Nadir Ali: What is your assessment of the cross-LoC trade over the last two years? What are the problems and prospects associated with this trade?
Shakeel Qalander: Cross-LOC trade was initiated as a Confidence Building Measure (CBM) in 2008, when the political situation in Kashmir was worsening. The governments across both sides responded positively and the process began in earnest. Our Chamber has always been keen that goods produced in J&K is made tradable across the border and vice-versa. When formal trade relations actually began, we told the governments of India and Pakistan that they should provide us modalities on how to operate this process. The governments decided to start with around 21 items from either side, these products were to be traded with each other. But, the trading items that we were interested in were not allowed. This was a disadvantage because of the restricted tradable items.

The other disadvantage was the poor infrastructure at hand. We wanted a big scanner; one that could scan our big trucks and check goods and items. Another distinct disadvantage was that the bridge connecting us to Pakistan- Administered Kashmir (PAK) had a very low capacity of only one ton. This made it quite unviable and costly. We did have a variety of goods which were big in volume and less in terms of price, but the transportation cost was very high. What this meant was that goods generally heavy but low on cost could not be traded due to huge transportation costs.

Another important issue is telephone communication across the LoC. Unfortunately people from our side of Kashmir cannot make phone calls to the other side, although they can call us from their side. This means that Kashmiri traders have not been able to build healthy and sustained relationships with traders from Pakistan- administered Kashmir. We appealed the government that traders be allowed telephone communication across LoC. However, the government allowed some phone connections only after a year and a half (Our chamber was among the recipients). How is a trader from Pulwama or Kupwar expected to come to our office to make phone calls to Pakistan administered Kashmir? Traders would have to dedicate one entire day just for one phone call. This to me is the biggest disadvantage in Cross-LoC trade. Without proper communication facilities good trade relations is impossible. We want communication with the PAK traders, who have established modes of communication with us. We would like the Indian government to provide us with similar facilities.

Another serious disadvantage is the barter system which is dated, and our traders are not happy with because it has no provision for information regarding buyers and the people who are supposed to be approached for receiving payments from. We want the remittance system instead.

NA: How can the above issues be addressed?
SQ: The important point is ‘remittance’. The Remittance system is very important for Cross-LoC trade. In fact, remittance is the solution to most of our problems. At the moment, we don’t know who is paying and who is taking our goods. We suggested the idea of a dual currency system in Kashmir that can be realized if accounts are maintained with two separate banks. It was proposed to the government of India and the Reserve Bank that the J&K Bank should open Nostro and Vostro accounts(The account a correspondent bank holds on behalf of a foreign bank).

This implies an account in any state bank of Pakistan, whose branch is in Muzaffarabad or Pakistan- Administrated Kashmir, albeit in Pakistani rupees. In addition, Pakistan- Administrated Kashmir should also open Nostro and Vostro accounts with the J&K Bank in Indian rupees. All transactions should then be maintained through these two accounts. This would benefit Kashmiri traders on both sides. Unfortunately this did not happen. It would also have had other positive impacts. We could have used their currency and they could have used ours. I am sure that if the governments of India and Pakistan work towards this end, it would be economically beneficial to both sides of Kashmir.

Two months back I was approached by the Indian government. They said that the RBI had decided to open an Escrow account (A separate bank account for keeping money that is the property of others) in the J&K Bank, in Indian rupees which would be converted into dollars, instead of a Vostro account. Trade would be carried out in dollars and its conversion would be in Indian rupees, and the transactions would be carried out accordingly. Subsequently, we spoke to the President of Pakistan’s Chamber of Commerce, Mr. Zulfikar Abassi, on this issue. However, he did not show any inclination, citing the Nostro and Vostro accounts (dual currency system) as a better option. Currently, we do not have either the VNsotro and Vostro accounts or Escrow.

Over the last two years, cross-LoC trade has amounted to a total of 300 crore rupees. But this trade should not be restricted only to sending items from our respective Kashmirs. Goods and items from other Indian states can also be transported across the LoC in Kashmir. If it entails custom duties, the traders should pay them here. If the government of India opens this window for trade, our local traders would be immensely benefited.

NA: If you send your products directly to Rawalpindi or Karachi in Pakistan, would it be cross-LoC trade or international trade?
SQ: It would be international trade and not Cross-LoC trade. This is why I said that if goods are sent directly to Pakistan and it entails tax, people would have to pay the tax. They should be prepared for it.

NA: Which class or section benefits most from the trade?
SQ: Exporters benefit considerably from handicrafts, but we would like the artisans to reap equal gains. We are creating schemes with the help of the government to ensure that artisans export their own products and secure benefits. In the horticulture industry, farmers should get their due profit and not the middle men. Thus, similar schemes are being created for the farmers. I believe that thus far only traders and exporters have benefited, not farmers and artisans. It is time to change this trend.

NA: What steps should be taken to enhance trade?
SQ: The first step is to increase production and productivity. We have to strengthen growth impulses. Our handicrafts products are on the wane. During the 1970s, 15 lakh artisans were involved in the handicraft industry. Today, the number has come down to 2.5 lakh. It is a matter of serious concern. In the horticulture industry, production is quite less, especially in comparison to other places that have equivalent areas of arable land. There should be good Universities and scientists educating farmers about land use and cultivation.

NA: What would international trade offer us?
SQ:  I think international trade holds promise. When trade activity is strengthened, there is obvious economic development. We have a lot of resources here, both natural and human. We are capable of producing an immense range of exportable items which can be exported nationally and internationally.

NA: Should there be any specific international trade relaxations for Kashmir traders?
SQ: There need to be some special interventions. We have raised some demands and the government is giving them due consideration. We do not have an Inland Container Depot. Ours goods go to Mumbai, Delhi, Bangalore etc for export purposes. If we have an Inland Container Depot in our state, people will be able to book export material in Kashmir and hence save on transportation costs. The government of India has provided funds for an Inland Container Depot which is under construction at Rangrate, Srinagar.  It is expected to be completed by next year. We would also expect interventions in other areas. Our crafts sector also need to modernize. Things are gradually improving. Let us hope for the best.