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Providing transit and transhipment facilities to India, though once considered a contentious issue, is a reality now. More than a decade back, there was a lot of debate and discussion on the subject. Though the government of that time was convinced of the benefits that the arrangement could bring for the country, many were sceptical about it. Some experts, on the other hand, viewed that a cautious approach about the issue would be advisable.
New Delhi persistently pushed for transit and transhipment using the land and water of Bangladesh to enhance and smoothen connectivity between the country's mainland and its northeastern region. To justify its case, the Indian side also portrayed a rosy picture about the benefit that Bangladesh would be able to gain in the long term. Getting the transit or transhipment facility from Bangladesh is undoubtedly a significant strategic gain for India regarding trade and geopolitics. Of particular importance here is its access to the seaports. It may be noted here that transit is basically about one country allowing its territory to be used by a second country to convey the latter's cargoes to a third country. As a member of the World Trade Organization (WTO), Bangladesh is thus obliged to give a transit facility to India to move to a third country. Paragraph 5 of Article V of GATT says: "With respect to all charges, regulations and formalities in connection with transit, each contracting party shall accord to traffic in transit to or from the territory of any other contracting party treatment no less favourable than the treatment accorded to traffic in transit to or from any third country."
So, Bangladesh or any other country is not legally bound to allow India or another country the transit facility to go to other part of the same country. Instead, it is binding for India to give transit to Bangladesh to go to Nepal or Bhutan as it is the third country transit. There is, however, no barrier to providing bilateral transit if the two countries mutually agree on the terms and conditions.
Nepal and Bhutan, both being land-locked nations have a greater claim for transit facilities than India. Bangladesh also signed bilateral transit agreements with these two countries in 1976 and 1984, allowing them to use Mongla seaport. It was never realised, mainly due to non-cooperation from India, which did not give transit to the land-locked nations to enter Bangladesh. The situation, however, improved after 2010 when India allowed transhipment facilities. There is now a move to extend the facilities so that both these countries can use the Bangladeshi seaports easily.
Besides transit, there is a transhipment facility one country can offer to another. Transhipment usually occurs when there is no direct trade route between the export and the import locations. It generally means unloading cargo from one vessel and then loading those into another to complete a trip to the final destination. During a transhipment, the containers are unloaded from a vessel of the first country at the border point or any dedicated site inside the second country. The containers are then reloaded onto another vessel and transported to the endpoint, the third country, or other part of the first country. The intermediate location or the point of shipment in transfer is known as the transhipment hub.
Bangladesh and India signed the formal transit agreement in 2010, and the protocol for transit and transhipment was signed in 2015. Under the agreement, Bangladesh has allowed several land and water routes to carry Indian goods from the mainland to northeast India. Bangladesh has also allowed India to use the Chittagong and Mongla seaports permanently for transit and transhipment of goods subject to payment in exchange for a set of charges. Early in this month, the government of Bangladesh also approved four routes for the transportation of goods to traders in Tripura and other northeastern states of India.
As a matter of fact, India now has multiple entry and exit points and routes through the land and waterways of Bangladesh. It is sometimes termed a multimodal transit-transhipment facility. The work on rail connectivity is also moving ahead, and soon transit through the rail network will be established. Thus, India has already attained robust strategic connectivity through Bangladesh, which will be extended in the near future. However, a few questions remain. For example, what will happen if India wants to transship goods imported from a third country like Singapore through Chittagong port to Tripura? The current arrangement allows only goods to and from the mainland and northeastern region.
For Bangladesh, the financial gain against all these transit facilities is minimal. It is because the fees can be collected only when the vessels travel through these routes or the ports are used. So far, the use of transit and transhipment facilities by Indian traders has been limited. If Indian traders and business people do not find the facilities viable, they may not use these. Several shortcomings also exist on the Bangladesh side. For instance, some land ports in the country need to be developed. Some roads are also not in a good condition. Cargo handling in transhipment hubs is also inefficient.
Nevertheless, to reciprocate the comprehensive transit facility from Bangladesh, New Delhi has also offered Dhaka free transit using its territory for exporting Bangladeshi products to a third country. Against the offer, India will allow Bangladeshi traders to use selected land customs stations, airports, and seaports to ship their cargoes to other countries. The necessary protocol still needs to be finalised.
In fact, allowing transit to India opens up some opportunities for Bangladesh. There is a provision to use Bangladeshi vehicles for transhipment which is likely to boost the transport and logistics business in the country. The comprehensive transit to India will help Bangladesh to enhance its regional connectivity. It is also a bargaining chip and should be used judiciously when negotiating the bilateral comprehensive economic partnership agreement (CEPA) with India.