Promoting Trade through ICP Sutarkandi – Challenges and Opportunities

1. India-Bangladesh Macro Level Trade

India and Bangladesh share strong trade and economic relations. Bangladesh is India’s largest trading partner in South Asia, and the bilateral trade between the two countries is worth over US$10 billion (Figure 3). Moreover, Bangladesh is one of the largest contributors to India’s tourism industry. The Indian High Commission in Bangladesh issues more than one million visas annually, amongst the highest numbers issued by Indian missions globally. Most of these are tourist visas, and the majority of these visitors enter India through the land border.

Trade and connectivity are crucial to bilateral ties. In this regard, India has taken some key initiatives to further its relations with Bangladesh. These include the provision for duty-free entry of Bangladeshi products into Indian markets, investments in the development of infrastructure in Bangladesh, and the simplification of the visa process. Such steps encourage and are likely to increase, the cross-border movement of people and goods.

Figure 1: Value of Exports and Imports (Ind-Ban Trade)

Source: Export-Import Databank, Government of India.

It can be seen in Figure 2 that the total value of exports is much greater than the total value of imports in the India – Bangladesh macro-level trade. Further, the value of exports and imports have both risen significantly over the last 10 years which can be attributed to trade promotional policies, a higher level of cooperation between the two countries and increasing demand for commodities due to increased consumption patterns.

Now let’s take a look at the commodity basket of exports and imports between India and Bangladesh.

Table 1: India’s Major Commodity Exports to Bangladesh (at the HS 2-digit level)

Source: Export-Import Databank, Government of India.

Table 2: India’s Major Commodity Imports from Bangladesh (at the HS 2-digit level)

Source: Export-Import Databank, Government of India.

It can be noted from Table 1 and Table 2 that majorly raw materials and primary products are being exported to Bangladesh from India and intermediate/finished goods are being imported to India from Bangladesh. This indicates the existence of value chains between the two countries which are governing the commodity baskets of exports and imports. For example – Raw cotton is being exported from India to Bangladesh, which is then processed to apparel, clothes (finished) and paper yarn (intermediate) and exported back to India. Thus a textile value chain exists between the two countries. Similarly, other value chains can also be identified between the two countries.

Finally, let’s take a look at the trend in the total number of items exported and imported between India and Bangladesh:

Figure 2: Number of Exported& Imported Items (Ind-Ban Trade)

Source: Export-Import Databank, Government of India.

2. India-Bangladesh Macro level Border (Land) Trade

Border Trade with Bangladesh - Currently, NER has over 38 trading points (known as LCSs) with Bangladesh, of which most are functional. Tripura and Meghalaya have seven and eight functional LCSs, respectively. Importantly, more ICPs in Assam are yet to be functional. NER contributes only 8 to 10 per cent of India’s export to Bangladesh. NER’s exports to Bangladesh are mostly primary horticulture items and minerals such as coal, quick lime, ginger, oranges, and dry fish and other citrus fruits, boulder stones, dry fish, rawhides, woven fabrics & synthetic filament, etc. On the other, NER’s imports from Bangladesh are well diversified and mostly secondary items such as cement, processed foods, plastics, knitted & crocheted synthetic fabrics, garments, cement, fish, PVC pipes, wooden furniture, etc. About 75 per cent of imports from Bangladesh and 50 per cent of exports to Bangladesh cross India–Bangladesh land border. Furthermore, the land border is the favoured route for people to move between the two countries (Bhattacharjee, 2019). Thus, ICPs are very crucial for the overall India-Bangladesh Trade.

Let’s take a look at all the major ICPs on the Ind-Bangladesh border:

Table 3: Trade and Passenger movement through ICPs on Ind-Ban border (2016-17)

Source – Land Ports Authority of India, Ministry of Home Affairs.

As it can be seen in Table 3 trade through ICP Sutarkandi formed a very minute part of the overall land trade between Ind-Ban in 2016-17. This part has grown fractionally over the last 5 years but still, it is not that significant and there’s a lot of room for improvement by leveraging the opportunities and tackling the challenges which will be discussed in the coming sections. The majority of land trade between India and Bangladesh happens through ICP Petrapole which is attributed to its vast size, advanced facilities and existence of regional value chains. There is often a delay in trade through ICP Petrapole because of traffic congestion and road blockage which is why some load (Trade) needs to be shifted to other ICPs like Sutarkandi which are relatively new but are gradually developing all the required facilities to handle large consignments.

3. Trade through ICP Sutarkandi

Integrated Check Post (ICP) Sutarkandi is located in the Karimganj district of Assam, around 48kms from the main district. Sutarkandi is connected to Karimganj and Sylhet in Bangladesh by two national highways, NH-151 and NH-7. The Sutarkandi ICP was a Land Customs Station (LCS) under the North Eastern Region Commissionerate of Customs and Shillong. In January 2009, South Assam designated the LCS as a "Border Trade Centre" and it was declared an ICP in the year 2018. After being proclaimed as an ICP, this check post is maintained by the Lands Ports Authority of India (LPAI), Ministry of Home Affairs. Now, ICP Sutarkandi is used for international trade (exports and imports) and cross border passenger movement with Bangladesh. On the Bangladeshi side, the closest LCS is Sheola LCS (Sylhet), which is overseen by the Commissionerate of Customs, Excise, and VAT, Sylhet division.

Figure 3: ICP Sutarkandi – Location

Source: Author's own based on google map

Formal Trade:

In September 2019, Border Tarde Centre was taken over from the Assam government by the Lands Ports Authority of India and was declared as an ICP. It was operationalised from the same day. ICP Sutarkandi is the smallest ICP and is built over an area of only 3.38 acres. According to an LPAI official, a minimum of 30 acres of land is required for a fully functional ICP to be made with all the necessary facilities like warehouses, separate cargo & passenger terminals, quarantine facilities, testing labs, cold storage, space for loose cargo etc. Thus, currently, land acquisition is going on in Sutarkandi by LPAI, Govt. of India to expand the facilities of the ICP. It is noted that before being declared as an ICP, the LCS was used for both commodity and passenger movement. The LCS, till the time it was operational, had a separate office building for Customs and Immigration purposes. The building had a parking lot, baggage scanner, fax and computer facility, powerhouse, and trans-shipment platform, 2 weighbridges of 50 metric tonne capacity each as other facilities required to facilitate movement. All these facilities were in a dilapidated condition as they were created in 2008 and thus LPAI gave a contract to renovate these existing facilities in 2019. New facilities that are proposed at ICP Sutarkandi and are likely to be constructed after the land acquisition is done includes – Animal & Plant Quarantine, Cold Storage, Exchange Counter, Independent Truck Terminal and a Separate entrance for Indians and Bangladeshis. Right now there is a common entrance for Indian and Bangladeshi travellers due to which intermingling happens which leads to informal trade. It is to be noted that in the first step of the export process, exporters have to prepare a shipping bill with the help of a CHA (Customs House Agent). Now, there is only one qualified CHA in the entire NER who sits in Sutarkandi itself. Thus, there is a need for more qualified CHAs to facilitate the export process and make it more efficient. After this step, the shipping bill comes to ICP Sutarkandi’s Weight Bridge Operator where the items are weighed and a list of a number of vehicles is given to the BSF (Border Security Forces) & Customs. BSF’s role is to verify the driver’s identity and check him/her for any potential safety threat. Custom’s role is to check the goods that are being exported/imported and verify the quality and quantity of the same. After talking to different stakeholders in the export-import process we identified several problematic areas:

(1) Customs check all the consignments manually due to the lack of truck scanners and other technological tools. Thus, they only check 2 or 3 trucks randomly out of the entire consignment and often rely on intuition and informers to detect illegally traded items.

(2) Even though every stakeholder has a specific role in the import-export process, sometimes BSF tries to get outside of their purview and try to unnecessary scrutinize products that delay the consignments.

(3)Some exporters try to bring goods that weigh more than the specified weight carrying capacity mentioned by MoRT which causes a delay in the overall process.

Further, unlike ICP Sutarkandi, there is no weighbridge at ICP Sheola, thus items are weighted using the traditional ‘feeta’ system / volumetric system. Weight gets reduced in Bangladesh due to the feeta system which is a loss to the Indian exporters. Trade is seasonal in nature, ginger and perishable goods like citrus fruits are seasonal while coal is exported throughout the year. A maximum number of 147 trucks have passed through ICP Sutarkandi for exports in a day. Goods like limestone are cleared quickly due to the mechanised unloading process (within the vehicle) whereas coal takes a lot of time to get cleared due to manual unloading. Now let’s analyse the value of exports and imports through ICP Sutarkandi:

Figure 4: Total Trade Value through ICP Sutarkandi (2014-15 vs 2018-19)

Source: Customs, ICP Sutarkandi

As it can be seen in Figure 4 the total traded value has increased by a marginal six per cent from 2015-15 to 2018-19. This is because the value of exports has fallen by 40 per cent and the value of imports has risen by 27% over the same period, thus these two opposite phenomena have cancelled each other out leaving a marginal change in the total traded value. Also, it can be observed that the total value of imports is much greater than the total value of imports through ICP Sutarkandi in all the years. This is counterintuitive because at a macro level the value of exports to Bangladesh is much greater than the value of imports from Bangladesh as shown earlier. To further analyse these phenomena let’s compare the average value per export and average value per import through ICP Sutarkandi over the past few years.

Figure 5: Average value per export through ICP Sutarkandi in US$ (2014-15 to 2019-20)

Source: Customs, ICP Sutarkandi

Figure 6: Average value per import through ICP Sutarkandi in US$ (2014-15 to 2019-20)

Source: Customs, ICP Sutarkandi

Key Observations from Figures 5 and 6:

(1) Average value per export is much lesser than the average value per import across all the years.

(2) Average value per import has risen significantly (2.4 times) over these 6 years whereas the average value per export has almost remained the same.

Thus, despite of the large quantities of exported items through ICP Sutarkandi, the value of exports is very less compared to the value of imports because of the significantly low average value per export in contrast to the high average value per import. This difference in average value per export and import is because of the types of goods that are being exported and imported through ICP Sutarkandi. The major goods being exported are Coal, Fruits - Apple, Orange, Ginger etc., Limestone, dry fish and Imported goods like Drinks, Sweet toast, oil, food, plastic and more respectively. Raw materials like coal and raw fruits which are of low value are being exported and value-added products like drinks and food items are being imported through ICP Sutarkandi. Also, over the years, the proportion of coal (very low value) has increased in the export basket leading to a slight decrease in the average value per export, whereas the average value per import has increased significantly due to the addition of more value-added products to the import basket. Bangladesh has a very large brick manufacturing industry and Indian coal is used majorly as a raw material for this purpose. A large proportion of coal that is exported through Sutarkandi comes from Meghalaya where a local tribe called ‘Khasi’ engage in coal mining and trading. During national festivals like Eid, there is a surge in demand for products from the Bangladesh side leading to a surge in exported items. In 2020, Bangladesh couldn’t source ginger from China due to Covid-19 and hence a lot of ginger was also exported from India to Bangladesh through ICP and Steamer Ghat (riverine port) in Sutarkandi. Some exporters told that there is a huge demand of pressure cookers in Bangladesh but they can’t export it because of restrictions by the Indian government. Other such items include motorcycles and bicycles.

Informal Trade:

Apart from the formal trade that is mentioned above, there is also a significant level of informal trade going on in Sutarkandi. Since the current area of ICP is only 3.38 acres, there is a lot of open area with weak fences which is exposed to vulnerability and opportunity for informal trade.

1. Due to the intermingling of people at the border, the smuggling of YAPA tablets (a type of drug) happens in huge amounts. These tablets originate from Southeast Asian countries like Indonesia, Myanmar and Vietnam and then they enter the Indian market from where they are illegally exported to Bangladesh (since drugs are banned in Bangladesh) and they finally reach the international market. The value of these tablets grows exponentially throughout the value chain, especially when they enter the international market from Bangladesh.
2. There is also a presence of cattle smuggling in Sutarkandi on the Ind-Ban border. There is a huge tannery industry in Bangladesh, thus cattle are in huge demand. Local exporters try to export the cattle illegally through the broken fences because they find the formal channel cumbersome and time inefficient. During Ramzan, there is a huge demand for cattle from Bangladesh and thus cattle smuggling spikes during this time of the year.
3. It is also found that there exists some illegal trading of counterfeit currency at the border.

The existence of this informal trade indicates that there is a potential to increase exports through ICP Sutarkandi if this demand is catered through the formal channel. Items like YAPA tablets and counterfeit currency cannot be exported through the formal channel for obvious reasons but cattle could be a major product that could contribute to overall exports through the ICP. Thus, there is a need to streamline the exporting process by developing adequate facilities and informing the cattle exporters about the ease and efficiency of the same.

4. Conclusions and Recommendations

ICP Sutarkandi is located at a very strategic location on the India-Bangladesh border with access to all three modes of transportation – railways, roadways and waterways. This fact coupled with the vicinity of the BCIM corridor that is currently under construction makes ICP Sutarkandi a very important ICP from the trade point of view. However, to unlock its full potential several challenges which were mentioned before need to be eradicated by land acquisition, development of new facilities, leveraging tech for cargo scanning, setting up EOUs & local manufacturing units and channelizing informal trade through the formal route. Key policy recommendations are:

1. Setting up a Multi-Modal Transhipment Hub in Karimganj district by incorporating ICP Sutarkandi, Steamer Ghat and Mahisashan Railway Station.
2. Setting up Export Oriented Units (EOUs) and local manufacturing units and leveraging the prospective BCIM Corridor to boost exports through the region.
3. Inclusion of technology at the ICP for smooth and efficient cargo scanning and a clear demarcation of duties between the different stakeholders involved in the export-import process.

References

• Bhattacharjee, J. (2019) Integrated Check Posts on the India-Bangladesh border: A Field Survey and Brief Analysis. Observer Research Foundation.
• Banerjee, S.(2019) Bridging the East: Trade and Transport Connectivity in the Bay of Bengal Region. CUTS International.
• CUTS (2019) Role of Multi-modal Connectivity in Fostering Value Chains in the BBIN Sub-region.Jaipur: CUTS International.
• Shelly, B.(2009) Karimganj-Bangladesh Border Trade: A case study of Sutarkandi LCS, Assam.
• Ghosh, D. (March 2021) Field Diary Karimganj: A Strategic Location for India-Bangladesh Trade.Jaipur: CUTS International
• Karim, M. (June 2018) Bangladesh-China-India-Myanmar (BCIM) Economic Corridor: Challenges and Prospects. The Korean Journal of Defence Analysis.
• Export-Import Data Bank, Department of Commerce, Government of India (Aug 2019).
• World Bank, (May 2016) The Potential of Intra-regional Trade for South Asia.The World Bank.

Written by Mr Amol Goel, BS Economics, IIIrd Year, Indian Institute of Technology (IIT), Bombay and Dr Durairaj Kumarasamy, Associate Professor and Head, Department of Economics, Faculty of Behavioural and Social Sciences, Manav Rachna International Institute of Research and Studies (MRIIRS)

Acknowledgement: The article is written based on the research paper prepared during the internship period (August-October 2021) at the Land Port Authority of India (LPAI), New Delhi.  All the views and opinions are the author's own. Usual disclaimers apply.