Online Report : Bangladesh has canceled a $21 million defense contract with a Kolkata-based Indian company, Garden Reach Shipbuilders & Engineers Ltd. (GRSE), amid diplomatic friction following India’s recent restrictions on the transit of Bangladeshi goods through its land ports.

Several leading Indian media outlets reported on Friday that the canceled deal involved the procurement of a tugboat for the Bangladesh Navy, which was to be built by GRSE, a shipbuilding company under India’s Ministry of Defence.

According to reports, the decision to scrap the order came shortly after India imposed a ban on the transportation of Bangladeshi-made garments and other goods via its land ports last Saturday. Indian media speculated that Bangladesh’s cancellation of the defense deal may be a retaliatory move.

Indian publication India Today confirmed that Bangladesh officially canceled the ?180 crore ($21 million) deal with GRSE. The vessel in question was an 800-ton tugboat, which was to be delivered under a 2023 defense loan agreement between Dhaka and New Delhi.

According to NDTV, GRSE informed the Indian stock exchange of the cancellation, stating, “We would like to inform that the Government of Bangladesh has canceled their purchase order.”

The Hindu Business Line reported that the cancellation came through mutual discussions between the two parties. The original contract was signed in July 2023 between senior officials of the Bangladesh Navy and representatives of GRSE.

The tugboat order was the first major procurement under the $500 million line of credit India extended to Bangladesh in 2023 to bolster defense cooperation. The loan was part of a broader strategic partnership initiated during the tenure of former Bangladeshi Prime Minister Sheikh Hasina, under which India pledged over $8 billion in credit lines over the last eight years.

The diplomatic strain appears to have intensified after Bangladesh’s Chief Advisor Dr. Muhammad Yunus reportedly described India’s northeastern region — known as the "Seven Sisters" — as landlocked, while referring to Bangladesh as the region’s “sole maritime gateway.” His comments, coupled with proposals to facilitate Chinese trade through Bangladesh, reportedly triggered India’s decision to restrict transit access.

While there has been no official statement from Bangladesh’s Ministry of Foreign Affairs on the cancellation, the development underscores the growing tension between the two South Asian neighbors, particularly in the defense and trade domains.