India’s decision in April 2025 to revoke the transshipment facility for Bangladesh, originally established in 2020, continues to reverberate through South Asia’s trade and logistics landscape. For export-import and logistics professionals, the move—driven by India’s cited logistical constraints and underlying geopolitical tensions—demands a nuanced understanding of its cascading effects on Bangladesh’s supply chains, cost structures, and regional trade positioning. This analysis delves into the evolving consequences and strategic options for Bangladesh’s export sector, particularly its $50 billion readymade garment (RMG) industry, while highlighting actionable insights for professionals navigating this shift.
Escalating Costs and Supply Chain Strain
The loss of access to India’s efficient ports and airports, such as Kolkata and Delhi, has forced Bangladeshi exporters to rely heavily on domestic infrastructure like Chittagong Port and Hazrat Shahjalal International Airport. Freight charges at these facilities are up to 40% higher than India’s, with air cargo rates particularly punitive for the RMG sector’s just-in-time delivery model. By mid-2025, logistics costs for RMG exports to Europe and North America have risen by an estimated 15-20%, eroding Bangladesh’s competitiveness against rivals like Vietnam and Cambodia. Congestion at Chittagong, already operating near capacity, has led to average delays of 2-3 days, risking contract penalties and reputational damage in time-sensitive markets.
Strategic Diversification: Alternative Routes
For logistics professionals, the challenge is optimizing limited domestic capacity. Investments in warehouse automation and real-time tracking systems could mitigate bottlenecks, but scaling these requires significant capital and time. Exporters are advised to renegotiate contracts with buyers to include cost-sharing clauses or extended delivery windows to cushion the impact of delays.
Bangladesh’s response hinges on diversifying export pathways, each with distinct operational and strategic implications:
Domestic Port Modernization: Accelerating development of Payra and Matarbari deep-sea ports offers a path to logistics sovereignty. These projects could enable direct shipping to Europe and Southeast Asia, bypassing regional dependencies. However, completion timelines stretch to 2027-2028, and costs exceed $2 billion per port. Logistics firms should explore public-private partnerships (PPPs) to expedite financing, while prioritizing interim upgrades at Chittagong and Mongla for short-term relief.
China-Myanmar Economic Corridor (CMEC): Leveraging Myanmar’s Sittwe Port for access to China’s Yunnan Province logistics network is a high-risk, high-reward option. The route could integrate Bangladesh into China’s Belt and Road infrastructure, but Myanmar’s political instability and cross-border infrastructure costs (estimated at $500 million for road/rail links) pose barriers. Exporters considering this route should conduct risk assessments factoring in Myanmar’s governance challenges and potential Indian diplomatic pushback.
Colombo Port and Air Freight:
Rerouting via Sri Lanka’s Colombo Port or expanding air cargo through Gulf and ASEAN hubs is viable but costly. Colombo offers competitive sea freight rates, but transshipment adds 3-5 days to transit times. Air freight, critical for high-value RMG, faces scalability constraints due to Dhaka airport’s limited cargo capacity. Logistics professionals should negotiate bilateral air freight agreements with Gulf carriers to secure preferential rates, while exploring multimodal (sea-air) strategies to balance cost and speed.
BCIM Economic Corridor:
The Bangladesh-China-India-Myanmar (BCIM) rail corridor remains a long-term prospect. If revived, it could enable cost-effective bulk cargo movement, but India-China tensions and stalled talks since 2019 make progress unlikely before 2030. Exporters should monitor diplomatic developments but avoid banking on this option for near-term planning.
Regional Trade and Competitive Dynamics
The revocation has curtailed Bangladesh’s re-export opportunities to Nepal and Bhutan, weakening its leverage in SAARC and BIMSTEC negotiations. This isolation could cede regional trade influence to competitors like Sri Lanka or Thailand. Meanwhile, Indian textile exporters, such as Vardhman Textiles and KPR Mills, are capitalizing on Bangladesh’s logistical challenges, with some reporting a 5-7% uptick in orders as buyers shift to Indian suppliers for time-sensitive apparel.
For Bangladesh’s trade bodies, lobbying for alternative regional agreements—such as enhanced ASEAN trade pacts—could offset losses. Logistics firms should anticipate increased demand for intra-regional warehousing to support re-exports, particularly to Myanmar and Northeast India, where trade potential remains untapped.
Indian Logistics Market: Opportunities Amid Disruption
Indian logistics operators, including Container Corporation of India (CONCOR) and Gateway Distriparks, have seen a 3-5% volume drop at Kolkata and Delhi terminals due to reduced Bangladeshi cargo. However, this has freed capacity for domestic e-commerce and exports to Southeast Asia, where demand is surging. Logistics professionals should pivot to these segments, leveraging digital freight platforms to optimize terminal utilization. Indian textile exporters, meanwhile, should target buyers in Europe and North America with aggressive pricing to capture market share from Bangladesh.
Geopolitical and Regulatory Considerations
The decision’s timing, following Bangladesh’s interim Chief Adviser Muhammad Yunus’s March 2025 remarks in China about Northeast India’s “landlocked” status, underscores its strategic undertones. India’s move aligns with protecting its Siliguri Corridor, a critical geopolitical chokepoint. For export-import professionals, this highlights the need for geopolitical risk assessments in logistics planning. Additionally, India’s compliance with WTO transit rules (GATT Article V) remains under scrutiny, potentially inviting trade disputes. Exporters should monitor WTO developments and prepare contingency plans for further regional trade restrictions.
Actionable Strategies for Professionals:
Cost Management:Implement dynamic pricing models to absorb freight cost hikes, and explore freight forwarder partnerships for bulk discounts.
Infrastructure Investment: Prioritize short-term upgrades at Chittagong and Dhaka, while advocating for PPPs to fast-track deep-sea port projects.
Route Diversification: Pilot Colombo and Gulf air routes for high-priority shipments, while conducting feasibility studies for CMEC integration.
Market Positioning: Strengthen buyer relationships through transparent communication on delays, and target emerging markets like Africa to offset losses in Europe.
Geopolitical Hedging: Diversify trade partnerships beyond India and China, focusing on ASEAN and Middle Eastern markets to reduce regional dependency.
Conclusion : India’s revocation of the transshipment facility has thrust Bangladesh’s export sector into a challenging phase, with rising costs and supply chain disruptions threatening its global competitiveness. For logistics and export-import professionals, the path forward lies in strategic diversification, infrastructure investment, and proactive market repositioning. As Bangladesh navigates alternatives and India capitalizes on its logistical recalibration, the region’s trade ecosystem faces a pivotal moment—one that demands agility and foresight to maintain stability and growth.
