Srinagar: Trade across the line of control (LoC) has been suspended by the home ministry after reports that Pakistan-based terror groups were using LoC trade routes “for funneling illegal weapons, narcotics and fake currency”.

The decision taken on Thursday aims at cutting down terror funding and stopping the misuse of the LoC trade routes. The trade between the two countries was to enable the exchange of consumer goods through facilitation centres in Salamabad, Uri, Baramulla and Chakkan-da-bagh. The suspension of trade comes two months after the Jaish-e-Mohammed (JeM) attack on a Central Reserve Police Force (CRPF) convoy in Pulwama that killed more than 40 jawans.

The ministry, “It has been revealed that trade has changed its character to mostly third-party trade, and products from other regions, including foreign countries, are finding their way (to India) through this route. Unscrupulous and anti-national elements are using the route as a conduit for hawala money, drugs and weapons, under the garb of this trade.”

Several trading groups were working in collaboration with banned terrorist organisations involved in encouraging separatism in the Kashmir Valley.

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A senior intelligence officer with the National Investigation Agency (NIA) said, “One of the main sources of funds is invoicing fraud during trade deals. If a retailer in Pakistan says he is buying dry fruits from Kashmir worth Rs 25 lakh, he actually pays the wholesaler in Kashmir Rs 1 crore, while the invoice reflects the former amount. The remaining Rs 75 lakh is then released in very small instalments of Rs 1.5-2 lakh to fund terror activities or train militants in Kashmir.”

The officer added that the main source of illegal income was through the trade of carpets and dry fruits. He also said that investigations have revealed that certain individuals, who had crossed into Pakistan, have joined militant organisations and have opened trading firms in Pakistan. The funds generated are used by militant organisations and terrorists for sustenance.

Sources from within the home ministry said the suspension was temporary while strict regulatory mechanisms were being put in place.

A senior ministry official said, “The main objective of allowing LoC trade between J&K and POJK (Pakistan-occupied Jammu and Kashmir) was to encourage local trade and exchange of locally-made and grown products. However, this facility was misused by some influential local businessmen. Hence, the government has suspended the LoC trade at Salamabad and Chakkan-da-Bagh in Jammu and Kashmir.”