The Ministry of Home Affairs said a probe conducted by the National Investigation Agency (NIA) had revealed that some individuals, who have crossed over to Pakistan and joined militant organisations, have opened trading firms there and these were under the control of militant organisations and were engaged in the LoC trade.
Noting that India had already withdrawn the Most Favoured Nation (MFN) status to Pakistan after the Pulwama terror attack, it said the latest action has been taken after receipt of inputs that “in order to evade the consequent higher duty, LoC trade is likely to be misused to a much larger extent”.
“It has, therefore, been decided by the government to suspend the LoC trade at Salamabad and Chakkan-da-Bagh in Jammu and Kashmir with immediate effect.”
Meanwhile, “a stricter regulatory and enforcement mechanism is being worked out and will be put in place in consultation with various agencies”, it said, adding the issue of reopening of LoC trade will be revisited thereafter.
The government, it said, “has been receiving reports that the cross-LoC trade routes are being misused by the Pakistan-based elements for funnelling illegal weapons, narcotics and fake currency etc”.
The LoC trade, meant to facilitate exchange of goods of common use between local populations across the LoC in Jammu and Kashmir, is allowed through two trade facilitation centres located at Salamabad in Baramulla district and Chakkan-da-Bagh in Poonch district.
The trade takes place four days a week and is based on barter system and zero duty basis.
“However, reports have been received that the LoC trade is being misused on very large scale. It has been revealed that the trade has changed its character to mostly third party trade and products from other regions, including foreign countries, are finding their way through this route,” the statement said.
“Unscrupulous and anti-national elements are using the route as a conduit for hawala money, drugs and weapons, under the garb of this trade,” it added.
The MHA said that during the ongoing investigations of certain cases by NIA, “it has been brought out that a significant number of trading concerns engaged in LoC trade are being operated by persons closely associated with banned terrorist organisations involved in fuelling terrorism/separatism”.