Amid the deteriorating relationship between India and Bangladesh after the fall of the Sheikh Hasina regime, the Indian government on Wednesday revoked a transshipment facility given to Bangladesh. This transshipment facility allowed Bangladesh to export its products to third countries through India using Indian ports and airports.

Under the facility granted in 2020, Bangladeshi exporters were allowed to ship their cargo to India by road or rail, from where they were further shipped to other countries. A circular issued by the Central Board of Indirect Taxes & Customs under the finance ministry’s revenue department said that that the Circular No. 29/2020-Customs dated 29.06.2020, that had granted the transshipment facility to Bangladesh, has been rescinded.

This means Bangladesh now won’t be able to export its products to other countries using Indian airports and seaports.

What was the transshipment facility?

The finance ministry in June 2020 issued a circular granting the transshipment facility to Bangladeshi exports to third countries. Under this facility, Bangladesh was allowed to send container trucks from the Petrapole Land Port located on the India-Bangladesh border, the largest land port in South Asia, to Kolkata port, Kolkata Airport’s air cargo complex, and Nhavasheva Port in Maharashtra.

Similarly, Bangladeshi exporters could ship their products from Petrapole Land Port, Gede Land Port or Ranaghat Land Port using freight trains to Nhavasheva Port, also known as Jawaharlal Nehru Port. From the ports and airports in India, the cargo was then shipped to their final destination countries.

This facility was particularly beneficial for the Bangladeshi textile sector, the largest industry in the country. While Bangladesh has major seaports at Chittagong and Mongla, using the port in Mumbai offered then logistical advantage in particular in exports to the Gulf and Europe. Shipping the goods by trucks and then trains to Mumbai for loading onto cargo ships in JNPT offered a faster route then shipping directly from Bangladesh as that needs circumventing the Indian peninsula.

Moreover, airports in Bangladesh don’t have enough cargo facilities to handle the country’s exports, and the Kolkata Airport and Delhi Airport offer that facility as it has much higher cargo handling capabilities. Also, Indian airports have direct flights to almost all routes in the world.

Apart from that, cargo shipping costs are lower in India compared to Bangladesh, offering an incentive to Bangladeshi exporters. As per Bangladeshi media reports, shipping products from Kolkata airport to the Western world costs between $1 to $2.50 per kg, while the cost is $3 to $6 for shipping from Bangladesh.

Unlike India, Bangladesh does not have regulatory control over freight charges, resulting in freight operators charging higher amounts in the country. The cost difference is so high that it is profitable for Bangladeshi exporters to ship their products to Kolkata and Delhi on trucks and trains to be loaded onto cargo planes instead of directly shipping from Dhaka Airport.

Why India revoked the facility

The decision by the Indian government came days after controversial remarks by Bangladeshi Chief Advisor Md Yunus on North East India. During his four-day visit to China last week, Yunus pitched for extension of Chinese economy, saying that as Northeast India is landlocked, Dhaka is the “only guardian of the ocean for all this region”.

“Seven states of India, eastern part of India, called seven sisters… they are landlocked country, landlocked region of India. They have no way to reach out to the ocean,” Yunus said.

“We are the only guardian of the ocean for all this region. So this opens up a huge possibility. So this could be an extension of the Chinese economy. Build things, produce things, market things, bring things to China, bring it out to the whole rest of the world,” the chief advisor of the interim govt added.

However, the Ministry of External Affairs has said that the decision was taken due to congestion at Indian airports and seaports caused by Bangladeshi shipments. MEA spokesperson Randhir Jaiswal said, “The Transshipment facility extended to Bangladesh had over a period of time resulted in significant congestion at our airports and ports. Logistical delays and higher costs were hindering our own exports and creating backlogs.”

Notably, the MEA also clarified that the withdrawal of the facility wouldn’t impact exports to Nepal and Bhutan through Indian territory.

It is a fact that Bangladeshi exports through India were causing significant congestion at Indian airports. In fact, the Apparel Export Promotion Council (AEPC) in February had requested the Central Board of Excise and Customs to cancel the transshipment facility due to this reason.

AEPC Chairman Sudhir Sekhri had said that almost 20-30 loaded trucks arrive in Delhi every day which slows down smooth movement of cargo and airlines are taking undue advantage of this. This has led to an excessive increase in air freight rates, delay in handling and processing of export cargo, and severe congestion at the Cargo Terminal at the IGI Airport, Delhi, Sekhri had added.

While the union government has cited congestion at airports and ports as the reason for withdrawing the facility, outspoken Assam CM Himanta Biswa Sarma has linked with the comments of Md Yunus. He tweeted, “India’s decision to revoke the transshipment facility for Bangladesh underscores Hon’ble Prime Minister @narendramodi‘s unwavering commitment to safeguarding national interests and the security of the Northeast region. This decisive action reflects the government’s firm stance on protecting India’s strategic and economic priorities.”

India’s decision to revoke the transshipment facility for Bangladesh underscores Hon’ble Prime Minister @narendramodi ‘s unwavering commitment to safeguarding national interests and the security of the Northeast region. This decisive action reflects the government’s firm stance…

— Himanta Biswa Sarma (@himantabiswa) April 9, 2025

Impact on Bangladeshi economy

The cancellation of the transshipment facility comes as double trouble for Bangladeshi trade, as the Donald Trump administration has imposed a 37% tariff on exports to the US from Bangladesh.

The ready-made garment (RMG) industry, a cornerstone of Bangladesh’s economy, is anticipated to face notable challenges. While direct shipping has been the primary mode for RMG exports, the withdrawal of transshipment options through India may limit alternative routes, potentially affecting timely deliveries. This could undermine Bangladesh’s competitiveness in the global apparel market.

India’s move will affect the flow of Bangladesh’s ready-made garment exports through India, especially Indira Gandhi International Airport in New Delhi, which handles a substantial volume of such shipments.

Now Bangladeshi exports will have to be shipped to Colombo, Maldives, Dubai, or Pakistan first, and then be flown to their destinations. This will add significant delays and cost to the shipments. Notably, Bangladesh has already started exploring other options since last year, and some exporters have been utilizing a sea-to-air transshipment model through the Maldives to reach global markets.

Bangladesh’s textile industry constitutes approximately 85% of the nation’s $55 billion annual exports, and the sector is already under strain as several factories were shut down in the immediate aftermath of the political upheaval. Reports indicate that around 170 factories have shut down, rendering approximately 100,000 workers unemployed. The Beximco Group alone closed 23 textile and garment units in the county, affecting 40,000 workers.

Now, the US tariff and the cancellation of transshipment through India come as additional setbacks for the industry.

It was also feared that the cancellation of the facility would have a major impact on Bangladeshi trade with Nepal and Bhutan. But later, the Indian government clarified that the decision is not applicable for these two landlocked Himalayan nations.

Move comes after BIMSTEC summit

Notably, India’s decision comes just a week after the BIMSTEC summit in Thailand, where regional connectivity was a key theme. Several connective projects were discussed at the summit, such as the India-Myanmar-Thailand Trilateral Highway.

PM Modi proposed a 21-point action plan covering different aspects of cooperation among the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) nations at the 6th BIMSTEC Summit in Bangkok. This action plan included setting upthe Sustainable Maritime Transport Centre in India.

Road, rail, air and maritime transport, and trade Facilitation are some of the major objectives of the regional organization. BIMSTEC Master Plan on Transport Connectivity includes 267 projects across maritime, road, rail, and aviation sectors, which includes 216 transport infrastructure projects.