Despite Indo-Pak tensions, proposals to enhance “cross-LoC” trade

By Ajai Shukla

Business Standard, 25th Nov 16

As India and Pakistan expel each other’s diplomats and the two armies trade fire across the Line of Control (LoC) in Jammu & Kashmir (J&K), the 2003 ceasefire appears increasingly fragile. Yet, even through this disruption, trade across the LoC continues, making it perhaps the most robust confidence building measure (CBM) between the two sides.

On Friday, Ram Madhav, Bharatiya Janata Party (BJP) General Secretary, and former J&K chief minister Omar Abdullah, will release a report that examines how cross-LoC trade through J&K can be enhanced and facilitated.

Since October 2008, when New Delhi and Islamabad allowed the parts of J&K they respectively control to start trading across the LoC, the two sides have traded commodities worth more than US $700 million.

According to a Standard Operating Procedure (SOP) signed between India and Pakistan, “barter trade” takes place on a mutually agreed list of 21 items (which originate in Kashmir) through two designated routes --- Uri-Muzaffarabad route at Salamabad; and Poonch-Rawalakot route at Chakkan-da-Bagh.

The tariff-free trade takes place four times a week, with 100 vehicles (each under 9 tonnes) allowed to cross the LoC each day. They must have Jammu & Kashmir (India) or Azad J&K (Pakistan) number plates.

Since New Delhi and Islamabad do not accept the LoC as an international border, the terms “trade out” and “trade in” goods are used instead of “exports” and “imports”.

The report, which Business Standard has reviewed, proposes opening more trade routes across the LoC to “enhance people-to-people contact and make trade and travel geographically easier”.

Over the years, the two sides have discussed opening a second land route in Punjab in addition to the already functioning Atari-Wagah link; and also trade through a rail link connecting Munabao in Rajasthan (India) with Khokrapar in Sindh (Pakistan). This has not moved forward.

The report proposes replacing the current barter trading system with monetised trade to reduce losses to the traders. The list of tradable items is proposed to be expanded, with harmonized system (HS) codes introduced to prevent items being misrepresented.

To mainstream LoC trade, the report recommends including LoC traders in national business chambers in India and Pakistan.

It recommends that periodic “Border Haats” (rural markets) be organized at the LoC to enhance the economic well being of communities living near the LoC, and to boost informal trade.

To improve trade infrastructure, the report proposes the installation of full body truck scanners at check-posts or Trade Facilitation Centres (TFCs) to ease and expedite inspection and minimise damage to goods. It proposes upgrading road links to the LoC, and instituting communication channels between traders.

Recognising the danger of disruption from Indo-Pakistan political downturns, the report proposes that cross-LoC trade be contextualized in terms of South Asian Association for Regional Cooperation (SAARC) trade through innovative models like “Intra-regional Cluster Trading”.

The report, entitled “Cross-LoC trade through Jammu & Kashmir” has been prepared by the market research organization, Bureau of Research on Industry & Economic Fundamentals (BRIEF). The presence of Ram Madhav and Omar Abdullah at the release is regarded as significant.

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Recommendations on LoC trade

Open more trade routes across the LoC to enhance people-to-people contact

 

Replace barter trading system with monetised trade to reduce losses.

 

Expand list of tradable items from the current 21 items.

 

Introduce “harmonized system” codes to prevent items being misrepresented.

 

Periodic “Border Haats” at the LoC to boost local communities.

 

Install “full body truck scanners” at check-posts to ease inspection.


 

Upgrade road infrastructure to reduce cost of transportation.

 

Establish formal communication channels between traders.