India pulls back transshipment support for Bangladeshi exports citing competition, airport congestion, and political tensions.
India toughens its stand against Bangladesh over persecution of Hindu minorities and diplomatic overtures. In a significant policy shift that may have far-reaching implications for regional trade dynamics and bilateral ties, India has officially scrapped the transshipment facility it had granted Bangladesh for exporting cargo to third countries through Indian territory. The move comes amid growing trade concerns and a cooling of diplomatic warmth between the two neighbours.
A circular issued by the Central Board of Indirect Taxes and Customs (CBIC) on April 8 announced the immediate withdrawal of the earlier circular dated June 29, 2020, which had allowed the transshipment of Bangladeshi export cargo via Indian Land Customs Stations (LCS) to Indian seaports and airports. The earlier arrangement was designed to facilitate the movement of Bangladesh’s export consignments to countries like Bhutan, Nepal, and Myanmar more efficiently.
While the CBIC has allowed consignments that have already entered Indian territory to continue their journey under the previous provisions, the transshipment route will no longer be available for fresh consignments.
Trade Pressures and Industry Complaints
The decision follows sustained pressure from Indian exporters, particularly in the apparel and textile sector, who had expressed concerns over Bangladesh’s increasing competitiveness. Bangladesh, with its low-cost labour and high export capacity in the textile sector, has emerged as a formidable rival to India in global markets. Several Indian apparel manufacturers had lobbied the government to withdraw the special facility, citing its impact on domestic businesses.
Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), confirmed that Indian exporters had complained about reduced availability of space for Indian cargo at airports, blaming the congestion on the transshipped goods from Bangladesh.
“There were concerns that transshipment was being misused, leading to unfair competition and logistical disadvantages for Indian exporters,” Sahai noted.
During a visit to China, Yunus stirred controversy by describing Bangladesh as the “only guardian of the ocean” for India’s northeastern states, calling them “landlocked” and dependent on Dhaka for maritime access.
Diplomatic Tensions with Dhaka
The decision also comes at a time of strained diplomatic relations between New Delhi and Dhaka, particularly in light of recent remarks made by Professor Muhammad Yunus, the Chief Adviser to Bangladesh’s interim government. During a visit to China, Yunus stirred controversy by describing Bangladesh as the “only guardian of the ocean” for India’s northeastern states, calling them “landlocked” and dependent on Dhaka for maritime access.
India responded sharply to these comments, interpreting them as a veiled assertion of regional dominance by Bangladesh. Officials in New Delhi view such statements as an attempt by the current Bangladeshi leadership to increase strategic leverage over the Northeast, a region India considers geopolitically sensitive.
Yunus has also been seen as pivoting Bangladesh’s foreign policy closer to China, a move that has not gone unnoticed in New Delhi. China’s deepening economic and strategic ties with Dhaka, including infrastructure investments and port access, have raised concerns about Beijing’s growing footprint in South Asia — particularly in regions India sees as within its sphere of influence.
Regional Implications
The end of the transshipment facility could have a significant impact on Bangladesh’s export sector, especially as the country faces external economic pressures. The United States recently announced higher tariffs on a range of imports, a policy expected to adversely affect Bangladeshi exports.
Given these international headwinds, losing the Indian transshipment route could increase logistical challenges and costs for Bangladeshi exporters, possibly affecting trade volumes to neighbouring countries.
Human Rights and Bilateral Friction
Another simmering point in the India-Bangladesh relationship has been Dhaka’s handling of minority rights. New Delhi has repeatedly raised concerns over reports of persecution of minorities in Bangladesh, an issue that continues to affect public sentiment and political discourse in India.
Though the transshipment rollback is officially framed as a trade and customs decision, analysts say the move underscores the complex mix of economic competition, geopolitical maneuvering, and diplomatic disagreements shaping current India-Bangladesh relations.
As both countries head into crucial political cycles and navigate shifting regional alliances, the decision to scrap the transshipment facility may mark a turning point in South Asia’s evolving trade and strategic landscape.
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