Cross LOC trade began in 2008 during the first tenure as Chief Minister of Late Mufti Mohammad Sayeed. 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”, the adversary saw it as another means to promote terrorism in the troubled state of J&K.

1. Cross LOC Trade: A Boon or Bane
(Between Jammu and Kashmir in India Pak Occupied Kashmir)
Brig Veteran Anil Gupta
Cross LOC trade began in 2008 during the first tenure as Chief Minister of Late Mufti
Mohammad Sayeed. 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”, the
adversary saw it as another means to promote terrorism in the troubled state of J&K. 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-LOC trade is based on the barter system of trade against the usual currency
based trade due to non-availability of banking systemand communication facilities. No
excise duty or taxes are levied as in case of regular international trade. 21 tradable items have
been identified. Only items produced or manufactured across the either side of 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. 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 trader 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.

2. 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/Chammb-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 LOC is not an international border and hence trade across 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 the trucks
employed for cross LOC trade after the intensified vigil and strong counter-infiltration grid
deployed by the security forces along the LOC and IB.
How the cross LOC trade is 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. The
traders exchange goods based on value. The goods sent from POJK 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. 2100 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).
The 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
Delhi High Court blast case in 2011 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 camouflage box
of the body of a truck at Facilitation Centre in Salmabad has confirmed beyond doubt the
evil intention of the deep state.
Why blame the enemy 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 same, i.e., Ministry of Commerce and Trade is not involved.
Are we really serious to plug 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 author is a Jammu based columnist, political commentator, security and strategic analyst.
He can be contacted at anil5457@gmail.com)