Time and trade wait for no one

Economic cooperation and improved connectivity with Bangladesh, Nepal and Bhutan, referred as the BBIN sub-group, is a pet agenda of the Modi government. Still, trade costs are abnormally high in this region, pulling down formal cross-border economic activities.

The reasons for this are not difficult to understand. On a sub-regional scale, India is pursuing projects such as seamless road transport where gains are either limited or uncertain due to various physical, emotional and social issues on either side of the border.

This is already evident in the case of Bhutan. In all fairness to the deal, India will probably see some restricted and low-scale roll-out, which will not impact overall trade costs.

Bilaterally, India is pursuing many rail and inland water connectivity projects with its largest regional trade partner, Bangladesh. However, none of them promises to decongest the costly road traffic through Petrapole border in West Bengal. Petrapole is the largest trade route.

It is, therefore, time the Government revisited the connectivity agenda with a policy focus on reducing trade costs in a time-bound manner. Removing key domestic logistical bottlenecks and integrating the same with foreign policy in the front-end is an immediate priority.

Since regional trade is heavily tilted in India’s favour, any reduction in trade costs should primarily address the interests of the importing nations, helping to create a positive environment for further economic integration and seamless traffic.

To start with, India should give a systemic push for conversion of non-containerised road cargo to containerised rail cargo for regional trade. (Obviously, bulk commodities would not feature here.)

That landlocked Nepal and Bhutan have distinct interest in this is evident from the fast growth of rail cargo and containerisation ever since India connected the biggest Nepalese gate at Birgunj with a 6-km link from Raxaul in Bihar, in 2005.

It is a pity that since then, India hasn’t extended the facility to other Nepalese gates — all located close to Indian railheads. There is no progress either on the proposed 30-km rail link to Bhutan, India’s most trusted partner in the region, despite repeated reminders from Thimphu.

That’s not all. Nepal imports third-country products through the Kolkata port, which lies barely 700 km from Birgunj. And, the freight train takes a minimum of three days to cross this distance due to poor track capacity in North Bihar!

The task at hand is to expand rail connectivity to border gates, invest in dry-port or transhipment facilities across the border, and decongest key rail corridors without worrying about financial returns in the near term. This should also help us reduce rent-seeking on the Indian side which makes road transport unduly costly.

It is no coincidence that India has failed to build a rail over-bridge at the border town of Raxaul or that the 50-km stretch of the National Highway from Raxaul to Motihari is perennially potholed.

Many allege that it is a design to keep trucks in waiting and extort money. The price is paid by customers in importing nations.

The design is most obvious in the over $6-billion India-Bangladesh formal trade. The majority of India’s $5.4 billion export cargo originates in the producing States of north and south India, and travels 1,500-2,000 km by road to Petrapole. Surprisingly, there is not much trace of containerisation in this trade.

The journey is prolonged by more than 20 rounds of checks en route and the last 70-80 km from Kolkata to Petrapole takes up to three days (down from seven days a couple of years ago).

This is partly due to a narrow road — which is difficult to widen (many bids failed in the past) for social and environmental reasons — and mostly due to rampant rent-seeking. This is a major source of political funding in the region.

The Atal Bihari Vajpayee government connected the Petrapole border gates by rail in 2001. But rail cargo didn’t go up. The Railways refuses to carry break bulk, and Bangladeshi importers are not big enough to afford a whole rake. The rolling stock mismatch between the railways on either side added to the complexity.

There is broad-gauge connectivity to Dhaka through Gede-Darshana but it is not suitable for freight movement due to load restrictions on Jamuna Bridge in Bangladesh.

The Sheikh Hasina government is planning an infrastructure revamp in Bangladesh. But given the track record of the nation in project completion and rampant corruption, it will take years before the logistics gap is plugged.

Till then, investing in transhipment facilities right across the border is the only option India has. Inviting private logistics companies to run the facility and make the market for containerised cargo are other logical steps to follow.

Increased participation of reputed private logistics players in serving regional trade is another area India must focus on.

Awarding contracts to state-owned companies may be the right option to ward off allegations of corruption. But it is not necessarily the most efficient one.

For example, India recently granted Nepal access to Vizag seaport for third-country imports as an efficient alternative to Kolkata river port. Both are controlled by the Government. However, the trade is barely benefited as costlier rail freight erodes the advantage of efficient port handling at Vizag.

Why can’t we allow an equally or more efficient privately-run Dhamra Port, located 900-km from Birgunj, to throw in its hat for the Nepalese cargo? If India wanted to please the Nepalese, who had all across been squeezed by the monopoly of Kolkata Port, Rail and CONCOR trio, why wouldn’t it offer access to lower cost alternatives? After all, the nation has a right to access private ports. Moreover, with so many deep-sea ports on the east coast, why can’t India explore the opportunity to extend third-country import services to Bangladesh?

The only Bangladeshi port at Chittagong in the south-east suffers from low draft and congestion. The deep-sea port will take a long time to come. Also, there are road and rail logistics gaps to be mitigated. There is every possibility that ports such as Dhamra or Paradip can serve south-eastern Bangladesh better, provided India is quick to build the rail-connected transhipment facility.

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