India Ends Transshipment for Bangladesh Exports

Syllabus: GS2/IR

Context

• India has formally revoked the transshipment facility that allowed Bangladesh to export goods to third countries via Indian land customs stations, ports, and airports.

Transshipment Agreement

• Introduced in 2020 by India’s Central Board of Indirect Taxes and Customs (CBIC), the agreement aimed to enhance regional connectivity and trade cooperation.
• Under this arrangement, cargo from Bangladesh could pass through Indian Land Customs Stations (LCSs) en route to ports and airports. 
• This facilitated smoother trade flows for Bangladeshi exports to regions like Europe, West Asia, and beyond.

Why was it revoked?

• India cited logistical challenges as the primary reason for rescinding the facility.
• The transshipment arrangement led to ‘significant congestion’ at Indian airports and ports. 
• This congestion resulted in delays, increased costs, and backlogs that hindered India’s own export processes.
• The move is expected to significantly impact Bangladesh’s trade logistics and costs, particularly for exports destined for Western markets.

Highlights of India Bangladesh Relations

• Independence and Liberation War: India played a crucial role in Bangladesh’s independence in 1971, supporting the Bengali nationalist movement against Pakistan’s rule.
  • This historic event laid the foundation for strong bilateral ties.
• Land Boundary Agreement (LBA): In 2015, both countries resolved long-standing border issues by exchanging enclaves and simplifying their international border, which had remained unresolved since partition in 1947.
• Connectivity: Five pre-1965 rail links have been rehabilitated between India and Bangladesh.  There are currently three railway trains operating between the two countries – Maitri Express ; Bandhan Express ; and Mitali Express.
  • The inauguration of Akhaura-Agartala cross-border rail link is a crucial step towards enhancing connectivity of northeastern India with Bangladesh. 
• Economic Relations: Bangladesh is India’s biggest trade partner in South Asia and India is the second biggest trade partner of Bangladesh in Asia.
  • The total trade turnover in FY24 touched US$ 12.90 billion.
  • India’s export to Bangladesh stood at US$ 11.06 billion in FY24.
• Trade Agreements: The two countries are members of various regional trade agreements such as the Asia Pacific Trade Agreement (APTA), the SAARC Preferential Trade Agreement (SAPTA) and the Agreement on South Asian Free Trade Area (SAFTA) which govern the tariff regimes for trade. 
• Regional Cooperation: Both countries are active members of regional organizations like SAARC (South Asian Association for Regional Cooperation) and BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation), promoting regional integration and cooperation.
• Various Joint exercises take place between the two countries:
  • Exercise Sampriti (Army) and 
  • Exercise Milan (Navy).
• In the energy sector, Bangladesh imports nearly 2,000 megawatts of electricity from India. 

Challenges

• Border Issues: Although the Land Boundary Agreement in 2015 resolved many longstanding border disputes, there are still occasional issues related to border security and illegal crossings that strain relations.
• Water Sharing: Disputes over the sharing of common rivers, such as the Teesta River, remain unresolved. 
• Trade Imbalance: While trade between India and Bangladesh has grown significantly, there remains a trade imbalance where India exports more to Bangladesh than it imports.
  • This led to economic tensions and protectionist measures.
• Cross-Border Migration and Demographic Shifts: Historical and undocumented migration from Bangladesh to Indian states like Assam and West Bengal remains a politically sensitive issue.
• Security Concerns: Issues related to border security, cross-border smuggling, and occasional incidents involving extremist groups pose security challenges for both countries, requiring continued cooperation and vigilance.
• China’s Growing Influence in Bangladesh: Bangladesh’s deepening ties with China, particularly in infrastructure and defense, is a strategic concern for India. India perceives this as a potential dilution of its strategic space.

Way Ahead

• India considers Bangladesh an important ally in South Asia, with whom it shares the longest land boundary among all its neighbours.
• Over the years, India and Bangladesh have forged a multifaceted relationship, marked by a shared history, culture, and geographical proximity. 
• By fostering dialogue, promoting inclusivity, and diversifying partnerships, they can pave the way for a stronger and more resilient bilateral relationship.

Source: BS