Bangladesh-India Shipbuilding Agreement Canceled

Bangladesh has cancelled a $21 million deal with a Kolkata-based Indian state-run shipbuilding firm for the construction of an advanced ocean-going tugboat amid strained relations between the two sides since Prime Minister Sheikh Hasina’s removal from power last year.

The move comes days after India on Saturday restricted imports of ready-made garments from Bangladesh only to Kolkata and Nhava Sheva ports, reports Hindustan Times.

The Garden Reach Shipbuilders and Engineers Ltd (GRSE) signed a contract for the tugboat with the Bangladesh Navy in July 2024, a month before Hasina was ousted from power. The GRSE wrote a letter to the National Stock Exchange of India Limited about the contract cancellation.

“...In terms of Regulation 30 and other applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (the ‘SEBI Listing Regulations’), we wish to inform you that the Government of the People’s Republic of Bangladesh has cancelled the order,” said the company on Wednesday in an exchange filing.

The contract was signed as India and Bangladesh agreed to strengthen defence cooperation with a long-term perspective during Hasina’s visit to India in June 2024. The deal with the GRSE for an 800-tonne ocean-going tugboat was the first major contract under India’s $500 million line of credit for defence purchases.

New Delhi this month barred imports of Bangladeshi consumer goods through 11 land border posts in the northeast. This restriction was expected to impact Bangladesh’s annual ready-made garments exports to India, worth about $700 million. As many as 93% of these goods were exported through land ports

In April, India ended an arrangement for the transshipment of Bangladeshi export cargo to third countries via Indian airports and ports. Bangladesh stopped yarn exports from India through land ports on April 13.

Bangladesh was India’s biggest trading partner in the subcontinent in FY24. India was Bangladesh’s second-largest export partner, accounting for 12% of total exports. India’s exports to Bangladesh were worth $11.06 billion in FY24. The imports from Bangladesh stood at $1.8 billion during the same period.

Bangladesh interim government head Muhammad Yunus’s remarks, appearing to leverage the geographical isolation of India’s northeastern states while seeking Chinese investments, strained the relationship further.

Yunus said India’s landlocked northeast, sharing a nearly 1,600-km border with Bangladesh, has no way to reach the ocean except through his country, and added this opens up a huge possibility of an extension of the Chinese economy.