Monday, April 25, 2011

India's Transit / Corridor : Delhi For Extending Agreement To Seven Years

Bangladesh Government Site New investment proposals have been tabled to the tune of $7 billion to put into effect appropriate transit infrastructures facilities through Bangladesh for the benefits of India.The new investment requirement has been flashed through expert reports at a time when India has advanced a proposal for a seven-year agreement with Bangladesh to formally put the transit through. With the new Indian move the transit issue has again come to the forefront with the Indians seeking new routes and bringing pressure on Bangladesh to put investments to building new infrastructures projects to effectively put the transit services functioning. Informed sources say Dhaka is not opposed to such Indian demands but it is giving priority to work out a ‘reasonable transit fee’ agreement. Latest development shows both sides are moving towards a negotiated settlement to the issue which had created jitters late last year on refusal of the Indian government to pay such fees. The Indian refusal at that time to pay transit fees on commercial goods on board two Indian cargo vessels at the entry point to Bangladesh inland waterways from Kolkata had forced Dhaka to take away the government gazette notification causing embarrassment to decision makers here. The stand off continued until recent communication by the Indian government indicating its readiness to find a negotiated settlement to the issue. India was so long denying payment of transit fees saying in the first place that such obligation was adequately covered under the Inland water protocol signed by both countries in early 1970 s. Moreover, they argued that the World Trade Organization (WTO) protocol does not authorize member states to collect customs duty or transit fees on movement of goods to a third country destinations. Advocating the Indian line of argument Dr. Moshiur Rahman, adviser to Prime Minister Sheikh Hasina on the ministry of finance and her conduit to Delhi on transit issues recently said, demanding transit fees from India will be an ‘ uncivilized act’ and Bangladesh can’t project itself as such. The comment invited sharp public reaction. However the new move to find a negotiated settlement on the issue seems to be a fresh breakthrough and both Bangladesh and India will not only be able to burry public misgivings on the issue, they also will stand to reciprocally benefit from it. Nepal and Bhutan will also find a common framework agreement to resolve transit fee issues in sharing of financial benefits from such negotiated settlement, analyst here say. They held the view that the reference of WTO protocol by India or by Dr Moshiur Rahman to avoid payment of transit fees was based on an evasive proposition and why the Prime Minister’s adviser toed the Indian line was a big question. They say, WTO does not allow realizing transit or customs fees on movement of goods to a third country destination, but in this case India is carrying its goods from one end of its territory to another part using Bangladesh territory as a corridor. In this case, Bangladesh has the right to charge fees for using its facilities. Some analysts referred to Suez Canal Authority in finding a parallel example saying the Egyptian government is legitimately charging fees from the users of the canal and it is not treated as a breach of the WTO protocol. The fact of the matter is that the Suez Canal Authority has made huge infrastructure investment and also running a giant administrative set up to provide services to users and ship owners and if one does not pay for it, how these services could be provided and keep the waterway navigable. Bangladesh Tariff Commission made a similar case in a study prepared by its Chairman Mr Mujibur Rahman and handed over to Finance Minister AMA Muhith and some other senior ministers of the cabinet recently. It said Bangladesh should charge service fees from the users of the transit facilities and additional charges can be levied as cost of polluting environment. On top of it the country should realize fees for using roads, railways, waterways, ports and other facilities to recover the investment and also to keep them running. The study reports said Bangladesh would require an investment of about US$ 7.0 billion or Taka 50 , 000 crore in the next two to three years in roads, rail, waterways and ports to upgrade them to serve the transit requirement for India, Nepal and Bhutan. Besides, the report suggested that for initial two-three years only limited transit could be provided while the infrastructure facilities were being built. Full-fledged handling of cargo will be available from around the fourth year. Keeping this in mind, India has proposed signing a transit agreement for the next seven years, news report said covering the tenure of the next government whoever comes to power in the next election. Study reports further said Bangladesh would earn about $50 million during the first five years after appropriate corridor infrastructure have been put in place for use by India. From a list of sixteen routes recently proposed by India, study report prepared by the Bangladesh government has essentially focused on seven such routes. From the sixth year, Bangladesh may fetch $500 annually to go up to $1 billion when the services will be utilized by all parties to its maximum level, the report pointed out. This report was prepared by regional transportation experts Dr M Rahmatullah, who said it would bring robust benefits. “This steam of benefits, albeit partial would more than justify investment accounts.” The Tariff Commission report however, failed to mention the financial benefits that Bangladesh would derive from the transit/ corridor exercise, although Rahmatullah made a very illuminating forecast of the financial benefits. Finance Minister AMA Muhith receiving the Tariff Commission report on the issue has asked the committee members to recast the report, incorporating the details of projections and especially the financial benefits that may accrue to Bangladesh. Any investment decision to transit infrastructure essentially requires short, medium and long term revenue forecast and the report should have clear projections, analysts here say. Moreover, Bangladesh should think seriously how much it should open up its interior taking into consideration its health, environmental or many social factors, in addition to rate of economic returns and the recovery risks of such investment. Analysts say that there should be a national debate to find a consensus on how much risk the country should take to bear on such issue.