Bangladesh Cancels $21m Defence Deal with Indian Firm

Bangladesh has cancelled a $21 million defence contract with Indian state-owned company Garden Reach Shipbuilders & Engineers Ltd. (GRSE), against the backdrop of rising diplomatic tensions following India’s recent restrictions on the transit of Bangladeshi goods through its land ports.

The cancelled deal involved the procurement of an 800-tonne tugboat for the Bangladesh Navy, which was to be built under a 2023 defence loan agreement between Dhaka and New Delhi. The vessel was the first major acquisition under a $500 million line of credit India had extended to Bangladesh to strengthen bilateral defence cooperation.

The decision to scrap the contract came shortly after India imposed a ban on the movement of Bangladeshi-made garments and other goods via land ports. The cancellation is widely viewed as a potential response to that move.

GRSE confirmed the cancellation in a statement to the Indian stock exchange, noting that the Government of Bangladesh had withdrawn the purchase order. The contract had originally been signed in July 2023 following negotiations between Bangladeshi naval officials and representatives from the Indian shipbuilding firm.

The development adds to growing strain in bilateral ties, especially in the defence and trade sectors. Tensions have reportedly deepened following remarks by Bangladesh’s Chief Advisor Dr. Muhammad Yunus, who described India’s northeastern region as landlocked and referred to Bangladesh as its sole maritime gateway. His comments, coupled with suggestions to enable Chinese trade through Bangladeshi territory, are believed to have influenced India’s decision to tighten transit access.

Although no official statement has yet been issued by Bangladesh’s Ministry of Foreign Affairs regarding the cancellation, the move highlights the fragile state of relations between the two neighbouring countries.