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Cross-LoC Trade: A Boon Or Bane – Analysis


By Brig Anil Gupta (Retd)*

Trade across the Line of Control (LoC) in Jammu & Kashmir began in 2008 during Mufti Mohammad Sayeed’s first tenure as Chief Minister. Hailed as the biggest Confidence Building Measure (CBM) to bring peace in the region, it began three years after the commencement of cross-LoC travel meant to unite the divided families across the LoC.

While the Government of India was sincere in its intent and approach, our adversary Pakistan had a hidden agenda while agreeing to allow such cross-LoC interactions. The Indian side wanted to heal the wounds of the divided families, encourage cross-LoC tourism and promote “peace through trade”, but the adversary saw it as another means to promote terrorism in the troubled state of Jammu & Kashmir.

Our intelligence agencies had always been suspicious of the intent of the Pakistani deep state and kept a close vigil on the cross-LoC trade. In order to apprehend the modus-operandi of the hostile agencies, it is essential to understand the nuances of the cross-LoC trade. Readers need to understand that cross-LoC trade is different from international trade and is governed by a Standard Operating Procedure (SOP) issued by the Ministry of Home Affairs (MHA).

The cross-o trade is based on the barter system of trade against the usual currency-based trade due to non-availability of banking system and communication facilities. No excise duty or taxes are levied as in the case of regular international trade. A total of 21 tradeable items have been identified. Only items produced or manufactured on either side of the LoC are permitted to be traded. The list of items includes eatables, fruits, vegetables, dry fruits, medicinal herbs, saffron, garments and handicrafts. The list is not specific but general in nature leading to intentional/unintentional misinterpretation at times.

The trade is carried out along two routes presently namely Uri- Muzaffarabad and Poonch-Rawalakot. Trade Facilitation Centres have been built on both sides but have been provided with minimal and primitive facilities compared to the modern technological era. On the Indian side, the Facilitation Centres are located at Chakan da Bagh near Poonch and Salmabad near Uri. The trade initially was allowed only twice a week but has now been enhanced to four times a week. A total 100 truck loads are exchanged per trading day. The trucks are checked manually to ensure that they do not contain any prohibited material. There is only one X-ray machine for screening of parcels. As per estimates, trade worth about Rs 30 million per day takes place between the traders on both the routes.

The cross-LoC trade, apart for generating employment for the locals, has also been successful in developing a sizable peace constituency in the Kashmir narrative. The testimony to this is the fact that despite heightened tensions between the two nations leading to consideration of withdrawal of Most Favoured Nation status and levying of economic sanctions, there have been very few interruptions in the cross-LoC trade. It has also benefitted the trading community on both sides due to the land-locked nature of the region. However, since it is a barter trade, it is based purely on trust and good faith. Presently, there are 300 registered traders.

At times, the facility has been misused by other traders in the country to send across their goods in order to avoid the excise duty that would have been levied if traded through Wagah border, the authorised point for international trade. The trade is being mainly done between the divided families. It has also benefitted the local transporters whose trucks ply from Trade Facilitation Centres to other parts of the state.

The traders on the Indian side are keen to convert the barter trade into currency trade. However, Pakistan is unwilling for the same due to obvious reasons. While India is keen to expand the trade and open new routes like Kargil-Skardu, Turtuk-Khapulu, Gurez-Astor-Gilgit, Jhangar-Mirpur/Kotli, Jourian/Chhamb-Mirpur and Jammu-Sialkot, Pakistan is unwilling to accept the same because it apprehends that it would not get the local support in these areas it needs to carry on its nefarious design of using the facility to promote terrorism.

Ostensibly, Pakistan insists that the LoC is not an international border and hence trade across the LoC cannot be conducted as an international trade. It is an eye-wash. Pakistan has been using cross-LoC trade to finance terrorism in Kashmir Valley through Hawala transactions as well as through sale of narcotics. It has recently started sending weapon and ammunition hidden in trucks employed for cross-LoC trade after the intensified vigil and strong counter-infiltration grid deployed by the security forces along the LoC and the International Border.

How is the cross-LoC trade being exploited to generate Hawala money? Usually, in a barter system of trade items of similar nature should be exchanged. It is not happening like this here. The traders exchange goods based on value. The goods sent from POK are undervalued and exchanged with goods from this side for similar approximate value. For example, a truck containing fine high-value Turkish and Persian carpets carries an invoice of just ‘carpets’ because carpets are allowed in the barter system. The carpets are highly undervalued and exchanged for some item of similar value. The recipient trader on the Indian side is then contacted and asked to pay the difference between the actual cost of consignment received by him and the value of his traded goods to a third party in Kashmir. This is how terror is being financed by Pakistan exploiting the loop holes of barter system.

NIA has credible information about fraudulent transactions amounting to about Rs 2,100 crore at Salmabad and Rs 670 crore at Chakan da Bagh since cross-LoC trade began in 2008. Other items being used to finance terror are California Almonds (traded as Badam-giri), clothing and ‘dupatta’ (stoles).

Instances of misusing the facility for narcotics trade in 2014 and 2015 have also been reported. The money generated through sale of narcotics is also used for terror-funding. ISI has also been misusing the facility for exporting terror. The investigating agencies looking into the 2011 Delhi High Court blast case found that the three-battery remote control and the explosive used for the blasts had its roots in Pakistan and was delivered to the terrorists in Kashmir via the cross-LoC trade. The latest finding of arms and ammunition hidden in the camouflaged box of the body of a truck at the Facilitation Centre in Salmabad has confirmed beyond doubt the evil intention of the Pakistani deep state.

Why blame the adversary only? Our own approach and attitude has been lack-lustre. The need to modernise the system has been ignored by the successive governments. Dependence on manual system for checks in the modern era is nothing but sacrilege as far as national security is concerned. The need for full- body truck scanners was identified as early as 2009 but we have failed to provide them till date.

The responsibility for the trade continues to remain with MHA while the dedicated ministry for the same, i.e., Ministry of Commerce and Trade is not involved. Are we really serious about plugging the loop holes? When it comes to national security no compromise of any type should be acceptable. A serious reconsideration of the entire mechanism of cross-LoC trade is required to ensure that it only remains a boon and does not turn into a bane.

*The writer is a Jammu-based political commentator, columnist, and security and strategic analyst. Comments and suggestions on this article can be sent to [email protected]

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