How BD can withstand India's transshipment withdrawal

The old proverb "when life gives you lemons, make lemonade" inspires optimism and a proactive approach in the face of adversity. Even though it is viewed as a simple encouragement at personal level, history suggests that adversity can indeed be the mother of invention even on a national scale.

For Bangladesh, unexpected challenges imposed by its neighbour, India, have paradoxically spurred domestic growth and self-reliance in key sectors. Take the example of India's 2014 ban on cattle exports, which catalysed a surge in local cattle rearing, ultimately leading Bangladesh towards self-sufficiency in meat production and empowering hundreds of thousands of farmers and traders. Similarly, India's onion export restrictions in 2020, even though initially caused a record price hike, ultimately led to a notable rise in Bangladesh's domestic onion production in the following years.

Now, with India abruptly halting Bangladesh's transshipment facility-which had enabled the export of goods to third countries via Indian airports-Bangladeshi apparel exporters, particularly those dealing in fast fashion and seasonal wear that require short lead times, are left without a fast and cost-effective export route.

It is worth mentioning that the transshipment facility was introduced in 2020 as part of a bilateral agreement, and Bangladeshi exporters have been using it by paying a certain fee. Clearly, it had been a win-win arrangement for both countries, and India stands to gain no apparent benefit from withdrawing the facility. In fact, the move is widely seen as politically motivated as one Indian news outlet reports "How India Is Making Bangladesh's Yunus Pay for Cozying Up With Pakistan, China."

However, there is little reason for Dhaka to be unnerved by India's unilateral decision, as the volume of Bangladesh's RMG exports routed through the Indian transshipment facility is negligible compared to its total volume of exports. And, Bangladesh is well-positioned to overcome this challenge through its own arrangements.

Although the seaports are the primary gateway for Bangladesh's exports and imports, there is an annual demand to export over 200,000 tonnes of garments by air, which is growing by the year. This demand primarily stems from garments produced for specific seasons or under the fast fashion segment, where trends change rapidly. Products under this segment are treated as perishable goods as delayed delivery can result in order cancellations. Air shipment is also vital for the delivery of agricultural goods where time is of the essence.

Apparel makers are under constant pressure to reduce lead times. However, bureaucratic hurdles which causes delay in custom clearance as well as limited storage facility, a lack of adequate scanning facilities, and frequent equipment failures - such as scanning machines frequently going out of order-create significant obstacles to smooth export processes. These challenges hinder manufacturers' efforts to quickly deliver products.

Moreover, due to higher jet fuel prices along with higher taxes, ground handling fees, and other airport charges, it has often been more economical for exporters to transship goods via Indian airports like Kolkata or Delhi rather than directly through Dhaka.

Despite this, of the annual 200,000-tonne air shipment demand, approximately 80 to 85 per cent was already being handled through Hazrat Shahjalal International Airport (HSIA), with only 15 to 20 per cent previously routed via Indian airports under the transshipment arrangement. To put this into perspective, between January 2024 and March 2025, just over 34,900 tonnes of garments-worth $462 million -were shipped through India. For a country that exports over $40 billion worth of garments annually, managing this small portion of redirected shipments is not supposed to be a big deal.

As a matter of fact, there is a silver lining in this disruption. The authorities here in Bangladesh started considering it is an opportunity for Bangladesh to enhance its air-cargo shipment capacity, which will pave the way for greater control over its supply chain. Needless to say, it would also greatly boost government's revenue. The authorities have already decided to begin air cargo operations from both Sylhet and Chattogram airports, with air shipment from Sylhet set to commence on April 27.

Meanwhile, efforts are being ramped up to accelerate the operation of the third terminal at HSIA by as early as October this year. The third terminal is expected to boost HSIA's cargo handling capacity to 546,000 tonnes annually-a significant increase from the current capacity of 200,000 tonnes handled by Terminals 1 and 2. That means the third terminal will triple the airport's export cargo handling capability.

Although a "soft inauguration" of the terminal was held by the then-Awami League government in October 2023 ahead of the national election, it was nothing but a farce. The terminal is yet to become operational. The latest report suggests that 98 per cent of the terminal's construction is complete, with only exterior infrastructure works remaining, which are going on in full swing. Several operational components-including equipment installation, calibration, and testing-are being carried. The Civil Aviation Authority is currently in talks with the Japan International Cooperation Agency (JICA) regarding ground-handling services. The authorities are hopeful of completing these tasks by June of this year. Once completed, the terminal could be a game changer for the country's aviation sector.

So, while India's withdrawal of the transshipment facility may initially pose challenges and raise export costs to some extent, with foresight, policy backing, and strategic investment, Bangladesh can transform this setback into a catalyst for boosting air cargo logistics and port infrastructure. Bangladesh must seize this moment by streamlining regulatory reforms, reducing costs and leveraging its expanding airport capacity.

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