India and Bangladesh on 15 November 2015 signed the Standard Operating Procedure (SOP) in New Delhi, to operationalise the “Agreement on Coastal Shipping”. The two nations inked the agreement on 6 June 2015 during the visit of Prime Minster Narendra Modi to Bangladesh.
The SOP 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.
Agreement on Coasting Shipping: Advantages
• The opening of coastal shipping between India and Bangladesh would enable the movement of cargo to the North East through coastal shipping up to 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.
Why agreement was needed?
Low draft in the upper reaches of Bangladesh Rivers: India and Bangladesh have a bilateral Protocol on Inland Water Transit and Trade (PIWTT) for operation of inland vessels. As per this, inland vessels transit between river ports of Haldia, Kolkata, Pandu, Karimganj and Silghat in India and Narayanganj, Khulna, Mongla, Sirajganj and Ashuganj in Bangladesh. 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.
Traffic Congestion at Indo-Bangladesh border: Due to rapid growth in bilateral trade, the Land Custom Stations/Integrated Check Posts, especially at Petrapole and Benapole on the Bangladesh side has witnessed traffic congestion. This congestion emerged as one of the biggest barrier to the movement of EXIM cargo leading to undue rise in the transportation cost.
Huge Transportation Cost through Sea Route: Due to present bilateral trade between two countries taking place through sea routes of Colombo and Singapore, the transportation cost is too huge. This SOP will help in improving the connectivity and provide competitive freight rates.
Non-availability of River Sea Vessel in Bangladesh: It was the biggest impediment in commencing coastal shipping between the two nations. This is because Bangladesh dependency upon foreign going vessels has not been cost-effective for coastal voyage between the two countries due to higher technical and manning standards.
When: 15 November 2015