India to expand overseas port operations with Mongla terminal in Bangladesh

This will be the third international port operations by India after Chabahar in Iran and Sittwe in Myanmar and will be managed by IPGL

Following successful agreements for Chabahar in Iran and Sittwe in Myanmar, India is set to operate a terminal at Mongla port in Bangladesh. This will be the third overseas port operation by India as New Delhi rapidly sheds reticence in foraying abroad to expand its commercial interests in the ports and shipping sector. 

The terminal at Mongla will be managed by India Ports Global Ltd (IPGL). A senior official from the Ministry of Ports, Shipping and Waterways said that IPGL will henceforth be the preferred entity for India’s international port operations. The company will also act as the leaseholder for the Mongla terminal.

Strategic importance of Mongla port

Securing operational rights at Mongla port holds strategic importance for India. While China has also declared its commitment to invest in Mongla, it has not received a commitment for lease of a terminal from Bangladesh. The position is different from Sri Lanka, where India has interests in Colombo while China is building the Hambantota port on the other side of the island. The official said that India plans to utilise the Mongla terminal for both bilateral trade and trade with other countries.

For Bangladesh, the decision to offer the rights to the terminal is a huge vote of confidence in its relations with India. It follows a series of rapid confidence building measures the two countries have launched since last year to improve connectivity, through both sea and river routes.

Overview of Mongla port

Mongla Port, located near the Bay of Bengal’s coastline, is Bangladesh’s second-largest seaport. In 2023, Dhaka offered India a “permanent transit order”, allowing regular movement of goods to and from the port. While Chattogram (Chittagong) remains the largest port in Bangladesh, handling 90 per cent of the country’s export-import business, it faces capacity constraints. 

Consequently, Mongla is rapidly gaining volumes, particularly with increased cargo volumes from India, including automobiles.

Delayed investment and future prospects

The decision to invest in Mongla port was kept pending by India for several years. In 2015, the two governments decided to upgrade the Mongla facilities under a $530 million line of credit from India. But the project, approved by Bangladesh’s Executive Committee of the National Economic Council in 2018, could not move ahead since India did not identify a contractor to build the project. 

The project included constructing a container terminal, handling and delivery yards, a residential complex and community facilities, marine workshop and service jetty. In 2023, the project was awarded to Egis India Consulting Engineers at a cost of $9.6 million. The project has a short lead time till the end of 2024. Upon completion, India will gain operational rights.

China has also offered a $400 million line of credit to Bangladesh for Mongla port, but has yet to act on it. In fact the Chinese offer, in the works since 2016, was finalised after India announced the award of the port project.

For India, the ownership of the Mongla terminal will be a valuable asset since it will cut the cost of ferrying goods from the rest of the country to the northeastern states. The two countries have already identified eight routes for the transit of goods using Mongla as the base. The port’s prospects have sharply improved after the inauguration of a multipurpose bridge over the Padma river. This bridge connects Mongla with Dhaka, reducing the commuting distance by nearly 100 km.

In tandem, the order issued by the National Board of Revenue, the tax department of Bangladesh, in April 2023 has for the first time laid out a set of standard rules for the movement of cargo. “We are ready for the start of transit and transhipment of goods between Bangladesh and the northeastern region of India through Chittagong”, Minister of State for Shipping Khalid Mahmud Chowdhury had said, outlining his expectations. 

Enhanced shipping cooperation

During secretary-level dialogues between Dhaka and New Delhi, it was decided to substantially relax rules on the highly-restrictive Indo-Bangladesh Protocol Route and Coastal routes. A number of decisions were taken during the three meetings to resolve the trade issues and to promote Inland Water Transport and Coastal Shipping between the two countries, noted a release issued after the meeting between T K Ramachandran, secretary of the Indian Ministry of Ports, Shipping & Waterways, and his counterpart Md Mostafa Kamal, senior secretary.

Key areas that were agreed upon: 

• Easing visa issuance 
• Shore-leave facility and repatriation for seafarers may be eased 
• Inclusion of Odisha’s Dhamra Port as Port of Call under Coastal Shipping Agreement considered 
• Bangladesh agreed on using Pangaon container terminal for interim period for transhipment of containers 
• Locations for drop-in centre for Bangladesh shall be identified near Kolkata 
• Explore third-party EXIM trade