Bangladesh has withdrawn from a $21 million agreement with Kolkata-based state-run firm Garden Reach Shipbuilders and Engineers Ltd (GRSE) for the construction of a modern ocean-going tugboat. The cancellation follows a period of escalating tensions between Dhaka and New Delhi, particularly after Prime Minister Sheikh Hasina was removed from office last year.
The decision comes shortly after India imposed restrictions on ready-made garment imports from Bangladesh, limiting them to just two ports: Kolkata and Nhava Sheva.
GRSE had signed the tugboat contract with the Bangladesh Navy in July 2024—just a month before Hasina’s ouster. On Wednesday, the company formally notified the National Stock Exchange of India about the termination.
“In compliance with Regulation 30 and other relevant provisions of the SEBI Listing Regulations, we hereby inform that the Government of the People’s Republic of Bangladesh has cancelled the order,” the GRSE said in its exchange filing.
The now-cancelled deal was a significant step in a broader effort to bolster India-Bangladesh defence cooperation, agreed upon during Hasina’s June 2024 visit to India. It was the first major project under India’s $500 million line of credit for defence-related purchases by Bangladesh.
In recent weeks, New Delhi has further strained trade ties by banning imports of Bangladeshi consumer goods through 11 land ports in India’s northeast—a move expected to severely affect Bangladesh’s $700 million annual garment exports to India, 93% of which transit through land routes.
Additionally, India ended a transit arrangement in April that allowed Bangladeshi cargo to be shipped to third countries via Indian airports and seaports. In retaliation, Bangladesh stopped allowing yarn imports from India via land ports on April 13.
Despite these tensions, Bangladesh remained India’s top trading partner in South Asia during FY24. India was Bangladesh’s second-largest export destination, accounting for 12% of its total exports, while Indian exports to Bangladesh reached $11.06 billion. Imports from Bangladesh stood at $1.8 billion in the same period.
Relations have been further strained by comments from interim Prime Minister Muhammad Yunus, who suggested leveraging India’s northeastern states’ geographical dependence on Bangladeshi ports to attract Chinese investment. He emphasized the strategic advantage of Bangladesh’s coastline for regional trade, particularly as the northeast shares a 1,600-km border with his country.
