Problems in India Bangladesh Direct Sea Trade

India and Bangladesh have always shared common visions for closer economic integration within the sub continental region and trade between these two countries has grown rapidly since the early 1990s. A free trade agreement (FTA) has been under consideration for some time but has not yet materialized, however trade has progressively liberalized over the years. Still, there are some hurdles remaining before an FTA or anything resembling it can be pressed into the service of bilateral trade. One such issue is the lack of extensive or well-managed sea trade between the two countries.

• For India, trade with Bangladesh is only about 3 percent of its total exports and a minuscule 0.01% of its total imports. For Bangladesh, however, India is the largest single source of its imports (approximately 15% of the total, more than China and Singapore) and accounts for about a tenth of its total trade. This has been colloquially called “Brutal Trade Imbalance” between India and Bangladesh. The total bilateral trade increased to $5.78 billion in 2012-13 from $2.68 billion in 2009-2010.

Consequent to this growth in imports from India, two custom stations one at Petrapole and another at Benapole were opened along the 2,429 mile-long international border. Land custom stations were a natural choice for shipping the bulk cargo because goods that are shipped from the two countries via sea are sent through the ports of Singapore or Colombo, incurring a massive expense for traders and therefore even though the two countries share a massive common oceans, they could not be put well to trade use because it is more economical to trade over land.

Petrapole-Benapole
Petrapole-Benapole border checkpoint between India and Bangladesh is the largest land customs station in Asia. Petrapole is on Indian side and Benapole is on Bangladesh side. Majority of import items from India to Banlgadesh come through Petrapole-Benapole.

These land customs stations handle almost more than half of the entire bilateral trade. Therefore, growth in trade has caused massive congestion on these two land custom stations slowing down trade and causing logjam for the traders. Even though land customs stations have been made operational seven days a week, they suffer massive traffic congestion, poor road conditions and lack of authorized parking facilities.

As a result, efforts are being made to open up sea-routes for trade so that the choking land trade routes could be relieved. However, it is an uphill task to make sea routes feasible given the geographic location of both countries. Significant problems regarding sea-trade for the two countries remain. Problems range from the fact that there is not enough cargo between Chittagong and Kolkata making it unprofitable for the mainline vessel to carry it to very high charges for Paradip port necessitating the cargo to run through the Colombo port, most trade experts are still advising the Govt. to improve land trade routes.

Yet, after several rounds of talks recently, it was proposed India and Bangladesh would begin the direct-sea-route initiative with smaller vessels. It is being projected as more cost-effective for Bangladeshi traders but since there are not enough shipments between Chittagong and Kolkata, so it is not profitable for a big vessel to ply. The only way sea trade can be made profitable between the two countries is if trade volume along the ocean is increased in proportion to the trade overflow at the land customs checkpoints, however these are early days in negotiations and a lot depends on the final negotiations between two sides.