Trade to Bangladesh through Kolkata port dips 18%

Cargo movement between India and Bangladesh, through Kolkata port, has dipped 18 per cent so far this fiscal in view of the forex crisis in the neighbouring nation.

With Bangladesh slowing down on opening of Letters of Credit (LC), and a resultant weakening in demand, Indian exporters sought extension of demurrage free time – doubling it to 30 days – and other benefits from the Kolkata Port authorities, sources in the Ministry of Ports, Shipping and Waterways told businessline.

Ministry officials say Syama Prasad Mookerjee Port (formerly Kolkata Port Trust) is mulling volume-based discounts and free time relaxation to attract more cargo.

The annual volume of Kolkata–Bangladesh trade is around 1700 TEUs (twenty foot equivalent units).

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Till February of FY23, cargo handled by the Syama Prasad Mookerjee port, which include Kolkata and Haldia ports, was 59.8 million tonne (mt). Target for FY23 is set at 65 mt, and in FY22, the port handled 58.2 mt of cargo.

“The service between Kolkata and Bangladesh has witnessed a slight drop in this current fiscal,” Sarbananda Sonowal, Minister of Ports, Shipping and Waterways, said in a response to Parliament.

Largest Trade Partner

Bangladesh is India’s largest trade partner in South Asia with bilateral trade between the two nations pegged at $18.2 billion in FY22. Of this, exports from India were $16.2 billion and imports were $2 billion.

Exporters generally prefer the sea route from Kolkata (port) to Chittagong (in Bangladesh) and a container vessel sails to the neighbouring country from the eastern Indian city once a month.

The major export items include cotton yarn, sponge iron, rice, silicon, electrical items and plastic products.

Internal Issues in Bangladesh

Stakeholders say because of some internal issues in Bangladesh, LC generation has been affected because of which there is low demand.

“Requests from exporters have been received to increase the demurrage free time....so that they can aggregate the cargo and ship it as soon as they get LC from Bangladesh,” Sonowal said.

As per reports in Bangladesh media, opening of LCs there dipped almost 25 per cent for July-January to $39.46 billion (down by $13 billion). The LC settlement – or import payment – for these seven months was $46.82 billion – up around 3 per cent, indicative of the global commodity price hike impact. Forex reserves in January was around $33 billion.

In shipping parlance, a demurrage refers to the charge that the merchant pays for the use of container within the terminal, beyond the free time period.

On the other hand, a letter of credit by banks guarantee that a buyer’s payment (to the seller) will be received on time and for correct amount. If buyer is unable to make a payment, the bank will be required to cover the same.

Current facilities to Bangladesh-bound cargo

Exporters using Kolkata port to ship to Bangladesh currently get a 40 per cent concession on box rate (for both import and export).

Cargo bound for Bangladesh has coastal status which attract lesser vessel and cargo related charges.

A 70 per cent waiver on Calcutta Dock Labour Board charges for stuffing of containers in Khidderpore Dock is also allowed.

Volume-based waiver is also given to stone chips and boulders sent to the neighbouring country; and an exporter who handles more than 100,000 tonnes by rail will be given 50 per cent waiver on local haulage charges.

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