DHAKA — Bangladesh has cancelled a $21 million defence contract with India’s state-owned Garden Reach Shipbuilders and Engineers Ltd (GRSE), marking a significant downturn in bilateral relations between the two neighbors.
The contract, awarded in July 2024, was for an advanced ocean-going tug designed for deep-sea towing and salvage operations for the Bangladesh Navy. GRSE confirmed the cancellation in a stock exchange filing on May 21, stating it followed “mutual discussions” with the Bangladeshi government. The company noted that the financial impact would be minimal since the order accounted for only 0.8% of its ₹22,680.75 crore ($2.7 billion) order book as of March 31, 2025.
Dhaka has not officially commented on the cancellation. However, analysts suggest the move is likely a response to India’s recent trade restrictions targeting Bangladeshi goods. On May 18, India tightened import controls at Integrated Check Posts in its northeastern region, affecting shipments of ready-made garments and processed foods. This followed India’s earlier withdrawal of a transshipment facility that had allowed Bangladeshi products to reach third countries via Indian territory.
The cancellation of the tug contract, while modest in monetary terms, was a strategic symbol of defence cooperation between India and Bangladesh. Its termination highlights a growing rift between the two countries, coinciding with a shift in Bangladesh’s foreign policy after the departure of Sheikh Hasina’s administration in August 2024.
In a related update, GRSE announced on May 22 that it was selected as the lowest bidder for the Indian Navy’s Next Generation Corvette (NGC) programme. The Kolkata-based company has a strong track record, having delivered 111 warships to Indian maritime forces and friendly foreign navies.
India-Bangladesh relations have worsened in recent months amid escalating trade restrictions and political developments. India has limited imports of Bangladeshi garments to select ports, impacting exports worth $700 million annually, blocked Bangladeshi consumer goods at 11 northeastern land ports, and ended a key transit route for Bangladeshi exports to third countries via India. Bangladesh retaliated by halting yarn imports from India through land ports in mid-April.
Despite being India’s largest trading partner in the region during the 2023-24 fiscal year, with India as Bangladesh’s second-largest export market, trade ties have chilled significantly. Adding to the strain, Bangladesh’s interim government recently banned the Awami League—the party of former Prime Minister Sheikh Hasina—under anti-terrorism laws, citing security concerns.