Transit fee too low

The fee agreed by Bangladesh for allowing multimodal transit and transshipment facilities to India is low when compared to the benefits the neighbouring country stands to gain from the services, analysts said.

Locked in June last year by the shipping secretaries of the two countries, the fee does not reflect the recommendations of the government-formed core committee and other international practices.

For instance, issues like congestion and road user and environmental degradation were not considered when fixing the transit fee for India.

The core committee led by Mujibur Rahman, then chairman of the Bangladesh Tariff Commission, proposed Tk 1,058 per tonne as transit fee.

But the government agreed upon a much lower tariff of only Tk 192 a tonne, of which the customs department will get Tk 130, roads and highways Tk 52 and inland water transport authority Tk 10.

“The committee proposed the fee inspired by an idea of farsightedness and investments required to develop infrastructure. But we have set the fee based on the present services Bangladesh can render to India,” Ashoke Madhab Roy, secretary of the shipping ministry, told The Daily Star.

For example, the secretary said Bangladesh is yet to make a shed or install a scanner at the Ashuganj port. Once these things are in place, the transit and transshipment fee will rise, he said.

Roy also claimed that the fee has been set based on the suggestions given by stakeholders, such as the National Board of Revenue, Roads and Highways Department and the Bangladesh Inland Water Transport Authority (BIWTA).

The committee made the report for the Bangladesh government, which India had opposed as they thought the recommended fee was too high for them.

On the benefit-sharing issue, the secretary said he did not know about it. “There is a technical committee that will decide on the issue.”

The Daily Star also spoke with a senior customs official of the NBR to get a better understanding of the rationale behind the agreed transit fee.

“Customs has fixed the price as a rule of thumb. It is not based on exact analysis and measurement,” said the official requesting not to be named.

Amid this situation, the shipment of the first consignment of transit cargo from Kolkata to Agartala via Ashuganj is being executed at a charge of Tk 192 per tonne.

The consignment, which comprises of 1,000 tonnes of corrugated iron sheets, is likely to reach Ashuganj by today.

An Indo-Bangladesh Protocol on Inland Water Transit and Trade exists between India and Bangladesh since 1972.

Under the deal, inland vessels of one country can transit through the specified routes of the other country.

The deal, which is renewed from time to time, was amended several times to include new routes and ports.

In 2010, India included Ashuganj as a port of call for transhipment through road networks. More importantly for India, this allowed it to operate transit without having to go for a separate road transit protocol.

Before this new arrangement kicked in, India was allowed to transship goods on waterways and for that, it gave Bangladesh Tk 10 crore annually, with no additional transshipment or transit fee.

Now that the facility has been extended to roads and railway, the question of fee has come to the surface.

Accordingly, the committee submitted its comprehensive report to the government in April 2011. It proposed Tk 1,058 per tonne as transshipment and transit fee.

The committee recommended that the country will have to improve services, administration, human resources, customs, infrastructure, ports, railways, waterways and roads to provide the services to India.

“We analysed the issue comprehensively, from investment to traffic movement and administrative cost and accordingly proposed the fee,” said Mustafizur Rahman, executive director of the Centre for Policy Dialogue and a member of the core committee.

The sharing of benefits that India will get by using Bangladesh territories was an important consideration in setting the fee, he said, adding that India will be able to save time and costs for fuel and transportation to ferry the goods from mainland India to its north-eastern parts.

The only land route access to these states from within India is through Assam and West Bengal by Siliguri or the Chicken's Neck corridor. The lengthy route from Assam passes through hilly terrain with steep and narrow roads.               

India would be able to save $210 per truck, thanks to the shortening of distance by 600 km, according to the core committee report.

After giving transit fee, bridge tolls and other charges, the potential gain for India would be at least $100, equivalent to nearly Tk 8,000.

The distance between Kolkata and Agartala is about 1,650 km through India, which comes down to 515 km if transportation is through Bangladesh.

So, India is saving over a thousand kilometre distance through Bangladesh and over $200 per trip.

Similarly, the road distance between Kolkata to Aizawl, the capital of Mizoram, is 734 km, which is halved when using the Bangladesh territory.

“I don't know on what basis the fee has been fixed. Who will invest to develop the infrastructure and dredging of rivers?” said Rahman.

If India invests to develop infrastructure, the fee would be different and if Bangladesh does, it will be different too, he said.

Like other countries, Bangladesh should also incorporate congestion, road usage and environmental degradation charges into the fee, he said.

Documents show the core committee had proposed road usage charge of Tk 318.3 for every 100km for heavy trucks and Tk 215.9 for buses. But Bangladesh settled on only Tk 52 for use of its roads.

“Tk 10 per tonne for BIWTA sounds very cheap,” said Ahsan H Mansur, executive director of Policy Research Institute.

He, however, suggested Bangladesh to review the charges it has been agreed on after 2 to 3 years based on experience.

Bangladesh has a chance of earning huge foreign currency by giving services to Indian transit cargos, said Sk Mahfuz Hamid, managing director of Gulf Orient Seaways that transports goods from India on river routes.

“If India transits one-third of the goods it carries through the chicken neck, Bangladesh will be able to earn over Tk 900 crore per year.”

Presently, India sends 15 lakh tonnes of goods through its chicken neck corridor to its northeastern states.

“We are talking about Tk 192 transit fees only. But there are many more charges, which India has to pay to avail the facility,” said Hamid, adding that there will be berthing and unberthing charges, unloading charge, port occupancy charge, loading and unloading of container charges and so on.

He, however, said private players, particularly vessel owners, will earn a lion's share of the Tk 900 crore estimated income per year from transit and transshipment to India.