India has recently withdrawn the transhipment facility that allowed Bangladeshi exports to third countries via Indian Land Customs Stations (LCSs), a decision that carries significant trade and geopolitical implications.

What Was The Transhipment Facility?

Introduced in June 2020, this facility enabled Bangladesh to use India's infrastructure—ports, airports, and LCSs—for exporting goods to third countries like Bhutan, Nepal, and Myanmar. It streamlined logistics, reduced costs, and supported Bangladesh's key export sectors, particularly its ready made garment (RMG) industry. The arrangement was mutually beneficial for regional trade but heavily relied on Indian infrastructure.

Why Did India Withdraw It?

The withdrawal, effective April 8, 2025, was announced by the Central Board of Indirect Taxes and Customs (CBIC).

Several factors appear to have contributed to this decision:

Indian ports and airports reportedly faced significant congestion due to the facility. Rising air freight rates and delays were impacting India's own exports, prompting domestic lobbying groups like the Apparel Export Promotion Council (AEPC) to push for its removal.

The decision coincided with controversial remarks by Muhammad Yunus, Chief Adviser of Bangladesh's interim government. During a visit to China, Yunus described India’s north-eastern states as "landlocked" and positioned Bangladesh as their maritime gateway. He also advocated for increased Chinese economic involvement in the region, which is strategically sensitive for India. These comments likely exacerbated tensions between New Delhi and Dhaka.

Both India and Bangladesh are competitors in global textile exports. Removing the facility could benefit Indian exporters by reducing competition from Bangladeshi goods routed through Indian ports.

Implications For Bangladesh

The withdrawal is expected to disrupt Bangladesh's trade logistics:

Without access to Indian infrastructure, Bangladeshi exporters will face higher transportation costs and logistical delays. This could erode their competitiveness in price-sensitive markets.

The RMG industry, which constitutes a major portion of Bangladesh’s $50 billion export economy, is particularly vulnerable. Other sectors like leather and cotton products may also face challenges.

Landlocked neighbours such as Nepal and Bhutan, which rely on Bangladeshi goods via Indian routes, might also experience trade connectivity issues.

Geopolitical Ramifications

The move highlights growing strains in India-Bangladesh relations:

Bangladesh’s increasing engagement with China—such as seeking Chinese investment in strategic infrastructure near India’s Siliguri Corridor—has raised concerns in New Delhi about Beijing's influence in South Asia.

While India has not officially linked the withdrawal to Yunus's remarks or Dhaka's China tilt, the timing suggests it may be a response aimed at countering Bangladesh's positioning of China as a regional partner.

Domestic Benefits For India

The decision is expected to ease congestion at Indian ports and airports while potentially boosting domestic exporters in sectors like textiles and footwear. However, it risks creating diplomatic friction with both Bangladesh and other regional partners like Nepal and Bhutan.

To  sum up, India's withdrawal of the transhipment facility reflects a mix of logistical concerns, economic competition, and geopolitical signalling. While it addresses domestic priorities, it introduces new complexities in regional trade dynamics and bilateral relations with Bangladesh.

Agencies