The Narendra Modi government has rescinded a critical transshipment facility that allowed Bangladesh’s export cargo to be ferried to third countries through Indian territory.
The move is being seen as the first major retaliation by New Delhi to the intensifying “anti-India stand” of the interim government helmed by Muhammad Yunus. The decision, within a week of a meeting between Modi and Yunus on the sidelines of the Bimstec summit in Bangkok, has also ruled out the possibility of a thaw in New Delhi-Dhaka relations that plumetted after the fall of the Sheikh Hasina government last August.
“New Delhi cannot keep making friendly gestures to a country that harbours an anti-India stand in all aspects,” said an insider in India’s foreign policy establishment, explaining the “most important” trigger behind the move.
There was no official reaction from Dhaka till late on Wednesday evening.
The transshipment facility, introduced in June 2020, enabled smoother trade between Bangladesh and the West, the major market for ready-made garments that comprise about 85 per cent of the neighbouring country’s $50-billion-plus exports.
A circular — issued by the Central Board of Indirect Taxes and Customs — withdraws the facility with immediate effect, with an exception for cargo already in Indian territory at the moment.
“Our export sector will be badly hit because of this decision,” said a Dhaka-based textile magnet whose company supplies to some major global apparel brands.
“We have been bearing the brunt of the political instability for the past few months, which resulted in the closure of hundreds of ready-made garment manufacturing units. Then came the tariff blow from Donald Trump in the form of a 37 per cent levy. And now this,” he added.
Although India-Bangladesh relations nosedived after Hasina’s ouster, exporters had been using Indian land customs stations, ports and airports to ship their products to Europe and the US.
In case of ready-made garments, the transhipment facility allowed exporters to send their products to India through land ports in bonded trucks or closed containers, which were then taken to New Delhi for shipping to the final destinations — mostly through Indira Gandhi International Airport.
The benefit of cost-effective exports using Indian infrastructure had added to the competitiveness of Bangladeshi products, said a businessman in Dhaka.
“Though there are alternatives like transhipment through the Maldives, it won’t be as efficient,” he added, ruing the Indian decision.
External affairs ministry spokesperson Randhir Jaiswal attributed the decision to significant congestion at Indian airports and ports because of Bangladeshi export cargo.
“Logistical delays and higher costs were hindering our own exports and creating backlogs,” he said in response to a question.
Jaiswal said the measure would not impact Bangladesh exports to Nepal or Bhutan transiting through Indian territory.
Sources aware of the recent complexities in India-Bangladesh ties also referred to growing security concerns over consignments from the neighbouring country as a possible reason behind the move.
The “most important factor”, a source said, was Dhaka’s apparent hostility towards New Delhi, which was on full display during the Bangkok meeting.
“Our Prime Minister made a friendly gesture by agreeing to meet the chief adviser (Yunus) although he offended the whole of India by calling the Northeast landlocked and projecting Bangladesh as the region’s maritime gateway during his visit to China,” the source said.
According to him, the response from the Bangladesh side to Modi’s overture was not only in “poor taste” but also lacked “diplomatic civility”.
“They made the entire Indian delegation, including the Prime Minister, wait for the chief adviser and his team. Within minutes, a video of our Prime Minister waiting and then getting up to receive Professor Yunus went viral in Bangladeshi media, which is completely under state control.
“They had a plan to insult us and it called for some retaliation,” the source said.
Ashikur Rahman, chief economist at the Dhaka-based Centre for Policy Research, said: “This unnecessary anti-India stand is meaningless and must stop.... Both countries should work towards creating an environment for enabling larger regional trade.”
The decision, a source in a think tank specialising on India-Bangladesh relations said, will be a boon for the Indian textile industry.
“Several global textile majors are shifting their production facilities to India because of the uncertainties in Bangladesh.... The scale of the Trump tariffs on India is 26 per cent, compared to 37 per cent on Bangladesh. Denial of transhipment facilities will make Bangladeshi exports dearer and make us more competitive,” the source said.