Bangladesh has cancelled a $21 million defence contract with India’s state-owned Garden Reach Shipbuilders and Engineers Ltd (GRSE), amid growing strain in bilateral relations.
The contract, awarded in July 2024, was for an advanced ocean-going tug for the Bangladesh Navy, a vessel designed for deep-sea towing and salvage missions. GRSE, a public sector unit under India’s Ministry of Defence, confirmed the cancellation in a stock exchange filing on May 21.
According to The Hindu, GRSE stated that the cancellation was anticipated and followed “mutual discussions” with the Bangladesh government.
The company added that the financial impact would be negligible, as the order represented just 0.8% of its ₹22,680.75 crore ($2.7 billion) order book as of March 31, 2025.
No official reason was given by Dhaka. However, as reported by Business Standard, analysts view the move as a possible retaliation for New Delhi’s recent imposition of import restrictions on Bangladeshi goods.
On May 18, India tightened controls at Integrated Check Posts in its northeastern region, affecting shipments of ready-made garments and processed foods.
These measures followed India’s earlier decision to withdraw a transshipment facility that had enabled Bangladeshi goods to reach third countries via Indian territory.
The diplomatic setback comes amid a broader shift in Bangladesh’s foreign policy posture following the departure of Sheikh Hasina’s administration in August 2024.
The ocean-going tug, while modest in budgetary terms, had been a strategic symbol of India-Bangladesh defence cooperation. Its cancellation underscores a deterioration in that relationship.
In a press release on May 22, GRSE said it had been selected as the lowest bidder for the Indian Navy’s Next Generation Corvette (NGC) programme.
The company, based in Kolkata, has delivered 111 warships to Indian maritime forces and friendly foreign navies, including missile and anti-submarine corvettes.
India-Bangladesh tensions rise amid trade curbs and political crackdow
India-Bangladesh relations have deteriorated in recent months due to escalating trade restrictions and political developments.
India has restricted imports of Bangladeshi garments to select ports, impacting exports worth $700 million annually. It has also blocked Bangladeshi consumer goods at 11 northeastern land ports and ended a key transit facility for Bangladeshi exports to third countries via Indian routes.
In response, Bangladesh halted yarn imports from India through land ports in mid-April.
Despite being India’s largest trading partner in the region during FY24, and India ranking as Bangladesh’s second-largest export market, trade ties have cooled sharply.
At the same time, Bangladesh’s interim government has banned the Awami League—the party of ousted Prime Minister Sheikh Hasina—under anti-terrorism laws, citing security concerns.
