The devils in the details

PM’S VISIT TO INDIA

The devils in the details

A lot has been made of Prime Minister Sheikh Hasina’s visit to India. After all, it was her first bilateral visit to the neighbouring country in seven years. As expected, discussions in the Bangladeshi media was dominated by the Teesta water sharing issue which, as predicted, still remains unsolved with the Chief Minister of West Bengal Mamata Banerjee saying that there is not enough water there to share.

Bangladeshis are, however, being asked to get over this disappointment because of the nearly USD 10 billion worth of agreements signed between some of the leading companies of the two countries in the power, energy, logistics, education and medical sectors. And because India will give Bangladesh USD 5 billion in loans, which includes USD 500 million in military assistance.

Not everything about the loan has been made clear yet, but what we do know is that the credit for the military sector has been given by India with 1 percent interest to be repaid over the next 20 years. The rest of the loan too is concessional with terms and conditions that are reportedly quite favourable for Bangladesh. More so, even than what China agreed to during President Xi’s visit to the country. But with regards to the USD 10 billion deals, as always, the devil is in the details.

Of the USD 10 billion, USD 1.6 billion is a facility agreement for debt financing the construction of the 1,320 MW Maitree Power Project in Rampal, between the Bangladesh-India Friendship Power Company and Exim Bank of India, which has widely been opposed based on its possible ramifications for the Sunderbans.

Another major portion will be spent on a hydropower facility to be built in Nepal by an Indian private company. In that regard, a Memorandum of Understanding worth USD 3.15 billion was signed by the Bangladesh Power Development Board (PDB) and India’s NTPC Vidyut Vyapar Nigam Ltd to import 500 MW of power from the facility.

However, a controversial guideline introduced by India may prevent Bangladesh from cheaply importing electricity from Nepal directly, through Indian territory, as the guideline does not allow such electricity transit. Rather, India may ‘facilitate’ such trans-border trade of electricity through its own agencies that will buy electricity from a neighbouring country and sell it to another under separate bilateral agreements (such as the one mentioned).

The reason this ‘guideline’ is controversial is because the eight-nation SAARC organisation, back in November 2014, signed a framework agreement which said that member states would try to waive export/import duties, fees and other charges for cross-border trade of electricity which the Indian guideline contradicts by providing for tariff and transmission charges on cross-border trade of electricity through Indian territory. This will likely cost Bangladesh more to import electricity from Nepal through India, unless the SAARC agreement is honoured.

The PDB already signed a supplementary agreement with the same Indian company to import 60 MW power from a gas-fired power plant in Tripura for Tk. 645 per kilowatt-hour – said to be a “high price” by Bangladeshi experts. What is frustrating in this specific case is that India had transported heavy machinery for the power plant from West Bengal to Tripura, through Bangladesh, paying no fees.

Under another agreement, Adani will sell electricity from its power plant in Jharkhand to the PDB for US 8.658 cents per unit and Reliance from its power plant to be installed at Meghnaghat for US 7.3123 cents, which are both reportedly higher than recent prices offered by Bangladeshi companies. Moreover, a contract signed to import 250,000 tonnes of diesel per year between the Bangladesh Petroleum Corporation and Numaligarh Refinery Limited will again cost Bangladesh a higher premium compared to rates in the international market.

While the benefits of sall these deals may seem skewed more towards India than Bangladesh, what is certainly in India’s favour is the balance of trade between the two countries. According to data from the Indian High Commission, Bangladesh imported goods worth USD 5.45 billion from India and exported goods worth USD 689.62 million in fiscal 2015-16. To bring some parity to the great disparity, India had, in 2011, offered zero-duty benefit to most Bangladeshi products.

But only the following year, the Indian government had imposed a 12.36 percent countervailing duty on Bangladeshi apparel shipments – the country’s main export item. Another major blow was dealt recently when the Indian government imposed an anti-dumping duty on Bangladesh’s jute exports. The significance of this should not be overlooked as India used to account for about 30 percent of Bangladesh’s jute shipments.

But because of the anti-dumping duty, jute good export to India already fell, year on year, by 52 percent to 6,872 tonnes in January and 37 percent to 6,155 tonnes in February, according to data from Benapole customs. Back when the duty was imposed, Bangladeshi traders had hoped that the issue would be resolved during the PM’s recent India visit. Unfortunately, that has not been the case.

In general, it seems then that the Bangladeshi government has again agreed to deals with India which, on paper, seem to benefit India more than it does Bangladesh, as has been the case quite often lately. Although Bangladeshis may not be too unhappy to provide India concessions at times, given the history that the two countries share, how long are such sentiments likely to last, if concessions continue to be as one sided as some argue they have been over the last few years?

This is something that the Indian side should seriously evaluate. And what the Bangladeshi side should assess is: why have deals between the two countries lately seemed to its own citizens, to have favoured India more than Bangladesh? This is something the Bangladeshi government must provide answers to, to those that it represents.

Source: The Daily Star

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