(Adds quotes from two prime ministers, deal on $2 bln loan, trade agreement)
DHAKA, June 6 (Reuters) - India and Bangladesh signed an agreement on Saturday to simplify their 4,000-km (2,500-mile) border and clarify the identities of 52,000 living in enclaves, over four decades after the neighbours first tried to untangle complex territorial rights set down in 1713.
Under the deal, signed in Dhaka in the presence of Indian Prime Minister Narendra Modi and his Bangladeshi counterpart Sheikh Hasina, the two countries will swap some 200 tiny enclaves dotted around the border. Their inhabitants have been deprived of public services and living in squalid conditions.
A string of trade and investment agreements accompanied the land deal, with $4.5 billion of investments in power and a $2 billion credit facility for Bangladesh unveiled on Saturday.
Established by a treaty between two former princely states, the 106 Indian enclaves in Bangladesh and 92 Bangladeshi enclaves in India are islands of foreign territory inside each country.
Under the pact, each country will take over most of the enclaves on its territory and residents will have the right to stay where they are or move to the other side of the border.
“We have shown political consolidation and goodwill with the signing of this deal,” Modi, who arrived Bangladesh on a two-day state visit, told a joint news conference.
Hasina said: “I salute all the citizens of India for supporting this bill in parliament.”
The land accord was originally agreed in 1974 by Indira Gandhi of India and Sheikh Mujibur Rahman of Bangladesh. Progress stopped for a long time, however, after Mujibur was assassinated in 1975 and subsequent governments failed to agree on the transfer of enclaves.
Dhaka’s Foreign Minister Abul Hassan Mahmood Ali has described the deal, which has since been updated, as “a historic milestone in the relationship between the two neighboring south Asian countries.”
The two prime ministers, along with the chief minister of West Bengal, India Mamata Banerjee, also inaugurated bus services along the border.
INCREASE IN TRADE
The two countries are looking to boost trade and security along the border and to fight human trafficking.
India’s announcement of a $2 billion new credit line to Bangladesh follows a $1 billion assistance it provided in 2011 for infrastructure development.
Among other investments, Adani Power Limited of India and Reliance Power Limited of India signed deals worth over $4.5 billion with state-run Bangladesh Power Development Board (BPDB) to develop six units of power plants to produce 4,600 MW of electricity.
Reliance will invest $3 billion to produce 3,000 MW power, while Adani will set up two coal-fired plants with a total capacity of 1,600 MW, costing more than $1.5 billion.
“Bangladesh will be able to more than double power imports from India to 1,100 MW from 500 MW at present,” Modi said.
Aggregate trade between India and Bangladesh stood at $6.9 billion for the 2014-2015 fiscal year. However, trade is heavily in favour of India with its exports to Bangladesh at $6.2 billion.
India has accorded Bangladesh the status of zero-tariff imports for all but 25 tariff lines.
“India will invest more as Bangladesh today offered an exclusive economic zone for India and this investment will help to narrow the gap,” Modi said.
Cumulative Indian investments in Bangladesh stood at $2.5 billion in 2012-13. (Additional reporting by Krishna N. Das from New Delhi; Editing by Clelia Oziel)
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