Significance of ‘India-Bangladesh friendship pipeline diplomacy’

Dr Arpita Hazarika

(drhazarikaarpita81@gmail.com)

India will begin exporting diesel to neighbouring Bangladesh through a pipeline this month after Indian Prime Minister Narendra Modi and his Bangladeshi counterpart Sheikh Hasina inaugurate the cross-border oil pipeline on 18 March.

“Good news is India will send us diesel, the (oil) pipeline has been completed. The two premiers will inaugurate the pipeline on 18 March,” Bangladesh Foreign Minister Dr AK Abdul Momen said.

The India-Bangladesh cross-border pipeline will be inaugurated by the Prime Ministers of Bangladesh and India virtually.

India-Bangladesh friendship pipeline

Till now, Bangladesh used to import diesel from India through railway carriages. The announcement of India-Bangladesh friendship pipeline (IBFPL) launch by Momen came a week after he held talks with Indian counterpart, India’s External Affairs Minister Dr S Jaishankar on the sidelines of the G20 Foreign Ministers’ meeting last week in New Delhi.

India-Bangladesh oil pipeline

India would export diesel to Bangladesh through the 130-km pipeline. The India-Bangladesh oil pipeline has been constructed at a cost of Rs 3.46 billion, and has been drawn from the Indian line of credit (LoC).

The pipeline stretched 125 km inside Bangladesh territory and 5 km inside India. The cross-border pipeline will carry fuel from Assam-based Numaligarh Refinery Ltd’s (NRL) marketing terminal at Siliguri in eastern Indian state of West Bengal to the Parbatipur depot of Bangladesh Petroleum Corporation (BPC).

The mechanical works of the project was completed on 12 December last year. The ground breaking ceremony for IBFPL was held in September 2018 in the presence of PM Modi and PM Hasina through video conferencing.

During his meeting with Hasina in 2017, Prime Minister Narendra Modi had agreed to finance the cross-border pipeline with a capacity of one million metric ton per annum (MMTPA).

The project once completed will solve the problem that 1,00,000 ton tankers cannot dock at Chittagong Port, Bangladesh, and must rely on maritime ships to transport crude oil.

The pipeline with India will cut transportation cost of fuel oil for Bangladesh by 50 percent, State Minister for Power, Energy and Mineral Resources Nasrul Hamid has said. State Minister for Power, Energy and Mineral Resources Nasrul Hamid on Friday said that the Bangladesh-India Friendship Pipeline will effectively contribute to the country’s energy security.

“It [the pipeline] will be a milestone in providing quick and uninterrupted fuel supply to the northern region of the country in a cost-effective manner,”

During a visit to the receipt terminal at Parbatipur in Dinajpur on Friday, Nasrul described the India-Bangladesh Friendship Pipeline as groundbreaking in Bangladesh’s energy history. “It will ensure energy security and low-cost fuel.”

In the near future, Bangladesh needs to transition from conventional energy sources to ensure its energy security and long-term sustainability. Following the Ukraine crisis, energy security has become a major concern for developing and least-developed countries. In this context, cross-border energy cooperation and revitalizing the idea of the power corridor could perhaps help Bangladesh to mitigate its energy crisis.

Friendly and warm relations existed between Bangladesh and India since the birth of Bangladesh in 1971. In any time of crisis, India and Bangladesh have got each other’s side just like a close mother- be it the current corona epidemic, or the liberation war of 1971. However, the whole world is currently in turmoil due to the post-pandemic wartime global crisis. Along with the political and economic crisis, the energy crisis has also intensified. Bangladesh is also in the grip of this crisis. To solve this global energy crisis, Bangladesh government has decided to reduce energy consumption. Importing fuel oil at an affordable price was very important for Bangladesh to reduce this cost. Although talks were started with countries like Saudi Arabia, Malaysia and Brunei about the import of fuel oil, Bangladesh’s neighboring friendly country India was the first to come forward to supply fuel.

The initiation of multi-dimensional avenues of cooperation with Bangladesh is only possible because of its geographical proximity to India. A prime example of this is the import of diesel from India through pipelines. These imports will ensure maximum utilization of Bangladesh’s geographical proximity to India. Diesel will arrive in the pipeline from India in June this year. Once this diesel starts coming in, it will be profitable for both Bangladesh and India. In this diesel trade, both countries will benefit economically and Bangladesh will be able to face its energy crisis more firmly. India will also benefit from it. India will earn revenue through this diesel export. India has already expressed a positive attitude towards increasing cooperation with Bangladesh. Not only that, recently Bangladesh-India has signed several agreements and memorandum of understanding to increase bilateral trade and investment.

Bangladesh-India diesel trade

Since 2017, India-Bangladesh diesel trade has been going on through railways. About 2,200 ton diesel is sent from Numaligarh Refinery Limited through West Bengal Railway every month. This transportation cost was very expensive for Bangladesh Petroleum Company. When this pipeline is operational, the supply of fuel in the country will increase significantly and the cost of transporting fuel by rail will be reduced. As the demand for diesel is highest in 16 districts of northern region during Aman and Boro season, the government decided to import this fuel through pipeline. If the project is implemented, diesel will reach consumer level in 16 districts of Rangpur and Rajshahi divisions within a short period of time. As a result, besides saving a huge amount of money, it will be able to provide it to the farmers at a low cost in a short period of time. This export of India will not only strengthen Bangladesh’s economic relationship with India but also strengthen the bond of friendship during energy crisis as well as dollar crisis. Apart from ensuring uninterrupted, cheap and fast fuel supply, the cross-border pipeline is also expected to help reduce system losses through petty pilferage due to rail transport.

India-Bangladesh Partnership Pipeline Agreement

An agreement was signed between the two countries in November 2018 to implement the India-Bangladesh Partnership Pipeline Agreement project. The work of this project started in March 2020 whose term was till June 2022. But the project has been extended till July 2023 as the pace of work has slowed down due to the Covid-19 pandemic. Now the construction of this Bangladesh-India friendship pipeline is almost at the final stage. The 131.57 km long pipeline project connects Siliguri and Parvatipur, Dinajpur in West Bengal. Out of the total length of the pipeline, 126.50 km is inside Bangladesh and the remaining 5.07 km is in India. Out of the construction cost of Tk 520 crore, Government of India is contributing Tk 303 crore and BPC is paying the remaining Tk 217 crore. About 1 million metric ton diesel can be imported from India annually through this 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 by 4 to 5 MT annually.

Light of hope in times of crisis

When Bangladesh along with the rest of the world is troubled by the energy crisis, this diesel business is showing a light of hope. An alternative source of diesel import is being created for Bangladesh through this pipeline. According to Bangladesh Petroleum Corporation data, Bangladesh imports 6.5 million tons of fuel oil annually. Among these imported fuels, 4 million ton diesel is imported annually. About fifty percent of the imported fuel will come to this country by reducing the significant amount of transportation cost through this pipeline.

Moreover, according to Bangladesh Petroleum Corporation data, currently the average premium cost per barrel (159 litres) of fuel oil (including freight) is $10. If this fuel is imported from India, it costs eight dollars. A reduction of two dollars per barrel can save about $1.5 million per 100,000 tons. Apart from taking less time for fuel supply, the people of 16 districts of the northern region will be able to enjoy this benefit. So, importing from India will also save foreign exchange. Now if it is possible to import in rupees instead of dollars, our dollar crisis will be reduced to some extent. Later, if India gives some price concession to Bangladesh, Bangladesh may benefit more.

Exporter India on the other hand can earn foreign currency inflows from its export earnings and invest it in other sectors to benefit economically. Even if India exports refined oil to Bangladesh at cheaper prices, it will bring overall economic benefits to both countries. India and Bangladesh through bilateral and multilateral energy cooperation can address the global problem of high energy prices in the wake of the Russia-Ukraine war. When diesel starts coming in, the India-Bangladesh alliance pipeline, if properly managed, could be a prime example of bilateral energy cooperation. Not only this, it will usher in a new dimension in energy cooperation between India and Bangladesh.