The untapped potential
Trade between India and Bangladesh stands at $9 billion and can increase threefold by doing away with Non-Tariff Barriers
Your columnist was invited to chair the closing session of a study on Non-Tariff Barriers (NTBs) to India-Bangladesh trade in Agriculture last week at New Delhi. The basic proposition of the study was that while the current trade between the two countries stood at 9 billion USD, the potential was at least three times; one of the reasons behind this untapped potential is the existence of a plethora of Non-Tariff barriers, which was especially detrimental to trade in agriculture. Incidentally, while the overall trade between the two countries showed a rising trend, agriculture trade was showing a decline – both in absolute and percentage terms, thereby preventing the marginal and small producers in both countries from optimising the trade and development potential.
The study (conducted under the aegis of CUTS international, with support from USAID) by Rahul Arora has classified the constraints into four categories: infrastructural, procedural, policy-related, and regulatory while discussing measures to address these issues. However, let us first discuss these constraints. Hurdles related to sub-optimal infrastructure at the borders, including inadequacy of warehousing, parking, banking, internet, and certification facilities reducing the volume of trade, as constraints that can be overcome if the infrastructure is improved and action is taken both at the level of the district administration, state government as well as the Customs authorities. Then there are Policy related NTBs, for example, the conversion of Land Customs Stations (LCS) to Integrated Check Posts (ICP) which has increased costs of compliance (in my view, this is limited to the short run), documentation related NTBs as poor connectivity compels traders to put in the papers manually (but this should also get resolved over time), and procedural NTBs on account of the stakeholders difficulties in getting required certifications. Technical barriers include asymmetry in the food quality standard and complex (multiple) testing requirements, besides divergence in maximum Residue Levels (MRLs) in agricultural commodities. Another issue that came up for discussion was the pernicious influence of 'syndicates' on both sides of the border, who monopolised export-related services especially those regarding logistics and seemed invincible on account of patronage from the political leadership at the local level.
The discussions that followed really contributed to the understanding on the subject as the panellists had an in-depth knowledge and understanding. Issues raised included financing of FPOs and self-reliant co-operatives to enable them to enter the value chain at a higher level, technical and administrative support for undertaking exports, and most importantly a change in the mindsets. In fact, till very recently, even pan-Indian agriculture trade was subject to so many constraints and restrictions that the very conception of trans-border agriculture trade appeared to most, especially those who were not living next to the border, as something which required special competencies or attributes.
There are other significant learnings from this study: the first relates to the unique position which Tripura has with reference to Bangladesh and the benefits which will accrue to Tripura (and India) from a seamless rail and road connectivity between Dhaka and Agartala. The physical distance would come down by about a thousand kilometres, thereby changing the economies of the small producers on both sides. One must realise that for high-value and low-volume products (which are usually non-perishable), the time and cost of transport do not have the same impact as they do for low-value and high-volume products, and unfortunately, most agricultural products come in the latter category. If a vehicle carrying manufactured goods, or even processed foods is held up at the border for two to three days, it is a problem, but not a disaster. Imagine, on the contrary, if the truck is carrying a load of bananas or mangoes. If this product does not reach the designated market/consumer in the stipulated time, the entire produce is likely to rot and have zero value. Therefore, opening up of border hats is far more critical for states like Tripura which are primarily rural and do not have proximity to a large market, than it is for say a district in West Bengal as the marketing of fresh produce is not a real problem. The viability of an FPO depends largely on the proximity of markets and ports and therefore, even when FPOs create 'social capital', the linkage to markets is imperative.
The second fact that comes out of this study is that almost every farmer, marginal or small, is not dependent on agricultural incomes alone for sustenance. Some member of the immediate family is employed elsewhere either in a job or seasonal work and some even migrate for short or long intervals. This could be looked at in two ways; the sceptics would argue that agriculture is losing out in terms of trade and that it is no longer a viable economic proposition. The counter-factual reality is equally significant where, finally, we are at the stage when less than fifty per cent of rural incomes will come from core agriculture and this in itself is a significant marker of economic development.
What next? The general consensus was that as a follow-up to this study, a professional market- driven organisation to support FPOs and self-reliant co-operatives to access markets, both within and outside the region, should be established as a Section 25 company with seed funding from social entrepreneurs /SFAC to enable marginal farmers in accessing the economies of all scales and scope!
(The author is Director General, ATI & Additional Chief Secretary, Government of West Bengal. The views expressed are strictly personal)