Informal Trade Surges between Bangladesh and India

First News Magazine, May 17, 2014
Indian farmers are getting rice seeds from Bangladesh though India does not officially import them from this country

Demand for goods cannot be confined within borders. This proposition may to some extent explain why smuggling or informal trade occurs especially in the border areas of the two countries, and the volume of informal trade between Bangladesh and India is growing gradually. Acknowledging the fact, the governments of both the countries recently introduced border haats, supervised temporary markets, in the border areas between the two countries. The evaluation of the success of these border haats will need more time and one cannot expect a fast reduction of informal trade as the number and variety of products in this trade is also very striking.

An interesting phenomenon in this connection is the informal trade of rice seeds. One finds that BR-11, a rice variety developed in Bangladesh, is widely used in West Bengal of India. Similarly, BR-12 and BR-9, two other Bangladeshi rice varieties, are popular in Bihar, another state of India. In Jharkhand one is equally surprised to find that some farmers are cultivating BR-8, also a Bangladeshi variety. The Bangladeshi hybrid variety, Hira, is also used by some farmers in West Bengal. How are Indian farmers getting these rice seeds when there is no official import from Bangladesh by India?

Farmers in Chapai Nawabganj and Dinajpur, two northern districts of Bangladesh adjoining the Indian border, are using an Indian variety, Swarna. Parijat, Rajendra-Shweta and Miniket are widely used by many rice farmers in Lalmonirhat, Bogra and Jessore. Seeds of these Indian varieties enter Bangladesh mostly through unofficial channels while some rice seeds from Bangladesh are moving to the adjacent Indian states using the same or similar channels.

These facts have been identified in a study conducted by Indian research organization, Consumer Unity Trusts (CUTs), in association with Bangladeshi organization, Unnayan Shamannay. In fact, these two organizations are now working to identify barriers to rice seed trade between the two countries.

Because trading is informal, the real volume of trade is impossible to detect. Only a rough estimate is possible based on field surveys as mentioned in the study report. It shows that out of 48,000 hectares, 33,000 hectares of land used Indian varieties, constituting nearly 70 percent of the total area under rice cultivation in Chapai Nababganj last year. Farmers plant seeds smuggled from India or grown and informally traded in Bangladesh.

But there was a time, when Bangladesh used to import rice seeds from India. In 2003, the value of Bangladesh’s total import of hybrid rice seed was USD2.16 million, of which import from India was worth USD1.95 million and import from China equaled only USD0.21 million. The trend, however, reversed sharply within a year and import of hybrid rice seeds stood at USD2 million while only USD20,000 was spent on importing Indian rice seeds. A reason for the sudden reversal was the bad experience with some Indian varieties in the market.

Since then, the Chinese varieties of hybrid rice-seeds have been dominating imports. In 2008, the import value of Chinese seed was USD15.7 million, which was 99 percent of total rice seed imports. In 2011, some USD7.47 million was spent to import Chinese rice seeds while the value of Indian rice seeds was USD0.15 million.

The CUTs-Unnayan Shamannay study, however, shows that Chinese seeds are costlier than Indian seeds. For example, the price of one kilogram of Chinese rice seed was USD 2.71 against USD0.46 for Indian seeds in 2011. Thus, one cannot claim that Chinese seeds are more in demand because they are cheaper. As farmers benefit from producing Chinese hybrid rice, demand and import for this seed is still high.

In this context, promoting Indo- Bangla rice seed trade is a challeng- ing task as Indo-Bangla bilateral trade has always been a sensitive issue in Bangladesh. It should be noted that export from Bangladesh to India was USD512.5 million in FY11, which dropped to USD498.5 million in FY12 but rose to USD564 million in FY13. On the other hand, import from India stood at USD4.56 billion in FY12, which surged to USD4.73 billion in FY12 and slightly dropped to USD4.70 billion in FY13. Thus Bangladesh is suffering a trade deficit of USD4.23 billion with India.

An important question is what drives these research organisations to push the agenda of formalizing bilateral seed trade. Consultation with different stakeholders, under the research initiatives revealed that there are some apprehensions among them on such trade. Some senior government officials, experts, and businessmen opined that by allowing seed trade, low quality seed from India may easily enter Bangladesh and ultimately harm local farmers. At the same time, some stakeholders expressed that formalization of the seed trade will help to get quality seed provided there is strict supervision.

Not that formal seed trade is banned but existing regulations act as a barrier. There are several non-tariff barriers and measures on the Indian side. For example, India releases quarantine certificates in 45 to 60 days for import of seeds, and this delay poses risks to seed quality and business opportunities. In contrast, this process takes only around 24 hours in Bangladesh.

The CUTs- Unnayan Shamannay study identifies policy-related problems such as lack of mutual acceptance of certified seeds, inadequate seed testing laboratories, delay in issuance of quarantine certificates, and lack of a harmonized certification process, work as barriers to trade. According to the recommendations made in the study, import permit and a phytosanitary certificate should be required to import rice seeds to Bangladesh. Furthermore, imported variety of rice must be included in the list of varieties of the National Seed Board (NSB) in Bangladesh.

Again, exporters/importers in India also require biosecurity and sanitary and phytosanitary (SPS) import permits, not only from the Ministry of Agriculture but also from the Ministry of Trade. Moreover, while importing all food products, India sends the consignment samples to testing laboratories located at places far from the customs points, which causes delays in the process.

In this connection, the two research organizations come with a set of recommendations to formalize the Indo-Bangla rice seed trade expansion. They are of the view that the gains of such trade formalization and cooperation could be in terms of market opportunity estimated at more than USD20 million, improved crop yield and food security, and better livelihood.

Bilateral cooperation is very important, as recommended. Bangladesh Agricultural Research Council (BARC), Bangladesh Agriculture Development Corporation (BADC), Indian Council of Agricultural Research (ICAR), and Central Rice Research Institute (CRRI) in India, can join hands for research and development on rice seed varieties. In fact, in 1983, BARC and ICAR had entered into an agreement to foster joint research and cooperation in the field of agriculture. But little progress has been made so far. Knowledge sharing is also important where bilateral cooperation can be bolstered.

Bangladesh and India have their own sets of laws, rules and regulations. Mentioning this fact, the study recommends complementing each other in meeting seed requirements as both the countries have similar agro-climatic conditions. Thus need for harmonization of laws, policies, regulations and standards relating to rice seed varieties is stressed by the two organisations.

While transforming an informal trade into a formal one is a daunting task, some caution is needed when the product is seed. Bangladesh is a net rice seed importer and total annual demand is estimated at around 220,000 metric tons, of which around 50 percent is locally produced and the rest of the seeds come from foreign sources. Better output is the key determinant of rice seed demand among farmers. So, awareness among farmers about the right variety suited to a particular type of soil for HYV seeds is a must to move forward with the transformation mentioned above.

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