ADB is exploring ways to improve rail freight link between Bangladesh and India

The lender has already initiated a study to identify infrastructure gaps, propose technology-based solutions for freight and container transportation, and recommend regulatory reforms to facilitate freight train traffic between the two countries.

Additionally, as part of the South Asia Sub-Regional Economic Cooperation Program, the study will explore the potential for transit cargo to and from Nepal and Bhutan, benefiting all parties involved.

ADB’s latest study aimed to quantify the benefits of rail freight and container transport between India and Bangladesh.

3 categories of rail transport

An ADB mission previously met with officials from Bangladesh Railway and the National Board of Revenue on May 23-25 ​​and discussed the prospects for three categories of rail travel between the two neighbors: bilateral trade, Bangladeshi and Indian traders carrying the Rail network and each other’s ports use land and Indian domestic freight traffic between the North East and the rest of India via Bangladesh.

Dhaka proposes the inclusion of Nepal and Bhutan

In response to the proposals, Bangladesh officials, while emphasizing the importance of linking up with north-eastern India, have proposed including Nepal and Bhutan in such a rail freight network. The study team was recommended to draft a proposal for a rail freight transit fee that would be justified and acceptable to stakeholders on both sides of the border.

The outcome of the study will be a clear “go-no-go” analysis of the concept of rail freight transport and container rail transport and determine their feasibility for different products, different origins and destinations and create a comprehensive list of supporting infrastructure projects and regulatory intervention , which is required, says an ADB document.

During the meeting, Bangladesh Railway proposed that the ADB study should provide recommendations for the pipeline of projects that can increase transport and logistics efficiency in India-Bangladesh trade, with a particular focus on containerized rail transport.

The opening of the new railway line across the Padma Bridge also needs to be addressed in the study, the meeting, which was attended by high-ranking railway officials including the director-general, said.

The study aims to develop a roadmap beneficial to Bangladesh, Bhutan, India and Nepal, officials said, emphasizing the importance of restoring old links and eliminating missing links in India to improve regional transit connectivity.

SM Salimullah Bahar, Bangladesh Railway’s Chief Planning Officer, said they had suggested to the ADB that additional subjects be included in the study.

He expressed optimism about securing ADB funding for the rail-based freight project.

ADB will likely fund

An Economic Relations Division (ERD) official, who asked not to be named, said that the ADB is not only conducting the study on the rail freight link, but will also fund the necessary infrastructure after the study. “The ADB promotes regional networking and regional trade. “There is hope that the agency will invest in expanding trade via the railroad,” the official said.

“The new study will determine what infrastructure will be required for the rollout of cross-border rail freight and what the costs will be. Based on the study, the ADB will decide on its lending program,” the ERD official added.

According to the ADB document, the final report of the mid-term survey is to be presented in September of this year.

The study also aims to assess the infrastructure status at interchange points such as Benapole, Darshana, Rohanpur, Birol and Burimari and to identify gaps in the existing railway network. Proposed recommendations include upgrading ring routes, sidings, container handling and storage infrastructure, and freight sheds at key train stations. The study will also examine other commodities that Bangladesh can export to India, Nepal and Bhutan.

The ADB team was convinced that the Electronic Cargo Tracking System (ECTS) used in container transport between India and Nepal could well be reproduced in such an agreement between Bangladesh and India.

Analysts and companies said that the India-Bangladesh rail freight initiative is promising for both countries. With the existing railway infrastructure and the ongoing efforts of the ADB, this mode of transport has the potential to open up new opportunities and foster stronger economic ties between the two nations.

dr Mostafa Abid Khan, a former member of the Customs Commission, said that rail freight-based trade relations with India have long been discussed. Although a small part of the trade in goods is now carried out by rail freight, there is room for expansion.

“As trade via rail freight increases, costs will decrease at both the import and consumer levels. This will shorten the export-import time, benefiting both countries,” he said.

But which routes would be suitable for rail freight would have to be determined through studies and appropriate customs offices developed, said the trade policy analyst.

If regular rail freight is introduced, it will expand opportunities for transit through Bangladesh in the future, he added.

Railway officials briefed the ADB mission on the interest of some exporters of clothing and other commodities in using Indian ports (Mumbai Nava Sheva and others) for export to third countries to take advantage of the non-transhipment direct connection that India offers to Bangladesh .

NBR grants approval for trains to India

Until November 2022, the rail trade between India and Bangladesh heavily favored India as transport was one-way. However, on November 4 last year, the National Board of Revenue gave permission for trains carrying goods from Benapole from Bangladesh to return to India, marking a clear shift in trade dynamics.

Mohammad Hatem, Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), believes that full operation of the rail freight trade will benefit both Bangladesh and India as it spares traders the hassle of land port trade.

“Meanwhile, a small amount of products are shipped from India by rail, which is very negligible compared to total imports from India. But there are hardly any exports from Bangladesh that are transported by rail,” said the industry leader in the clothing industry, emphasizing that there should be regulations for export-import by rail in the interests of the economy.

Trade links based on rail freight can be introduced primarily via four routes – Benapole, Darshana, Hili and Akhaura, Hatem said.

Unilever wants to import raw materials by rail

Unilever Bangladesh, which gets around 40% of its raw materials from India, had been trying for over two years to persuade both Bangladesh and India to allow imports of bulk raw materials by train.

“Why doesn’t Bangladesh use railways to transport raw materials in bulk? It can clog the streets,” said Kedar Lele, then CEO of Unilever Bangladesh, in a July 2020 interview with The Business Standard.

Finally, it happened two weeks ago in July, when a freight train arrived from India, where Unilever Bangladesh was hauling nearly 1,200 tons of much-needed raw materials. Unilever imported raw materials in 22 bogies and took 60 trucks off the road.

To support the RMG and textile business in Bangladesh, 468 tons of cotton yarn were transported to Benapole by rail for the first time in the same year. According to the Indian High Commission in Dhaka, bilateral rail trade has seen unprecedented growth of 130% year-on-year.

No transit fee

dr Mohammad Yunus, senior researcher at the Bangladesh Institute of Development Studies (BIDS), also believes rail freight will reduce the cost of doing business, which will benefit traders in both countries.

Asked about the railroad’s proposal to levy transit charges on rail freight, the economist said that under World Trade Organization (WTO) rules, transit charges could not be applied. Instead, long-term marginal costs would be levied to compensate for any damage sustained during the movement of Indian freight trains through Bangladesh’s territory, he said.

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