NEW DELHI: Indian govt’s retaliatory move to restrict import of ready-made garments (RMG) from Bangladesh via the land route is expected to increase logistics costs and transit time for the products which account for around a third of shipments from India’s neighbour in the east.While it takes only two-three days for apparel produced in Bangladesh to move through land borders, now the transit time is going to be longer, depending on how long it takes for ships to sail to Kolkata and Nhava Sheva (Mumbai), the two designated ports, and clear customs before taking the land route to reach Indian warehouses.
Bangladesh enjoys massive cost advantage
“The decision can hit Bangladesh apparel exports to India in multiple ways, particularly when a substantial proportion of apparel import into India is through land ports, 76% from Petrapole land port alone,” said Mithileshwar Thakur, secretary general of Apparel Export Promotion Council.For Indian retailers, changing suppliers not an easy decisionIt can restrict their access to the Indian market, increase their delivery time and jack up logistics cost, thereby adversely impacting their cost and export competitiveness,” said Thakur. The council’s members are rivals as well as exporters from Bangladesh.Several Indian companies had set up units across the border to take advantage of the lower cost of production, including lower wages and subsidised power, and the tariff advantage that Bangladesh enjoys due to its status as a least developed country (LDC), something that will change as it has now graduated to the middle-income bracket.
India-Bangladesh trade
“Indian manufacturers pay a 5% GST on locally-sourced fabric, while Bangladeshi firms import fabric duty-free from China and receive export incentives for sales to India, giving them an estimated 10%-15% price advantage,” explained trade expert Ajay Srivastava.For Indian retailers, as well as global chains operating in the country, switching suppliers is not an easy decision, given the massive cost advantage that Bangladesh enjoys. Besides, it produces at a scale which few Indian manufacturers have and have refused to add capacity despite wide-spread assessment that the political uncertainty will hurt Bangladesh’s industrial mainstay, readymade garments.“If I have a large order, I prefer Bangladesh because one producer can meet my requirement, and on time,” the CEO of an Indian retailer said.India’s retaliation follows a series of restrictions imposed by Bangladesh, including a ban on Indian yarn imports through five major land ports, tighter curbs on rice shipments, and import bans on dozens of Indian goods, including paper, tobacco, fish and powdered milk.“Adding to the friction, Dhaka introduced a transit fee of Taka 1.8 (Rs 1.25) per tonne per km on Indian goods moving through its territory. These cumulative actions, along with operational delays and tightened port inspections, have hampered Indian exporters and triggered calls for a calibrated response,” said Srivastava.
