Report

QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 85
tomatoes and other vegetables had gone from India to
Pakistan; the trade of tomatoes alone in this period
was worth Rs 143 million. 16 Direct trade among the
countries is expected to go up significantly with the
allowing of trucks to cross the international border. 17
Railways are the most economical and fuel-efficient
mode of transportation and there is significant potential
for containerised cargo movement. A bilateral agreement
with several components including streamlined
documentation procedures, operationalisation of third
country traffic and transit, removal of wagon-type
restrictions is required to realise the full potential of
trade via railways but the project is restricted to
infrastructure improvements as a first step.
Taneja (2007) estimates TC imposed on importers
and exporters for not being able to avail of the direct
rail link to transport goods. The costs are estimated as
money costs, which includes bribes to customs officials,
police, border authorities, and others for the procedural
clearances. Transport costs for various rail, truck, air
and sea routes between the countries was surveyed. It
is found that Mumbai-Dubai-Karachi and Delhi-
Mumbai-Karachi routes are most efficient in terms of
transaction costs per container-kilometre (Table 9.14).
However, even if one considers total bribes, costs per
container are lowest by the direct rail route which
cannot be utilised as it is not always available. Actual
transport time is also lowest on this route but delays
are due to time taken in obtaining clearances and
procurement of wagons.
Taneja’s survey of traders reveals almost every
exportable item is exported to Pakistan through third
countries and that cross-border informal trade occurs
though bus and rail passengers.
The Project
The most significant rail corridor connecting India and
Pakistan is the corridor from Lahore connecting to the
Indian Railways network by broad gauge. The link
from Lahore is 28 km to the Indian border through
Wagah/Attari. The corridor from Attari is connected
to Kolkata through Amritsar. The Attari-Amritsar
section of 23 km is single line and not electrified. The
Delhi-Kolkata corridor is capable of handling very high
volumes of both passenger and freight traffics.
However, inadequate handling capacity at Lahore and
insufficient infrastructure facilities at the rail cargo
station in Lahore add to transaction costs. Lack of EDI
facilities at both sides of the land border slows down
the movement of consignments.
For this analysis, we consider physical barriers on
the Pakistan side which require being addressed
(SAARC 2007). The project components are:
• Rehabilitation of the 28-km section between
Wagah and Lahore, from single-lined and nonelectrified
to electrified section, and that of
associated structures.
• Provision of air-brakes locomotive and freight
wagons on Pakistan railways.
• Computerisation at the border.
The project investment costs are summarised in
Table 9.15.
Table 9.15 Project Cost Estimates
Kolkata–Bangaon
$ million
Civil works 52.9
Equipment 2.8
Land acquisition, resettlement, and 3.8
social mitigation
Upgradation of warehousing facilities 7.9
Restructuring costs 0.7
Contingencies 1.5
Total 73.0
Besides boosting trade, the benefits from improved
railway infrastructure is immense which includes cost
and time savings to traders. There is also reduced fuel
consumption since railway traffic is more fuel-efficient
than road traffic, resulting in savings in carbon dioxide
emissions. Further there are reduced costs of future road
maintenance and reduced incidence of road accidents.
Offsetting increases in railways accidents are negligible
and not estimated. We quantify two types of benefits
for this analysis: increased trade and local employment
benefits.
Increased Trade: India’s exports to Pakistan as a
percentage of total exports have been negligible at less
than 1%. The import and export growth figures show
fluctuations due to the political relations between the
countries. However, there has been a rising trend since
the late 1990s with the rate of growth of exports
being 43% in 2002–03, 82% in 2004–05 and 32% in
2005–06 while import growth for corresponding years
has been – 31%, 64%, and 89%. We forecast the trends
16
‘Peoples movement down, Trade volume up between India-Pakistan’, http://www.thaindian.com/newsportal/india-news/
17
Sarin, Jaideep, ‘After 60 years, India-Pakistan trade finds a direct link’, http://www.indiaenews.com/business/20070928/
72520.htm