Disentangling transit costs and time in South Asia: lessons from firms in Bhutan and Nepal importing through Kolkata and Haldia ports

Abstract

This study attempts to identify the trade barriers that impede the trade flow of of Nepal and Bhutan through the gateway ports of Kolkata and Haldia in India, focusing particularly on the impact of transit regulations and agreements on the cost of services required to transit goods. The primary objectives are as follows: (1) to identify trade costs (particularly those produced by administrative, transport, regulatory, financial and procedural barriers) that affect the flow of goods between the two ports and Bhutan and Nepal; and (2) to compare the cost and length of time taken to get a similar product out of the ports and on the road to the gateway importer (India) and to each of Bhutan or Nepal.

Being landlocked, Bhutan and Nepal have to mobilise additional resources to deal with trade transactions, as supplies for their daily needs have to make a long transit across India. This case study indicates that transit is a major obstacle to trade, and despite transit agreements with India, both Bhutan and Nepal have yet to witness significant breakthroughs. Therefore, cutting costs and time by improving trade facilitation, such as by rationalising trade procedures, would be the key to enhancing trade flows and raising competitiveness in terms of trade and investment. Reducing customs and/or handling time at the ports of Kolkata and Haldia by streamlining procedures, developing infrastructure, etc. would improve the competiveness of Nepal’s and Bhutan’s imports.

At the same time, allowing more transporters, both in India and Nepal, for door to door multimodal operation would not only lead to lower transaction costs but also improve the efficiency of service providers. Labour-intensive transport services will see application of efficient technology at an increasing scale along the transit corridors. We recommend the implementation of a series of projects leading to improved transaction time and trade cost of trade in the eastern South Asia subregion. The projects should generate trade process re-engineering, improve performance at the ports of Kolkata and Haldia, introduce automation in customs, build border infrastructure facilities, rationalise trade procedures by revisiting the Treaty of Transit, enable electronic data interchange between the countries, introduce acceptance of cross-border electronic signatures on CTDs, etc. The bottom line is that we need to do away with redundant procedural and documentary requirements that cause delays and increase costs.

Citation

De, P. Disentangling transit costs and time in South Asia: lessons from firms in Bhutan and Nepal importing through Kolkata and Haldia ports. ODI, London, UK (2015) 47 pp.

Disentangling transit costs and time in South Asia: lessons from firms in Bhutan and Nepal importing through Kolkata and Haldia ports

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