Bangladesh has officially cancelled a ₹180.25 crore ($21 million) defence contract with Kolkata-based Garden Reach Shipbuilders & Engineers Ltd (GRSE), a public sector company under India’s Ministry of Defence.

The contract, signed in July 2024, was for the construction of an advanced ocean-going tug for the Bangladesh Navy—a specialised vessel designed for long-distance towing, salvage operations, and maritime support in open seas.

This cancellation comes amid escalating diplomatic tensions between India and Bangladesh, particularly following the ouster of former Prime Minister Sheikh Hasina and the rise of an interim administration led by Muhammad Yunus.

The new Bangladeshi leadership has shown a tilt towards China, signing significant deals and making statements that have irked New Delhi. Notably, Yunus described India’s north-east as “landlocked” and claimed Dhaka as the “only guardian” of the ocean in the region during a visit to China, heightening regional sensitivities.

The move is widely interpreted as a retaliatory response to India’s recent withdrawal of transshipment facilities for Bangladeshi cargo exports to third countries—a critical logistical link for Bangladesh’s trade.

This Indian decision followed Yunus’s controversial remarks and was compounded by India’s imposition of restrictions on imports of Bangladeshi goods, including ready-made garments and processed foods, especially through northeastern Integrated Check Posts (ICPs). These trade curbs mirrored similar restrictions earlier imposed by Dhaka on Indian goods.

The tugboat contract was part of a broader $500 million line of credit extended by India to Bangladesh for defence purchases. However, Bangladesh’s decision to cancel this order signals a shift in its defence procurement policy, reflecting a desire to diversify suppliers and reduce dependency on India.

Defence analysts also note that Bangladesh has not utilised India’s Defence Line of Credit, citing national security concerns, and has left several Indian-supplied military vehicles and equipment unused or in storage.

The cancellation of the ₹180-crore defence contract is a significant development reflecting the current diplomatic strain between India and Bangladesh. It underscores both countries’ willingness to use economic and defence ties as leverage amid shifting regional alliances and contentious political rhetoric.

Agencies