Relations between Bangladesh and India continue to sour, as Bangladesh has scrapped a $21 million defence contract with India’s state-owned shipbuilder, Garden Reach Shipbuilders and Engineers Ltd (GRSE).
The contract, awarded in July 2024, was for the supply of an advanced ocean-going tug for the Bangladesh Navy—a vessel intended for deep-sea towing and salvage operations. GRSE, a key player under India’s Ministry of Defence, confirmed the cancellation in a stock exchange disclosure on May 21.
GRSE noted that the cancellation had been anticipated, following “mutual discussions” with Bangladesh. The company also stated that the financial impact would be minimal, as the order made up only 0.8% of its ₹22,680.75 crore ($2.7 billion) order book as of March 31, 2025.
While Dhaka has not provided an official explanation, Business Standard reports suggest the cancellation could be a response to India’s recent tightening of import restrictions on Bangladeshi goods. On May 18, India imposed new controls at Integrated Check Posts in the northeast, disrupting shipments of ready-made garments and processed food products. This follows India’s earlier decision to end a transshipment facility that allowed Bangladeshi goods to transit through Indian territory to reach third-country markets.
The cancellation of the ocean-going tug contract—though minor in budgetary terms—represents a significant setback for India-Bangladesh defence cooperation.
A Broader Diplomatic Strain
The rift emerges amid wider geopolitical shifts following the departure of Bangladesh’s Sheikh Hasina-led administration in August 2024. Bangladesh’s interim government has since banned the Awami League, Hasina’s party, under anti-terrorism laws, citing security concerns.
Meanwhile, India has further restricted Bangladeshi garment imports to selected ports, impacting trade worth approximately $700 million annually. Additionally, India has blocked Bangladeshi consumer goods at 11 northeastern land ports, leading Bangladesh to suspend yarn imports from India in mid-April.
Despite Bangladesh being India’s largest regional trading partner during FY24, and India serving as Bangladesh’s second-largest export destination, these developments have sharply cooled economic ties between the two nations.
GRSE’s Future Prospects
Despite the setback, GRSE reported in a press release on May 22 that it had been selected as the lowest bidder for the Indian Navy’s Next Generation Corvette (NGC) programme. Based in Kolkata, GRSE has delivered 111 warships to India and friendly navies, including missile and anti-submarine corvettes.
