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.
What is the reason?
- 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.
- 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.
Time to revisit the connectivity agenda:
It is, therefore, time to revisit 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.
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.
Rail and transshipment
- India should give a systemic push for conversion of non-containerized road cargo to containerised rail cargo for regional trade.
- 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.
- 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.
- 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.
- Privately-run Dhamra Port, located 900-km from Birgunj, can be allowed to throw in its hat for the Nepalese cargo.
- With so many deep-sea ports on the east coast, India can 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.