India is mulling an annual fixed quota for essential commodities, including rice, wheat and onion, for Bangladesh amid the current volatility of the global market.
Delhi is likely to announce the move in a joint statement during Prime Minister Sheikh Hasina's upcoming visit slated for 5-7 September, foreign ministry officials said.
Other than the quota facility for imports, the joint announcement may include the starting of formal negotiations for the signing of the Comprehensive Economic Partnership Agreement (CEPA) between the two countries and the supply of wheat against Bangladesh's LCs opened before India banned wheat exports, Bangladesh High Commissioner in New Delhi Muhammad Imran informed the Ministry of Foreign Affairs.
The joint statement of the two prime ministers may also include providing duty- and quota-free export facilities for some other products of Bangladesh and withdrawing the existing anti-dumping duty on jute products, the Bangladesh high commissioner briefed the ministry after meeting India's Commerce Secretary BVR Subrahmanyam on 26 July.
The high commissioner also sought support of the secretary to release wheat for which LCs had been opened. He handed over copies of diplomatic notes issued in favour of Agrocrop International Private Limited and Bagadiya Brothers, which have concluded agreement with the Bangladesh food ministry to supply wheat under the B2G arrangement.
Bangladesh is heavily dependent on India to meet its domestic demand for various daily necessities including rice, wheat and onion. At times of low domestic production or rising prices of these products in India, the authorities there ban exports of these items, causing a severe shortage of these products in Bangladesh.
In 2019, after India suddenly banned the export of onion, Bangladeshi onion price rose as high as Tk300 per kg. The same had happened two years ago as well.
In May this year, India banned wheat exports in the wake of the Russia-Ukraine war. As a result, there was a shortage of wheat in Bangladesh and the price of bakery products including flour went up significantly.
As Bangladesh suffers as a result of such sudden export restrictions, Prime Minister Sheikh Hasina and Commerce Minister Tipu Munshi have repeatedly requested the Indian government to provide advance information to the Bangladesh government before banning the export of any commodity item.
Commerce ministry officials think India's decision to offer import quota facility is coming in view of that.
India currently exports essential commodities to its two other neighbours – the Maldives and Bhutan – under an annual fixed quota system. Under this mechanism, India publishes a gazette of how much potatoes, onions, rice, wheat flour, sugar, pulses and eggs will be exported to these countries every fiscal year. Usually, it is released at the beginning of its fiscal year.
Even if India imposes a ban on the export of a product due to the crisis in the domestic market, the two countries can continue to import from their fixed quotas, which helps them to keep their market stabilised.
Importers said such a move by India would be positive for us.
During the meeting with the Bangladeshi high commissioner, the Indian commerce secretary alluded to the recent conclusion of joint study on FTA (CEPA) negotiation between Bangladesh and India. He further suggested that the Joint Statement of the VVIP visit may stipulate the start of FTA negotiation.
The Indian commerce secretary also highlighted that the FTA negotiation should be more beneficial, the High Commission said.
Once the trade deal is signed, Bangladesh's export earnings will go up by $3-5 billion and India's by $4-10 billion in next 7-10 years, according to a final draft report of the joint feasibility study by Dhaka and Delhi.
The Indian commerce secretary also suggested exploring the possibility of duty- and quota-free or tariff concession for specific products from Bangladesh, in case those products are facing any tariff barrier. He invited any requirement from the Bangladesh side to address existing tariff/non-tariff barriers on Bangladesh exports and said India is open to consider such requests.
According to the South Asian Free Trade Area (Safta) agreement, India has given duty-free facilities to Bangladesh on all products except 25, including drugs and weapons. But, Bangladeshi exporters have complained at various times that there are various types of non-tariff barriers in the export of several products – in particular the non-acceptance of BSTI certificate for product quality verification. Implementation of new customs policy despite Bangladesh's objections is hindering Bangladesh's exports.
The Bangladesh High Commission said India may decide to withdraw the anti-dumping duty imposed on jute products of Bangladesh before the prime minister's visit. High Commissioner Muhammad Imran got the hint from the Indian commerce secretary that the matter may be mentioned in the joint statement of the two prime ministers.
India imposed the anti-dumping duty on Bangladesh's jute yarn, hessian and bags, ranging between US$19 and $352 per tonne, in January 2017.
In June, Bangladesh Finance Minister AHM Mustafa Kamal and Commerce Minister Tipu Munshi sent letters to India's Finance Minister and Commerce Minister separately in June.
"If India stops exporting onions and wheat, it creates instability in the country's market." If a certain amount is fixed every year, there will be no more crisis and there will be food security. Besides, the import can be planned in advance," Harun-ur-Rashid, president of Hili land port import-export group, told The Business Standard.
"25-30% of our imports come from India. If we have this assurance, importing decisions will be a lot easier. we can be very independent even in crisis, we can keep the supply chain in order. So this agreement will play a very important role for us," said Md Shafiul Ather Taslim, director, Finance & Operation of TK Group.
Taslim Shahriar, Senior AGM, Meghna Group of industries told The Business Standard, "Obviously it's a positive initiative, it will help us achieve food security."