Explainer: Why India has ended Bangladesh trans-shipment
India’s decision to terminate the trans-shipment facility extended to Bangladesh in June 2020 suggests a change in stance towards its eastern neighbour.
This key facility allowed Dhaka to use India’s Land Customs Stations for trans-shipment of export cargo, including for Bhutan, Nepal and Myanmar. It gave an impetus to Bangladesh’s exports, particularly the readymade garment sector.
Bangladesh could transport cargo through Indian borders and get it shipped from Indian ports or airports, making it a profitable venture for its exporters.
Cancellation orders
On April 8, a circular issued by the Central Board of Indirect Taxes and Customs said the trans-shipment facility had been terminated with immediate effect. A day later, Ministry of External Affairs (MEA) spokesperson Randhir Jaiswal said, “The trans-shipment facility 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. The facility, therefore, has been withdrawn.”
On apprehensions that the move could disrupt Bangladesh’s trade with Bhutan, Nepal and Myanmar, he said, “To clarify, these measures do not impact Bangladesh exports to Nepal or Bhutan transiting through Indian territory.”
Likely impact
India’s sudden move is expected to disrupt established trade routes for Bangladesh. It can lead to increased shipping costs and delivery time for Bangladesh’s exporters, particularly for goods moving through Indian airports and ports. With India’s changed ‘soft stance’, Bangladesh’s export sector can expect disruption.
Five years ago, India’s friendly gesture had streamlined Bangladesh trade, making it easier and cheaper for the country’s exporters to access international markets using Indian infrastructure.
The termination of this facility will likely increase costs for Bangladesh’s already strained export sector, especially its readymade garment industry.
The suspension could also improve the efficiency of logistics, especially at key hubs like New Delhi’s IGI airport, which handles a large portion of Bangladesh’s air cargo.
Underlying politics
The cancellation of the facility comes at a time when Bangladesh has been cosying up to China. The recent comments of Bangladesh interim government head Muhammad Yunus, too, have riled India. During his visit to China, Yunus described India’s northeastern states as a “landlocked region with no access to the ocean” and portrayed Bangladesh as the “only guardian of the ocean in the region”, suggesting this as an opportunity for China to extend its economic influence.
Bangladesh has been seeking Chinese investment in strategic infrastructure, including revitalising an airbase in Lalmonirhat, near the critical Siliguri Corridor (often referred to as Chicken’s Neck).
Another reason behind India’s decision could be pressure from the Apparel Export Promotion Council (AEPC) of India. India and Bangladesh are direct competitors in the global textile market, and AEPC has been arguing that eliminating this facility will reduce congestion at Indian airports, benefiting Indian exporters.
Rising logistical costs have added urgency to this push. Recently, air freight rates for shipments to the US and Europe have surged dramatically, putting additional strain on India’s infrastructure.
Diplomatic sources said India had been magnanimous to its neighbour, despite it being a competitor in the international market. However, “it doesn’t gel when you lovingly talk to me one day and keep hitting me at the back with a hockey stick the next day”.
India