The private sector will be kept out of a project to upgrade trade posts along India’s border, amid questions of security risks and questions over the ability of companies to run international customs centres.

Some 13 customs stations, along the border with Pakistan, Bangladesh, Myanmar and Nepal, are to be overhauled by 2009 as part of an effort to boost trade, most of which now takes place illegally.

“We wasted one year chasing public-private partnership for upgrading land customs stations," according to minister of state for commerce Jairam Ramesh. “We have decided that the entire investment on these will now come from government. We are no longer seeking a private role."

Being cautious: Minister of state for commerce Jairam Ramesh said the government wasted one year chasing public-private partnership for upgrading land customs stations.

Initially, the overhaul was meant to be through the public-private partnership, or PPP, model, that allows the private sector to charge a user fees for services it finances and runs.

The government changed its mind at a Monday meeting of external affairs minister Pranab Mukherjee, home minister Shivraj Patil and Ramesh, whose ministry is coordinating the work. At the meeting held on 24 December, the project cost was estimated at Rs853 crore.

The customs stations are to be upgraded to an “integrated check post", or ICP, that will provide complete immigration services, goods container terminals, weighing, vehicle parking and banking facilities. These posts have minimal or no infrastructure now.

The chief ministers of two states with a long international border, Meghalaya and Arunachal Pradesh, had demanded investments to boost border trade at the National Development Council meet held on 19 December. Countries bordering the north-eastern states accounted for about 6.2% of India’s exports in 2003-04.

Land trade is largely informal—or illegal—and usually highly inefficient. For instance, for items transported through Petrapole, on the border with Bangladesh, loading time in 2005 was taking up to 99 hours compared with some 30 hours it takes in a port equipped with adequate infrastructure. But, 80% of the Rs6,800 crore trade with Bangladesh in 2005-06 was through these land border posts.

“At some posts, official trade is non-existent. That is because virtually no infrastructure is available," Ramesh said. At Monday’s meeting, the government decided to spend Rs200 crore to enhance connectivity to the posts with roads and highways to encourage legal trade.

It is over a year since the Union cabinet’s first “in-principle" approval to upgrade the customs stations. The delay, Ramesh said, is on account of an “unreasonable" expectation earlier on that the private sector would invest in infrastructure in remote areas. “That is the government’s job. If after four-five years, the private sector says it can run them, we can consider it," he said.

Biswajit Dhar, a trade economist at the Indian Institute of Foreign Trade, said that the entire effort to open up border trade has a strategic and political advantage more than being a contender for “serious" economic exchanges.

“If you view the entire South-East Asia initiative, coupled with border trade regularization, at the level of examining balance sheets, you will never get anywhere. The effort to document legal and illegal trade may also not help. What will change through these efforts is the sentiment—the official dialogue tends to underplay this aspect," Dhar said.

Fifteen expressions of interest (EoI) were submitted by private companies to upgrade four of the 13 posts, including Raxaul on the Bihar-Nepal border, Petrapole, and Wagah on the Punjab-Pakistan border. They said it would cost Rs532 crore to upgrade all four, including Moreh on the Manipur-Myanmar border. The government estimates the job will cost Rs342 crore. Ramesh said the EoIs will not be pursued.

At the same meeting, the government cleared 15 other border posts, including three with China for the first time, for similar upgrades. The external affairs ministry will pursue bilateral negotiations for these.