Barter and duty-free trade across the Line of Control (LoC) has been indefinitely suspended, according to a circular from the Ministry of Home Affairs (MHA) on Thursday, April 18.This comes just two days after it was resumed (on Tuesday) following two weeks of suspension amid heavy border shelling.
The decision from the central government came after a tip-off from the National Investigation Agency (NIA) that claimed the route was being misused by Pakistani elements and trading firms, with links to militant organisations, to smuggle narcotics, weapons, and counterfeit money across the border.
The letter from the MHA said that that the Indian government has “received reports that cross-LoC trade routes in Jammu and Kashmir are being misused by Pakistan-based elements”. “This misuse involves illegal inflows of weapons, narcotics and currency,” wrote the director of MHA’s department of Jammu and Kashmir, Sulekha.
Later, the MHA issued a press release, asserting, “These trading firms are under the control of militant organisations and are engaged in LoC trade.”
The move comes in the midst of a fortnightly closure of the Kashmir highway NH 44 for civilian traffic, so as to allow troop movement. This has caused deep unrest and inconvenience in the Kashmir valley. The two regional parties, National Conference and Peoples Democratic Party, have decried the suspension of cross-border trade, calling it an electoral ploy.
What’s changed since Pulwama?
Intelligence officials believe cross-LoC trade has increased significantly since India revoked the Most Favoured Nation (MFN) status from Pakistan after the Pulwama bombing, thereby heightening the possibility of illegal trading via this route.
The MHA’s press release citing the NIA said that investigation into certain cases revealed that several Pakistan-based trading firms are being operated by “persons closely associated with banned terrorist organizations involved in fuelling terrorism/separatism”. The communique added that some of these companies have been opened by individuals who have crossed over to Pakistan and joined militant organisations.
The directive can, therefore, be seen in the light of India’s increasingly hardline stance to curb the financing of terror, especially since the February 14 terror attack on paramilitary personnel in Pulwama.
The home ministry also thinks that there is merit in the logic that the withdrawal of MFN has diverted more trade traffic to this route. “Inputs have also been received that in order to evade the consequent higher duty, LoC trade is likely to be misused to a much larger extent,” it said.
NIA has apparently asserted that “trade has changed its character to mostly third party trade and products from other regions, including foreign countries, are finding their way through this route”.
According to some estimates, the bulk of India-Pakistan trade via third-party nations like the UAE and Singapore stood at $4.7 billion in 2017-2018, as opposed to $2.4 billion by means of the formal bilateral trade that utilised the MFN status.
The MHA’s letter stated that the LoC trade mechanism was “being suspended pending the putting-into-place of a stricter regulatory regime”. “This is to ensure that only bonafide trade takes place, for the benefit of the people of Jammu and Kashmir, through this mechanism”, the circular said.
NC president Omar Abdullah, who has been CM from 2009 to 2015 reminded that the state government had been “pleading” for the installation of full truck scanners at the trade points.
“Rather than install the scanners, the government has taken the regressive and highly unfortunate step of throwing the baby out with the bath water. Instead of saving the CBM, they’ve decided to abandon it,” he said.
The Opposition hasn’t taken this kindly either
Congress leader and the leader of the Opposition in Rajya Sabha, Ghulam Nabi Azad said, “This is purely an election gimmick. The BJP is feeling that the ground is slipping under its feet and now they are desperately looking at further polarising the Lok Sabha elections,” he said.
“Using Kashmir as a scapegoat to claw its way back to power won’t help BJP. It’s an excuse to worsen ties with Pakistan, despite their peace overtures,” tweeted PDP’s Mehbooba Mufti who headed a coalition government in Kashmir with the BJP from 2015 to 2018.
She is referring to the fact that all concerns of national security of late, have converged on Pulwama, and by extension Kashmir—the highway blockade, trade suspension, and JeL ban, are all symptomatic of BJP’s poll strategy. Mufti is also likely referring to the phased release of 360 Indian fishermen held in captivity by Pakistan, as a ‘goodwill gesture‘.
Mufti also noted that Prime Minister Narendra Modi had “dismantled” an initiative of Vajpayee. “Won’t be surprised if an attack on Pakistan is in the offing,” she added.
What did a decade of cross-LoC trade look like?
Cross-LoC trade was initiated by the NDA government under then prime minister Atal Bihari Vajpayee. Although it commenced officially only in 2008, it was part of Confidence-Building Measures (CBM) that would kickstart trade relations between the two Kashmirs.
The trade has taken place four days a week, thus far, at two trade facilitation centres: at Salamabad in Baramulla district and Chakkan-da-Bagh in Poonch. It was based on the barter system and zero duty.
Over two years ago, the NIA began to probe suspicious trade and violation of norms in cross-border dealings. Cross-LoC trade over the last 10 years through both trade facilitation centres stood at $1.2 billion, according to local chambers of commerce, suggesting it is dying a slow death.
Azad, who is campaigning in Kerala, said, “The trade had almost come down to bare minimum ever since Modi took over as Prime Minister,” adding that there have been no reports of any illegalities at the two trading centres during the past few months.
“The BJP should know that the public is aware about such moves which are made in the name of their so-called national security,” he said.
According to LiveMint, trading in mangoes, red chilli and herbs will take a hit after the latest shutdown. The 21 items listed for the cross LoC trade also include bananas, embroidery items, tamarind, and cumin, for exports.
The MHA’s announcement came on the day that two constituencies in Kashmir went to polls in the second phase of the parliamentary elections. Udhampur in Jammu region saw a healthy turnout of 66.76%; Srinagar scored a dismal 13%, failing to register even half its turnout in 2014.
The state is currently under President’s rule.
Prarthana Mitra is a Staff Writer at Qrius.