Zero duty trans-LoC trade triggers a new breed of 'surrogate' traders in J&K

SRINAGAR/CHANDIGARH: Zero duty trans-LoC trade has triggered a new breed of ‘surrogate’ traders in J&K who ‘import’ and ‘export’ commodities on behalf of their masters operating from outside including Punjab. Continued silence by authorities over barter of non-Kashmiri products is encouraging Wagha lobby to enter J&K for reaping reaping the benefits of tax free trade.

It is one of the most open secrets in Amritsar’s exporter fraternity. “Everybody is going to J&K especially Jammu because it is not far away,” one trader said on the condition of anonymity. He termed Jammu a natural choice with a lot of cultural affinities and family connections adding that the margin given to the second party doesn’t impact the profitability. “Why should anybody pay 40 per cent duty when it is coming free from a few hundred kilometres away?”

Soon after the trans-LoC trade took off, Wagha traders made detailed representations to authorities in Delhi and Punjab seeking implementation of the agreement between India and Pakistan. They wanted the two sides should trade only in approved 21 items which are endemic to two parts of the erstwhile Kashmir. At one point some items were banned but the trade continued uninterrupted.

Mukesh Sindhwani, president of the Amritsar Exporters Chamber of Commerce told The ET that lack of adequate security and checks have led to the import of various illegal products. He sees zero duty trade being exploited by certain black sheep in connivance with the authorities as the main factor for all the happenings.

Government inaction forced trade to explore the second option. The zero duty regime at the LoC has attracted a number of players form Punjab who otherwise were paying duty as high as 48% on potato, 25-30% on spices, 22% on onions, informed Rajdeep Uppal, exporter of fruits and vegetables form Amritsar.

Consequently it has also a led to a dip of trade since the past few months. “The zero trade is strictly supposed to export items that are produced in J&K and import products that are endemic to PoK. However trade of items like ginger, coconut products, garlic, and spices like cardamom, chillies, and medicinal herbs are still going on,” Uppal added.

“This is a surrogate trade and we know it,” said a senior officer in the state’s finance ministry. “We know that trade has been taken over by bigger players from Punjab but they are using registration numbers of local traders for importing and exporting items.” He said they are seeking VAT from the traders simply because most of the items they trade in do not come under the ambit of trade. However, Income Tax department is planning to issue notices to the traders, informed sources said.

On Tuesday almost 99 per cent of the imports from Muzaffarabad on the Jhelum Valley Road (JVR) comprised of green gram, a spice that lacks any use in Kashmir and is diverted to markets in Indian plains. “Right now we export almost 60 per cent onions and 20 per cent spices with coconut making the balance of 20 per cent along with mangos, grapes and pineapple,” said Bilal Ahmad, general secretary of the Slamabad Traders Association.” He said the two countries have ignored the realities while deciding over the items. “There are a number of items that we can import but lack any market here and it is true about many items that are listed for export from this side,” he added.

“This is an open secret and there are black sheep everywhere,” said Nazir Ahmad Dar, president of Kashmir Chamber of Commerce and Industry. “The trade continues because we have got some families who have relatives on the other side.” Dar believes that the trans-LoC trade will continue to have the contradictions as long as the Delhi and Islamabad are not ready to make it a perfect CBM. “Primary stakeholders are gradually coming out of it and that is not good either for India or for Pakistan,” he asserted.

Notwithstanding the problems and bottlenecks, nobody is denying the significance of the trade. By the end of January last, officials say the two sides in Uri (Kashmir) and Chakan da Bagh (Poonch) have registered a business turnover of Rs 264 crores. This was despite the trade being limited to five hours, twice a week and the windows getting closed after protests over disputes or climatic reasons. From two points J&K exported material worth Rs 105.41 crores and imported worth Rs 158.50 crores.