With major trade and geopolitical ramifications, India recently withdrew the transhipment facility that permitted Bangladeshi exports to third countries via Indian Land Customs Stations (LCSs).
This facility, which was introduced in June 2020, allowed Bangladesh to export goods to third countries like Bhutan, Nepal, and Myanmar by using India’s ports, airports, and LCSs. It supported Bangladesh’s main export industries, especially its ready-made garment (RMG) sector, and expedited logistics while cutting expenses. Although the agreement greatly depended on Indian infrastructure, it was advantageous for regional trade.
The Central Board of Indirect Taxes and Customs (CBIC) announced the withdrawal, which will take effect on April 8, 2025.
According to reports, the facility caused severe congestion at Indian ports and airports. India’s own exports were being impacted by rising air freight rates and delays, so domestic lobbying groups like the Apparel Export Promotion Council (AEPC) pushed for its removal.
The decision was made in response to contentious statements made by Bangladesh’s interim government’s chief adviser, Muhammad Yunus. Yunus characterized the northeastern Indian states as “landlocked” during a visit to China, positioning Bangladesh as their maritime entry point. Additionally, he promoted greater Chinese economic engagement in the area, which is strategically important to India. Tensions between Dhaka and New Delhi were probably made worse by these remarks.
Bangladesh and India are rivals in the world market for textile exports. By lessening competition from Bangladeshi goods transported through Indian ports, the facility’s removal might help Indian exporters.
Bangladeshi exporters will have to deal with increased transportation costs and logistical delays if they are unable to access Indian infrastructure. Their ability to compete in price-sensitive markets may be weakened by this.
The RMG sector, which accounts for a significant amount of Bangladesh’s $50 billion export economy, is especially at risk. There may be difficulties in other industries, such as leather and cotton goods.
Landlocked neighbors that depend on Bangladeshi goods traveling through India, like Nepal and Bhutan, may also face problems with trade connectivity.
The action demonstrates the escalating tensions between Bangladesh and India:
New Delhi is concerned about Beijing’s influence in South Asia as a result of Bangladesh’s growing engagement with China, including its request for Chinese investment in strategic infrastructure close to India’s Siliguri Corridor.
The timing of the withdrawal raises the possibility that it is a reaction to Bangladesh’s positioning of China as a regional partner, even though India has not formally connected it to Yunus’s comments or Dhaka’s China tilt.
The move may help domestic exporters in industries like textiles and footwear while also relieving traffic at Indian ports and airports. But it runs the risk of causing diplomatic rifts with Bangladesh as well as other neighbors in the region, such as Nepal and Bhutan.
In conclusion, a combination of geopolitical signaling, economic competition, and logistical concerns led to India’s decision to withdraw the transhipment facility. Even though it takes care of domestic issues, it complicates bilateral ties with Bangladesh and regional trade dynamics.
