India ends trans-shipment facility for Bangladesh

India’s customs department issued a circular withdrawing a trans-shipment arrangement that had been in place since June 2020. The move comes amid increasing diplomatic tensions, particularly following controversial remarks by Bangladesh's interim government chief Muhammad Yunus, who referenced the isolation of India’s Northeast while seeking Chinese investments.

What is the Trans-Shipment Facility?

• Trans-shipment refers to the movement of goods through a third country’s port or airport before reaching their final destination.
• Under the 2020 arrangement, Bangladesh was allowed to:
  • Transport goods via Indian land customs stations.
  • Export them to third countries using Indian seaports and airports (e.g., Kolkata, Haldia, or Delhi airport).
• The facility had allowed Bangladeshi export cargo to pass through Indian ports and airports en route to third countries like those in Europe, West Asia, etc.

Current state of India-Bangladesh Relations

• The India-Bangladesh relationship, once marked by high levels of cooperation and strategic convergence under Sheikh Hasina’s Awami League government, is currently undergoing a period of uncertainty and tension following major political changes in Bangladesh.
• Trade and Economic Partnership:
  • Bangladesh is India’s biggest trade partner in South Asia and India is the second biggest trade partner of Bangladesh in Asia. In the fiscal year 2023-24, Bangladesh exported goods worth USD 97 billion to India, and the total bilateral trade for that year amounted to USD 14.01 billion.
  • India is Bangladesh’s 2nd largest trading partner in Asia. It is one of the top 15 sources of FDI into Bangladesh.
  • Trade facilitation measures:
    • SAFTA duty-free access for Bangladeshi goods.
    • Border haats and Integrated Check Posts (ICPs).
    • Investment in logistics, power, and transport
• Connectivity and Infrastructure
  • Rail connectivity:
    • Operational lines: Agartala–Akhaura, Haldibari–Chilahati, Gede–Darshana, etc.
    • Passenger trains: Maitri Express, Bandhan Express, Mitali Express.
  • Port access: Under a 2023 agreement, India can use Chittagong and Mongla ports for Northeast cargo transit.
  • Inland waterways are covered under the Protocol on Inland Water Transit and Trade (PIWTT), enhancing cargo movement.
• Energy Cooperation: India-Bangladesh Friendship Pipeline (IBFPL), operational since 202
• Multilateral and Regional Cooperation:
  • Both countries are part of SAARC, BIMSTEC, BBIN, IORA, and SASEC.
  • Both the countries conduct joint exercises called Exercise Sampriti (for the army) and Exercise Bongo Sagar (for the navy).
• The India-Bangladesh relationship is currently fragile, marked by a strategic pause, mutual distrust, and increasing influence of third powers like Pakistan and China.
• The direction of ties will depend heavily on Dhaka’s foreign policy choices, India’s diplomatic engagement, and the resolution of internal political instability in Bangladesh.

Key Challenges

• Border Security: The 4,096.7 km border is prone to illegal migration, smuggling, and cross-border crime.
• Management of transboundary river water: The two countries share 54 common rivers which directly impact the livelihoods of people in both countries.
  • While both countries have signed major treaties related to river water sharing, such as the Ganga Waters Treaty and the Kushiyara River Treaty, negotiations are ongoing for other major rivers such as the
• China’s Growing Presence: Bangladesh’s ties with China in infrastructure and defense are expanding. Recent outreach to Pakistan adds to India’s strategic concerns.
• Cross-border Migration: Sensitive issue in Indian states like Assam and West Bengal.
• Minority Rights and NRC-CAA: India is concerned about the safety of Hindus in Bangladesh. Bangladesh fears potential influx of Bengali-speaking Muslims due to India’s NRC and CAA.
• Trade Imbalance: Bangladesh complains of non-tariff barriers and slow progress on broader market access.