Bangladesh and India had been sharing friendly and warm relations since 1971. Both the countries have been kith and kin through crisis moments. Bangladesh and India are going to script another golden chapter in their bilateral ties through the launch of operation of India-Bangladesh Friendship Pipeline (IBFP) for diesel supply on March 17, the birthday of Bangladesh’s Father of the Nation Bangabandhu Sheikh Mujibur Rahman.
The import of diesel from India through the pipeline is one of the prime examples of maximizing the geographical proximity with Bangladesh’s perpetual neighbour country.
Once the diesel arrives it will bring a win-win situation for both Bangladesh and India. Whereas both of the countries will get a mutual benefit economically, Bangladesh will get to mitigate its energy crisis. India will generate revenue by exporting diesel to Bangladesh. India has already expressed its positive attitude towards increasing cooperation with Bangladesh
Understanding the agreement
An agreement was signed between the two countries in November 2018 to implement the project. The work started in March 2020. The duration of the project was till June 2022. But due to the COVID-19 pandemic, the project has been extended till December this year as the pace of work has slowed down a bit.
The construction of the Bangladesh-India Friendship pipeline is almost at the final stage. The 131.57 km-long pipeline project connects Siliguri in West Bengal with Parbatipur in Dinajpur of Bangladesh. Of the total length of the pipeline, 126.50 km is inside Bangladesh while the remaining 5.07 km is in India. Of the construction cost amounting to Tk520 crore, the Indian government is providing Tk 303 crore and the BPC is providing the remaining Tk 217 crore.
About 1 million metric tons of diesel can be imported from India annually through the pipeline. However, in the initial phase, two and a half lakh tons will be imported.
According to the 15-year agreement, the import volume will increase to 4 to 5 metric tons per year.
An alternative transportation will save time
India-Bangladesh diesel trade had been ongoing since 2017 carried by train. The cost of transportation was a huge sum of amount for Bangladesh Petroleum Company. About 2,200 tonnes of diesel is sent from Numaligarh Refinery Limited (NRL) in Assam through West Bengal Railway every month.
As the demand for diesel is highest in 16 districts of the northern region during Aman and Boro season, the government decided to import this fuel through the pipeline. If the project is implemented, diesel can reach the consumer level in 16 districts of the Rangpur and Rajshahi divisions in a short time. As a result, it will be able to provide it to the farmers at a low cost in a short period besides saving a huge amount of money. This gesture from India will not only strengthen Bangladesh’s economic ties with India but also uphold the ties of friendship during the energy crisis as well as the dollar crisis.
Moreover, according to BPC, it has to pay an average premium of $10 per barrel (159 liters) for bringing fuel oil (including freight). It can be eight dollars if imported from India. A reduction of two dollars per barrel can save about 1.5 million dollars per 100,000 tons. People of 16 districts of the northern region will be able to enjoy this benefit in addition to taking less time in fuel supply.
Therefore, foreign exchange will also be saved if imported from India. Now if it is possible to import in rupees instead of dollars then Bangladesh’s dollar crisis will reduce to some extent. If India gives Bangladesh some discount in the future, it can be more profitable.
Apart from uninterrupted, cheaper, and quicker energy supply security, the cross-border pipeline is expected to help BPC reduce the system loss that it incurs in the form of pilferage. Due to the introduction of pipelines, the supply of fuel in the country will increase and the cost of transportation of fuel will come down.
Enhanced energy cooperation
Through this pipeline, an alternative source of diesel import is being created for Bangladesh. According to Bangladesh Petroleum Corporation, Bangladesh imports 6.5 million tons of fuel oil annually. Of that, 4 million tons of diesel is imported annually. Through this pipeline, almost fifty percent of imported fuel will come to this country by reducing the significant amount of transportation costs.
The pipeline project has been successfully implemented because of the true friendship between India and Bangladesh. Enhanced energy cooperation through bilateral and multilateral arrangements can address the challenges posed by high fuel prices in the wake of Russia Ukraine war. And India Bangladesh Friendship Pipeline is a striking example of bilateral energy cooperation. Once diesel starts to arrive in Bangladesh, it will usher a new dimension to the energy cooperation between India and Bangladesh.
(The author is PhD fellow, International Relations at University of Bucharest in Romania.)