India and Bangladesh signed the Standard Operating Procedure (SOP) in New Delhi, to operationalize the “Agreement on Coastal Shipping” signed between the two countries in June, 2015.
Once it is operational, the Coastal Shipping Agreement will enable a huge saving in logistic costs of EXIM transport between the two countries.
The SOP has been framed as per the terms and conditions of the Agreement on Coastal Shipping and both India and Bangladesh have agreed to its provisions.
The Standard Operating Procedure will pave the way to promote coastal shipping between India and Bangladesh and would enhance bilateral trade between the two countries by bringing down the cost of transportation of EXIM cargo.
The SOP contains provisions which stipulate that India and Bangladesh shall render same treatment to the other country’s vessels as it would have done to its national vessels used in international sea transportation.
The two sides have also agreed upon the use of vessels of River Sea Vessel (RSV) category for Indo-Bangladesh coastal shipping.
India and Bangladesh have a Bilateral Protocol on Inland Water Transit and Trade (PIWTT) for operation of inland vessels on the river protocol routes between river ports of Haldia, Kolkata, Pandu, Karimganj and Silghat in India and Narayanganj, Khulna, Mongla, Sirajganj and Ashuganj in Bangladesh.
This protocol between the two countries has facilitated the movement of EXIM trade as well as cargo bound for the North Eastern states of India.
Out of a total of 1.8 million tonnes of cargo moved on Indo-Bangladesh protocol route during 2013-14, about 98% is fly ash which is transported from Kolkata to various river ports in Bangladesh.
During the current financial year, India for the first time is using the Indo-Bangladesh river protocol to transport food grains via Ashuganj to Tripura. However, the quantum of cargo has not picked up because of low draft in the upper reaches of Bangladesh rivers and also because of certain non-trade barriers.
Rapid growth in bilateral trade between India and Bangladesh has led to congestion on the road at Indo-Bangladesh border and at the Land Custom Stations/integrated Check Posts.
The traffic congestion at “Petrapole” and “Benapole” on the Bangladesh side has emerged as one of the biggest impediments to the movement of EXIM cargo. Due to such congestion, the exporters/importers on both sides have been facing undue increase in the transportation cost.
The present connectivity through sea route with Bangladesh is through ports of Colombo and Singapore. The long sea route adds significantly to the transportation costs of EXIM trade. There is no significant cargo movement between sea ports of Bangladesh and India as it is not profitable for the big vessels to operate between these sea ports.
Under such circumstances there is a need for smaller ships to provide direct connectivity of eastern sea ports of India with Chittagong and other ports in Bangladesh. This, besides improving the connectivity will also provide competitive freight rates.
The biggest impediment in commencing coastal shipping between India and Bangladesh was the non-availability of River Sea Vessel class of vessels in Bangladesh.
Bangladesh has foreign going vessels of higher technical and manning standards which are not cost effective for coastal voyage between the two countries.
The matter was discussed with Bangladesh side during the Secretary (Shipping) level discussion in Dhaka in July, 2012 and again in Delhi in February, 2013.
Several Joint Technical Committee (JTCs) meetings have also taken place between India and Bangladesh on the issue of coastal shipping.
The previous engagements finally culminated in a broad understanding on coastal shipping on 24th June, 2014 in Dhaka. Thereafter, an Agreement on Coastal Shipping between Bangladesh and India was finalized and signed on 6th June, 2015 during the visit of Prime Minster of India to Bangladesh.
Advantages of the Agreement
The opening of coastal shipping between India and Bangladesh would enable the movement of cargo to the North East through coastal shipping upto Chittagong and thereafter by road/inland waterways.
The deep draft ports on the eastern coast of India can be ‘hub ports’ for the onward transportation of cargo to Bangladesh via the coastal mode through RSV category of vessels.
The Indian ports will attract enhanced cargo and also the overall transportation cost to Bangladesh will get reduced.
The Indian ports serving as trans- shipment ports for Bangladesh cargo will derive benefits by way of enhanced throughput as a result of Indo-Bangladesh coastal trade.