, but it also does not prohibit imposition of such fees.

The protocol does have a provision for a fee for maintenance of the transit routes. The Indian government paid Tk 2 crore annually till 1999 for the purpose. For the existing protocol period, from April 1, 2009 to March 2011, the maintenance fee was increased to Tk 4.25 crore.

The protocol was renewed in March 2009, and on May 31, 2010 an addendum to the protocol was signed to add Ashuganj in Bangladesh, and Silghat in India as new ports of call.

The foreign ministry official said the Indian argument for not paying the transit and transhipment fees is not logical, and the Bangladesh government rightly introduced the fees.

"Neither the 1972 protocol nor any other agreement between the two countries says that Bangladesh can't impose the fees. These types of fees are in existence all over the world, and Bangladesh can't allow any waiver because those will be a source of revenue."

He said the maintenance fee, and transit and transhipment fees are not the same, and Bangladesh is not required to consult India prior to introducing the fees. India should pay the maintenance fee as the transit routes are being maintained primarily for use by Indian transit traffic, he added.

"The government imposed the fees following the addendum to protocol which will allow India to carry huge over-dimensional cargoes from Kolkata to Agartala for setting up a power plant in Tripura," he said.

If the waiver is granted to India, then Nepal and Bhutan will also ask for the same, he noted.

Foreign Minister Dipu Moni at a media conference on August 8 also said it is not possible for Bangladesh to waive the fees as those are a source of revenue for the country
 
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^^^^^^^^^^^^^^^
Hasina aunty needs to shut up this time around. We want to see 2.5 billion dollar transit fee/year from India which they were suggesting all along.
 
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Hasina aunty needs to shut up this time around. We want to see 2.5 billion dollar transit fee/year from India which they were suggesting all along.

Im not much into this stuff .... But to charge Maintainance fee and Transit fee ... simultaneously... Thats not fair.. isnt it ?
 
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Im not much into this stuff .... But to charge Maintainance fee and Transit fee ... simultaneously... Thats not fair.. isnt it ?

This is already clarified by the NBR that I posted earlier. We never charged Indian cargo that does not mean we will never charge as India is asking big on transit this time. 4 cr. a year for unlimited transit??? Sorry cant do it. :lol:
 
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Bangladesh already made that clear that the fees can not be waived. Indian high commissioner's request is irrelevant now. India can take it or leave it. Period.:coffee:

You miss the point. How dare India even make such a request? The political cost to the AL for allowing transit should be clear to India but they seem not to care and their arrogance then permits them to request waiver!!!???
 
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You miss the point. How dare India even make such a request? The political cost to the AL for allowing transit should be clear to India but they seem not to care and their arrogance then permits them to request waiver!!!???

You see where the anti-india sentiment comes from? I thought India would be thankful and this was one good opportunity to improve our relationship. But no, they have the audacity to ask for free service! They think Bangladesh is a little pawn in their grand chess board. It's time to wake up and realize Bangladesh can destroy the whole chess board. :flame:
 
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It is perfectly within Bangladesh's right to charge transit fees, I would be surprised if they don't.

Probably India is sending feelers... No need to feel agitated, Bangladesh just needs stick to its stand, rest will fall in place.
 
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You miss the point. How dare India even make such a request? The political cost to the AL for allowing transit should be clear to India but they seem not to care and their arrogance then permits them to request waiver!!!???

Sirji, it is not dare or arrogance, instead it is politics... Any trader will try to get the best deal and India is no exception...
 
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It is perfectly within Bangladesh's right to charge transit fees, I would be surprised if they don't.

Probably India is sending feelers... No need to feel agitated, Bangladesh just needs stick to its stand, rest will fall in place.

I agree. If Bangladesh sends goods to Nepal or Bhutan, it has to go though India. I would be surprised if India doesn't impose any fees. When a vehicle use roads, there is wear and tear on both the vehicle and the road.
 
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