BANGLADESH EXPLORING TRANSSHIPMENT THROUGH INDIAN PORTS

Off late, Bangladesh trade had been struggling with increased lead time and cost while moving cargo through conventional routes. The country is now exploring smarter options, which will possibly reroute its cargo through Indian east coast ports, rather than moving through conventional transshipment hubs

Connectivity and logistics cost has always been a grey area for South East Asian countries as it is far below the global standards. Home to some of the fastest growing economies and a huge consumer market, countries in this region have waken-up to this stark reality and are realigning their trade routes. In the past few years India has made much focused efforts to improve trade and connectivity with immediate neighbours including Nepal, Bangladesh, Myanmar and Sri Lanka, to many of whom India is also the largest trading partner. Earlier this year, the Central Board of Indirect Taxes and Customs (CBIC) permitted Indian-flag vessels to make calls en-route at Sri Lankan and Bangladeshi ports during their export-import (EXIM) and domestic services.

The move will help fleet owners make optimum use of their space, cut transportation costs and boost modal shift of cargo from road and rail to sea.

India is one of the largest trading partners to Bangladesh and movement of goods between both the countries takes place through both land and sea routes. Improving connectivity between the countries in 2016, India’s Prime Minister Narendra Modi revived trade agreements signed by former Prime Minister Indira Gandhi in 1974 and a coastal shipping agreement was reached, following which the Indian container vessel MV Harbour-1, owned by Neepa Paribahan moved a debut cotton cargo from Krishnapatnam Port through a direct route to Bangladesh. Previously, such shipments were routed via Colombo, Sri Lanka, or Singapore.

Cotton logistics

Bangladesh imports a lot of cotton from India, but in the absence of a direct shipping agreement between the countries the commodity was moved over the Benapole/Petrapole land border which is more time consuming and costly. It takes 20 days for a shipment to reach Bangladesh via land route, while it takes just 7 days through sea. About 17 per cent of the cotton exported to Bangladesh is from Andhra Pradesh and Telangana region. Shippers can save approximately R30,000 if the cargo is moved through sea rather than road.

Cotton imports to Bangladesh from central India – Nagpur area moves by rail to Nhava Sheva Port on the west coast of India and is then transhipped via Colombo resulting in longer transit time. Instead, the cargo can be moved from Nagpur to east coast ports via rail and then loaded on feeder vessels connecting to Chittagong Port or Pangaon Port.

In addition, Bangladesh imports many other manufactured goods from other ports in India such as Nhava Sheva, Mundra, Cochin, Tuticorin and Chennai. All these ports are connected to Chittagong Port through transhipment via Colombo or Singapore, leading to long transit and higher cost for Bangladesh importers.

“India and Bangladesh have signed several agreements for enhancing inland and coastal waterways connectivity between the two countries for trade and cruise movements. The agreements will facilitate easier movement of good sand passengers between the two countries, giving an impetus to trade, tourism, and export-import cargo by  reducing logistic costs and time.”

In October 2018, several milestone agreements for enhancing inland and coastal waterways connectivity were signed between the countries, which also included an agreement to use Chattogram and Mongla Ports in Bangladesh for movement of goods to and from India. An addendum to ‘Protocol on Inland Water Transit and Trade’ (PIWTT) between India and Bangladesh was signed for inclusion of Dhubri in India and Pangaon in Bangladesh as new ports of call. However, there was not much progress in trade movement through the coastal route, primarily due to the imbalance in trade. The trade between India and Bangladesh is heavily skewed in favour of India: India exports a lot to Bangladesh but doesn’t import much in return and this lack of return cargo was a major deterrent factor for shipping lines to operate on the route. Elaborating on the trade imbalance Ali Ahmed, CEO, BFTI said, “Bangladesh is connected with Tripura, West Bengal and not with the major trade areas of India. These states of India don’t hold much potential for exports or imports and the southern and western states are far away. To bring them closer for trade purpose governments in both the countries should focus on improving logistics infrastructure. The government should sensitise the trade about legal facilities, trade positions, potential for improving imports/exports and people-to-people contact. As per the statistics, the largest tourists coming to India is from Bangladesh, but Bangladesh has not many tourists visiting from India. Such scenarios needs to be balanced.”

To set right this imbalance in trade container shipping lines and port operators in India are seeking a change in the bilateral coastal shipping agreement signed between India and Bangladesh to permit transshipment of Bangladesh cargo from Indian ports. Even the shippers in Bangladesh have given a clarion call for amendment to some clauses in the coastal shipping agreement to allow transhipment of third country cargo through Indian ports.

Currently the India-Bangladesh coastal shipping agreement covers only origin-destination cargo between the two neighbouring countries. Since the local vessels cannot carry a third country’s goods, the international main line operators (MLOs) – like Maersk, Hyundai and Hapag- Lloyd – that carry goods from the US, the EU and other countries do not unload the Bangladesh-bound goods at the Indian ports. Rather, the MLOs take the Bangladesh bound goods to other transhipment hub ports like Singapore, Colombo or Kelang, where they are stacked in the terminals for at least a month before they are carried to Bangladesh in small vessels. It takes at least a week for the goods to arrive at the Chittagong or Mongla Ports from abroad. So in total, it takes about 45 days to carry those goods to Bangladesh, said

Shaikh Mahfuz Hamid, Managing Director of Gulf Orient Seaways. “If our local container ships are allowed to carry third country goods from three Indian ports of Visakhapatnam, Krishnapatnam and Haldia, we can save at least 45 days in each consignment,” said Hamid. Not only that, the shippers could have earned $12.5 million as fares and saved $37.5 million a year, as it takes only three days to carry the goods from the three ports of India to Chittagong or the Pangaon Port in Dhaka, he said.

Elaborating on the need for opening up Indian ports for transhipment of third country cargo destined to Bangladesh, SK Mahfuz Hamid, Vice President, Bangladesh Container Ship Owners Association & Chairman, Coastal Ship Owners Association of Bangladesh said, “Most of our import and export cargo are going to UK and USA and also some imports are coming from China. All these cargo are containerised. Main hubs for containerised cargo  now adays are Singapore and Port Klang. A vessel coming from US, UK and China is going straight to Port Klang or Singapore, because we don’t have direct vessel calls at Chittagong Port, so another feeder vessel will bring these containers to Chittagong Port, from where the cargo is brought to Dhaka because most of our industry especially garments are in Greater Dhaka. This route for cargo movement is very time consuming. Chittagong Port is handling huge containers, but during festival times and due to some issues there is congestion. So even the feeder vessels are made to wait at the outer anchorage. The lead time goes up and the shipper has to pay the congestion charges. Considering all these our Prime Minister decided that we will open ICDs near Dhaka so that the Dhaka bound cargo will directly come from Chittagong to Pangaon ICDs. At the same time she also asked the ship owners to immediately build or procure vessels for container movement. She also gave us direction that the shipping ministry will go for a change in coastal shipping protocol with India to include transhipment of third country cargo. From India huge cargo is coming such as raw cotton, garment accessories and denim. These cargo are going from Mumbai to Singapore then coming to Chittagong and finally reaching Dhaka. Under this protocol our vessels can bring in containers from Chennai or Krishnapatnam Port, Vizag Port and Haldia. When we started these operations we came to know we have huge containers coming by shipping lines that drop Indian containers at Krishnapatnam and carry Bangladesh containers again to Singapore. So instead of going back to Singapore for coming to Chittagong Port why we cannot take this advantage of routing our third country imports directly via Indian ports?”

“Unfortunately, when the coastal shipping agreement was signed Indian Shipping Ministry had mentioned that this will involve only Indian and Bangladesh cargo movement and will not include third country cargoes. That’s the reason, last October again when the secretaries from both sides met in Delhi, Govt of India raised this issue that it was a mistake and third country cargo movement should be allowed on this route because Bangladesh will benefit and the container owners will get more cargo. It will enable cargo to go directly to Pangaon Port instead of Chittagong Port. We have new port being developed at Payra. Mongla Port is also being developed, but currently it has draft issues, so the feeder vessels are not able to connect. But in this area a lot of cargo is available so if the coastal cargo movement can be started we can feed Pangaon, Payra and Mongla Ports. The importers and exporters will benefit by saving on freight cost and time.”

Moving forward, Chennai Customs had issued a notice stating that coastal vessels will now get Import General Manifest (IGM)/ Export General Manifest (EGM) rotation number for transshipment containers. Chennai Customs has also given green signal to sea-air transshipment of cargo from Chennai to West Asia based on a proposal from Orient Shipping Line. Besides, the Chennai Customs is evaluating the possibility of allowing transloading (re-stuffing into new containers) of Bangladesh garment cargo for an exporter who wants to transship the cargo to UK via Chennai instead of Singapore.

Concor, India’s largest container train operator has recently started its coastal service linking Deendayal Port Trust in Kandla with V O Chidambaranar Port Trust in Tuticorin with stops at New Mangalore Port Trust and Cochin Port Trust. The service will soon be expanded to east coast and will connect Bangladesh as well. Bangladesh is all set to tranship its third country imports and exports via Indian ports rather than routing them via traditional transhipment hubs like Singapore or Port Klang which involves a lot of time delay. Since most of the exports from Bangladesh are ready-made garments, these are time sensitive cargo and should reach the market within the stipulated time, else the consignment stands a chance of rejection. A team of senior executives including members from BFTI recently visited Indian east coast ports to examine the infrastructure and connectivity for transhipment of third country cargo.

“India has agreed for moving third country exim cargo on the coastal route. Bangladesh government is examining how practical it is to move third country cargo along with exim cargo. We are examining which ports will be best suited for west bound cargo and for connecting to Middle East.”

• Why was Bangladesh Foreign Trade Institute (BFTI) established, what is its mandate and why is this particular study of east coast ports of India being done?

BFTI is a public-private partnership wherein the public and private sector are equally involved, but it is not for profit organisation registered with the joint stock companies. Our mandate is to undertake research works on national economy – trade, commerce and economy. We also train people for trading from both public and private sector. We are involved in policy advocacy – advising the government on certain trade issues or giving replies to government queries on policies to be adopted or questions to be answered, especially those related to trade.

Q In your observation what is the intra-regional trade between India and Bangladesh? Is there scope for more growth in trade? What are the challenges facing the growth in trade between the two countries?

The intra-regional trade in South East Asia constitutes only 5 per cent of the total trade of the region, which means, we trade more with outsiders than with the regional countries. There are historical barriers that are hindering the growth in trade. Also the change in governments also affects the trade. India is the largest trade partner for Bangladesh, economically and in all aspects. Bangladesh also has a special trading arrangement with Nepal and Bhutan since the British era for free movement of trade, but it is not fully explored. The SAPTA offers concessions accessible to all countries and then came SAFTA wherein there has been some progress in terms of duty cuts. The idea of these agreements was free trade agreement in south Asia among these few countries, but unfortunately there seems to be no improvement at all.

India and Bangladesh are very interested to grow trade, but the balance of trade and balance of payment between the countries is heavily skewed against Bangladesh, so India needs to improve its imports from Bangladesh. After a long persuasion India has agreed to implement partially the mandates given by WTO that developing countries should import duty free from Least Developed Countries (LDCs). Earlier India did not agree to this, but now it is allowing certain imports duty free.

Q What is the governments stand on improving infrastructure within the country, especially relating to facilitating the trade and improving the foreign trade?

The current government in Bangladesh is very serious about improving infrastructure and along with it goes connectivity through rail, road and river. IWTTP – Inland Water Trade and Transport Protocol has been renewed and the new protocol which is being extended not just between India and Bangladesh, but also to Nepal and Bhutan. The coastal Trade Agreement is also agreed to between India and Bangladesh for enhancing trade and rail connectivity has been re-established. With this growing connectivity trade should also increase.

Q What is the scope of this study on east coast ports of India?

The coastal trade agreement that we are now working upon is a government to government agreement. During signing of this agreement Bangladesh insisted for including third country import and export. At that time India had refused, so it was signed as it is today, limited to flag vessels of both countries and goods between the two countries. it has not been successful because it has promoted only one way trade. Now India has agreed for moving third country import and export cargo on the coastal route. Bangladesh government has decided to examine individually to see how far it is practical to move third country cargo along with exim cargo. We are studying the infrastructure and efficiency of some ports on east coast such as Vizag, Krishnapatnam, Kolkata and Haldia, to see how it can be done. The study will assess the readiness of these ports in many aspects, for instance, which of these ports will be best suited for moving west bound cargo such as garments to the US, having a Middle East connection and Eastern side connection. We are also checking the probability of calling mother vessels to the ports. The focus is also on connecting Pangaon, Chittagong or Mongla to any of the four ports on the east coast using small feeder vessels. How beneficial this connectivity will be for shippers in Bangladesh as compared to connecting to Colombo or Singapore.

Q On the face of it how logical is it that if third country cargo is allowed on these routes the trade momentum will pick up?

The drivers for this trade are the shippers, buyers and the terms of service. Until the service starts they cannot decide how profitable it is, but it has to start somewhere, so it is a chicken and the egg scenario. This is where we recommend from where to start and then observe for about six months or a year. We need to put the service in place and then we have to make efforts from the port and ship owners side to instigate them.

Q Is it only the return cargo problem that restrains the success of the protocol route?

Yes, it is the imbalance in export and import cargo that is holding the success of the protocol route. Even some imports are using the land route even if it is more expensive.

“On the coastal route, if we are able to carry third country cargo the trade will definitely come forward to benefit from it. Exporters and importers are convinced and they will be very happy to save on freight and time. Timely movement of cargo is more critical than cost.”

Q What is the thinking of the government of Bangladesh and exporters and importers of Bangladesh for transhipment of third country cargo via Indian ports to Bangladesh?

Exporters and importers are convinced and they will be very happy to save on freight and time. We as businessmen know for the betterment of trade we have opened the coastal route with India, so there is no need to touch Port Klang, Colombo or Singapore. If one more window is opened by getting access to Indian east coast ports, then obviously we have more options. If the shippers see the benefits they will come and use the route, we are not going to force anybody.

Q We have tried one service from your company earlier (about three years back), even though the intentions were noble, but the service failed to attract cargo? Why did it fail? What is the situation now and how can we make it successful?

Actually, we have not failed. We started in 2016 from Chittagong Port to Krishnapatnam Port, now we are doing Chittagong Port to Paradip. Every month 2-3 sailings are coming to Paradip and Kolkata from Chittagong Port and Pangaon Port. We can bring cotton containers from Krishnapatnam Port to Chittagong Port or Pangaon Terminal but on the return leg we are not getting cargo other than empties. Under this change in transhipment agreement we can bring our containers to Krishnapatnam Port and then move cotton and other cargo to Pangaon Terminal, Mongla Port or Chittagong Port.

Q Do you have return cargo problem in Kolkata and Paradip Ports as well?

We have return cargo problem at Kolkata and Paradip Ports as well. We are carrying some empties from Chittagong Port. In shipping if I carry one way cargo then my cost will go up and I will have to charge my fright more, so my main intention is if I get both way cargo then I can easily reduce the freight. Now a days we have a lot of container vessels coming to Bangladesh on weekly basis. On coastal cargo movement if we are able to get permission to carry third country cargo the trade will definitely come forward to benefit from it. The trade will observe if they are able to manage the lead time by using this service, because timely movement of cargo is more critical than cost. The feeder vessel takes 4-5 days for connecting from Chittagong Port to Singapore. Coming from Dhaka to Chittagong Port takes another 2 days. The containers go to the off-dock and again it takes 4-5 days to reach Chittagong Port and to reach Singapore from Chittagong Port it takes another 4-5 days, while to reach Port Klang it takes 6 days, so it is this time consumed during transit that matters to the trade.

Q How do you plan to convince the trade that the service is time and cost effective?

When we start we will talk to the customers and convince them by showing the difference in freight and time and if you find it profitable you are welcome to use the service. I believe, once we will start, gradually it will happen.

Q How do the container shipping lines feel about transshipment through east coast ports of India?

The container shipping lines are very optimistic about the new service proposal. We have 12 coastal container vessels operational currently and the number is increasing day-by-day. We are waiting for the change in SOP, and when this service starts we are sure more vessels will start operating. More investments will come into this sector. We will have to buy bigger ships (about 400-600 teus to connect to Colombo. We are not saying that we want to stop sending vessels to Port Klang or Singapore, but transhipment through Indian ports will open a new window for us.

Majority of the shippers are located in greater Dhaka, so if we are able to use waterways, it will decongest roads specially from Dhaka to Chittagong port.

Q You have visited most of the Indian ports on the east coast, what is your impression?

We are very impressed by the operations of Krishnapatnam Port, they are very smart and calculative in their operations. Believe they will become the transhipment hub for Bangladesh cargo. Chennai Port has some limitations and is a bit far away for us. Kolkata Port and Vizag Port also offer good services for moving Bangladesh cargo.