In April 2019, cross-LoC (Line of Control) trade was suspended by India. Click here to know more.
With the increasingly strained relations with Pakistan now, it is wise that India makes a revised strategy on restarting cross-LoC trade.
When was connectivity established?
It was in 1972 that the LoC between India and Pakistan was thought of, as a part of the Shimla Agreement.
Though the LoC was mostly an issue of contention, it was 33 years later that the two governments decided to take a significant step.
On April 7, 2005, then Indian PM Manmohan Singh flagged the first cross-LoC bus, called ‘Karwaan-e-Aman’.
It was operated from the Sher-i-Kashmir stadium in Srinagar towards Muzaffarabad.
This Confidence Building Measure (CBM) came as a humanitarian reform reuniting divided families and friends.
How did trade come up?
In 2008, the two governments decided to take forward the existing transport potential to trade.
The Foreign Ministers of India and Pakistan decided to finalise the modalities of intra-Kashmir trade and truck service.
Cross-LoC trade, following barter system, thus began in October 2008.
It took place across Uri-Muzaffarabad and Poonch-Rawalakot for a list of 21 mutually agreed tradable items.
How significant was this?
The trade measure was aimed at converting social interconnectedness into commercial interdependence of the two similar yet separate sides of the LoC.
It was rightfully presumed that trade would flourish on the basis of the emotional capital of the people living on either side.
In all, the LoC gave rise to hope in the virtuous cycle between trade, trust and people-to-people connect, building bridges and reconnecting communities
The Cross-LoC trade was much more than a mere commodity exchange as the sentiments of the people attached to it kept it successful.
Importantly, cross-LoC trade did manage to connect the two divided sides of Jammu and Kashmir.
It, thereby, created a constituency of peace in an otherwise tense region.
Between 2008-2018, trade worth Rs.7,500 crore was transacted across the LoC.
This has generated more than 1.7 lakh job days and an approximate freight revenue of Rs.66.4 crore for transporters in J&K and Rs. 90.2 crore was paid to labourers.
A sizeable community of traders, businesses, transporters and labourers have benefited from this trade.
What are the trade facilitation measures to be taken?
Given the present situation in J&K, it is imperative that India plans an outreach connecting all stakeholders including the ecosystem of cross-LoC trade.
Besides, there is a need for a revised strategy towards the re-initiation of cross-LoC trade.
Concerns around transparency have negatively impacted this trade over the last decade.
So, the lack of transparency needs to be addressed in the complete ecosystem.
The measures could include standard operating procedure, invoicing, GST norms, and trader registration.
Other steps to address the long-standing concerns around cross-LoC trade include -
clarifications on harmonised system codes to avoid misrepresentation of commodities
rules of origin to avoid third country goods
GST rates and inter-State taxation rules to avoid tax evasions
a trader registration policy to ensure that credible traders are involved in the trade
Digitisation of systems and procedures at the trade facilitation centres at Uri and Poonch is another important step to help take LoC trade to the next level.
Globally too, digitisation of procedures and lower human intervention are the two major pillars that drive trade across borders.
Digital platforms to monitor invoicing, traders’ records, balancing and truck details will ensure real-time checks by the authorities, leaving lesser room for misuse.
What is the way forward?
Until the trade suspension, both bus links and trade had survived for more than a decade despite intermittent suspensions and ceasefire violations.
The current suspension of LoC trade could be seen as a window of opportunity to address the concerns hitherto unaddressed.
The cross-LOC trade should be revived in a stronger and more organised manner.
In its new avatar, Cross-LoC trade could continue to prove the value of a peace-through-trade policy, and one that has stood the test of time globally.
