Friday, October 14, 2011

Indian Use Of Ashuganj Threatens BD's Export Hopes In 7-Sisters

Bangladeshi companies' competitive advantage in the seven Indian states are under threat after the government allowed Indian traders to use Ashuganj as a transshipment hub for moving merchandise to the land-locked northeast.

Exporters have aired their concern on Saturday, saying the Kolkata-Ashuganj shipping link is detrimental to their business interest as the Indian firms practically pay nothing to move the goods through Bangladesh.

Indian firms have commercially started using the Kolkata-Ashuganj shipping link since last month after the government said the existing clauses of the Indo-Bangla water transit protocol supports the transshipment.

Local exporters said they have long enjoyed a price edge over their Indian rivals in the seven states --- also known as Seven Sisters --- due to Bangladesh's proximity to the area and the fact that major Indian firms are based at least a thousand miles away.

But thanks to the latest move, Indian companies can now grab the initiative as the Ashuganj transshipment facility makes their exports almost cost free," said Jahangir Alam, owner of a leading cement maker.

"In addition, most of the Indian firms have a strong marketing network in the northeast. They can now exploit the advantages at the cost of our fortune," he added.

At present, local manufacturers mainly export cement, plastic products, fish, beverage, juice, biscuits and batteries to the north-east region, home to more than 40 million people.

There are also potentials for exporting mild steel rod, ship scraps, woven bags, bricks and sea fishes to this part of India, which is just 50 kilometres away from Ashuganj and about 100 kiloemtres from Chittagong Port. .

Alam, whose Crown cement is popular in the sparsely populated region, has sought a review of the government decision, saying "Bangladeshi business interest must be protected" in any future Indo-Bangla deal.

"We'll be adversely affected if the shipping link continues in its present form. All we need is a level playing field. If they keep on using Ashuganj without paying any levies, there is no way we can compete with them," he said.

A narrow hilly strip links mainland India with the isolated, landlocked region, which shares less than two per cent of its border with the rest of the country, and the remainder with Bhutan, Bangladesh, Myanmar and China.

Companies based in Kolkata and other parts of West Bengal used to dominate the northeast market although they have to ship the products on road or rail through an insurgency-prone strip.

Indian firms' ascendancy faced the first major challenge early last decade when the increasingly expanding Bangladeshi firms started exporting their goods to the area through a raft of land-ports.

Pran Group, a food and beverage major, leads the Bangladeshi presence in the Seven Sisters, but company executives said the transshipment could deal a big blow to their dominance in the region.

"We can't compete against the Indian firms if they are allowed to use Bangladeshi waterways and the Ashuganj river port without paying any tolls," Md Kamruzzaman, executive director of Pran, told the FE:

The official suggested India should reciprocate the "transshipment goodwill" by removing all its non-tariff and para-tariff barriers on the Bangladeshi exports.

According to the Bangladesh Tariff Commission, Bangladeshi exports to India face at least 15 non-tariff barriers, which make the products costly in the Indian market.

M Rahman chairman of Ratanpur Steel Mills said local firms plan to grab a pie of the lucrative northeastern steel market will remain a distant dream due to the government's latest diplomatic overture to India.

"There are a lot of giant steel manufacturers in Kolkata. Why will the northeastern states import from us when the Kolkata products will be cheaper than Bangladesh due to its availability of raw materials," he said.

Ziaul Hoque Shovon, a director of Shovon Group, said almost every Indian group enjoys an "economy of scale" over its Bangladeshi rival thanks to their population size. India is home to 1.2 billion people.

"Because of their size, these companies can manufacture goods at a faster pace than us. They did not have the shipment advantage. But making Ashuganj a port of call just changed that arithmetic," he said.

Shovon Group wanted to ship several million pieces of woven cement bags to Kolkata-based Calcom cement but the move fell through due to 'security reason'.

Bangladesh and India signed an inland water protocol in 1972 but the deal was seldom used and did not include Ashuganj as a transshipment port.

But Dhaka and New Delhi amended the Protocol in May 2010, which included Ashuganj as the fifth port of call in Bangladesh and Shilghat as a port of call in Indian state of Assam.

The amendment allowed India to carry goods to Ashuganj port by ferry from Kolkata. The goods then take a land-route to India's north-east via Akhaura land-port.

Bangladesh imports goods over US$4.6 billion while export its merchandise worth nearly $600 million. The trade gap is highly tilted in favour of the neighbouring country ever since the independence of Bangladesh. 

BY : Jasim Uddin Haroon.