India cancels Bangladesh’s cargo transit to third countries, says exports to Nepal, Bhutan won't be affected

Infographics: TBS

India has officially revoked the transshipment facility that previously allowed Bangladesh to export cargo to third countries via Indian land borders. However, the Indian government has clarified that exports to Nepal and Bhutan, which transit through Indian territory, will remain unaffected.

Economists and business leaders in Bangladesh have downplayed the impact of Delhi's decision, suggesting that it could affect both nations economically – particularly with India potentially losing revenue from the service.

On 8 April, India's Central Board of Indirect Taxes and Customs issued a circular rescinding its earlier directive, which had permitted Bangladesh's export cargo to pass through Indian Land Customs Stations en route to Indian ports and airports.

"It has been decided to rescind…the circular…dated June 29, 2020, as amended, with immediate effect," the new circular states.

Additionally, the notice clarifies that cargo already within India will be allowed to exit the country in accordance with the procedure outlined in the previous regulation.

According to the Indian Express, the move followed Bangladesh's advocacy for extending the Chinese economy into the strategically important Northeast India region. 

During his recent China visit, Chief Adviser Muhammad Yunus urged China to establish an economic base in Bangladesh and insisted that Bangladesh was the "only guardian of the ocean" for the region. 

"Bangladesh's plans to establish a strategic base near the Chicken's Neck area with China's assistance may have prompted this action. Bangladesh has invited Chinese investment to revitalise the airbase at Lalmonirhat, near India's Siliguri Corridor," Indian Express quoted Ajay Srivastava, former trade officer and head of the think tank.

Meanwhile, the Indian Ministry of External Affairs clarified today (9 April) that the decision will not affect Bangladesh's exports to Nepal or Bhutan transiting through Indian territory. 

"The transshipment facility extended to Bangladesh had, over a period of time, resulted in significant congestion at our airports and ports. Logistical delays and higher costs were hindering our own exports and creating backlogs. The facility, therefore, has been withdrawn on 8 April 2025," said official spokesperson at the MEA, Randhir Jaiswal, while responding to a question during the weekly briefing.

He added, "To clarify, these measures do not impact Bangladesh exports to Nepal or Bhutan transiting through Indian territory."

Industry insiders in Bangladesh say during sea route crises or cargo surges at Hazrat Shahjalal International Airport, some goods are shifted to airfreight to meet deadlines, while certain fashion brands occasionally request shipments via Indian airports.

Abdullah Hil Rakib, former senior vice president of the BGMEA, said while the change may not affect Bangladesh's business, India will lose significant revenue from the surplus cargo space allocated for Bangladeshi goods. 

Kabir Ahmed, president of the Bangladesh Freight Forwarders Association, said while the shift may create initial pressure, it can be managed through coordination between the Civil Aviation Authority, Biman Bangladesh Airlines, and Bangladesh Freight Forwarders Association, with potential use of UAE, Sri Lankan, and Maldives airports for additional cargo at similar costs, helping Bangladesh retain revenue.

The opening of Dhaka airport's third terminal, which is expected by the end of this year, will significantly boost its cargo handling capacity, with a Japanese company expected to manage ground and cargo operations, improving efficiency.

Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, told TBS, "We rarely use transshipment facilities. If pressure arises at Dhaka airport, we occasionally tranship via India. If cancelled, it won't cause much disruption, and we can instead expedite cargo services at the third terminal, with passenger services starting later if needed."

M Humayun Kabir, former ambassador, told TBS, "India's sudden decision sends a negative message. As neighbours, we rely on each other, and this bilateral matter would have been better addressed through discussion." Regarding Bangladesh's transit and transshipment benefits to India, he said, "It's not about reciprocity. We will assess it and decide accordingly."

BKMEA President Mohammad Hatem said the change won't impact exports, as alternative routes like sea-to-air shipments can be explored. However, he raised concerns over higher airfreight costs in Bangladesh compared to India, urging the interim government to investigate and reduce these costs.