War may sometimes be a necessary evil, but no matter how necessary, it is always an evil, never a good. This quote by the former American President Jimmy Carter aptly depicts the plight of thousands of Indians who lost their livelihood abruptly after a sudden decision by the Government of India to impose phenomenal increase in trade tariffs on imports from Pakistan in the aftermath of Pulwama attack.
TIn the wake of the Pulwama terrorist attack on the Indian Army, the Government of India issued a Notification (No 05/2019-Customs dated 16/02/2019) wherein the Import duty leviable on all goods originating in or exported from The Islamic Republic of Pakistan, falling under the first schedule to the Customs Tariff Act 1975 is increased to 200 per cent by amending the 1st schedule to the Customs Tariff Act.
At present more than 120 containers at Cochin Port, around 200 Containers at Tuticorin and about 90 truckloads of material is lying in the warehouse of ICP (Integrated Checkpost) at Attari border as importers are not able to pay 200 per cent duty.
The wording in the notification ‘originating from Pakistan’ shows that the cargo originated in Pakistan but will be exported from Pakistan or other countries on or after the notification date. This will restrict import from Pakistan to India, no doubt. But the word ‘exported from Pakistan’ denotes cargo has already been exported from Pakistan. Imposing a higher rate of duty on cargo sailed out from Pakistan will cause only the importer in India to lose. So, Government of India with this notification, perhaps without weighing its repercussions, is penalising the citizens whose cargo has already sailed out from Pakistan but has not yet reached Indian port.
At the same time, no barriers have been imposed on exports from India to Pakistan by any notification. In short, neither Pakistan nor Indian government is losing anything due to the wrong/ incomplete wordings in the notification but the hapless Indian importers whose cargoes are already en-route to India by sea and land route from Pakistan at the time of the notification are the losers.
“About 900 trucks were deployed in routine by various transporters for haulage of goods from ICP which are now out of business. Close to 5000 families in Punjab, directly or indirectly dependent on trade with Pakistan have been severely affected post the duty hike as no alternative employment opportunities are available in border districts”, told Pradeep Sehgal, Vice President, Indian Importers Chamber of Commerce and Industry. The districts sharing international border with Pakistan are already susceptible to anti-national and anti-social activities, hence unemployment at this scale due to closure of business will worsen the situation, Sehgal added.
Major imports from Pakistan are cement, gypsum, dry-fruits and chemicals, whereas Pakistan majorly buys cotton yarn and cotton bales from us. Fresh vegetables are another prominent export item but it was discontinued in the wake of non-tariff barrier imposed by Pakistan about three years back. Jang Bahadur Singh Sangha, a prominent vegetable producer and an exporter from India apprised that Pakistan provided a market for potato growing Indian farmers in the wake of surplus production and prevented glut in domestic market. But three years back Pakistan imposed quarantine restrictions so stringently that consignments of vegetables were either delayed or rejected on quarantine issues causing a huge dent to Indian exporters. This discouraged the exports of fresh fruits and vegetables from India to Pakistan. Landlocked location of Punjab dissuades the local producers to export via sea route, at the same time exports through land to Pakistan and further Iran and CIF countries can fetch handsome returns to farmers. Though doubling of farmers’ income remained on agenda of Modi led NDA Government it was not reflected in actions. It is so unfortunate that simple revival of trade of with Pakistan can raise incomes of farmers in many districts on Indo-Pak border, but never discussed. This does not need any fresh investment, only intention is required. Instead of doubling, the farm incomes have been squeezed due to imprudent policies.”
Rajdeep Uppal, Director Narain Eximp Corporation, Amritsar told Tehelka that a dichotomy persists between the actions and words of our policymakers. “The import duty hike, according to our Ministry of Trade and Commerce is done to isolate Pakistan. But it looks farcical when you find that Pakistan is importing whatever it feels viable from India at a cheap price. Export duties are untouched. Samjhauta Express, a twice weekly train between New Delhi and Lahore is resumed, the talks for Kartarpur corridor (proposed border corridor between two nations connecting Sikh shrines of Dera Baba Nanak Sahib and Gurudwara Darbar Sahib Kartarpur) are underway. The cross LoC barter trade between Indian side and Pak-Occupied Kashmir at Uri-Muzaffarabad and Poonch-Rawalkot route was suspended during the escalations but later resumed. In the backdrop of this, can punishing a segment of business put Pakistan at any disadvantage? This is a half-hearted effort and will not benefit anybody”.
India had given MFN status to Pak in 1996 but it was never reciprocated by them. The trade across Wagah has been to the tune of 2.4 billion USD per annum, and has depleted considerably due to tensions primarily in Kashmir. In fact the projected potential of this border outpost itself is over 70 billion dollar; it was always perceived that 10 billion in trade was indeed low hanging fruit.
However, duty-free barter trade across Trans LoC trading points (borders of Kashmir & the Kashmir occupied by Pakistan) has been substantive, to the detriment of actual fiscal trade between the countries. The dwindling relationship has also negatively impacted the socio-cultural exchanges and healthcare tourism potential in the region. “The lack of improvement in the situation even after the takeover of the new government led by Imran Khan in Pakistan, and the impending national elections in India, coupled with disruptive action in Kashmir, there seems little scope for improvement in trade and commerce presently between the two nations,” says Gunbir Singh, Past Chairman CII Punjab State.
According to Sucha Singh Gill, a senior economist and a former Professor at Punjabi University, Patiala, “Our trade is surplus with Pakistan. We import more than what we export. A steep hike in import duty will worsen the terms-of-trade and will not benefit our country.”
Enormous pressure from various “People of this region looked forward to a brighter future with the inauguration of ICP (Integrated heck Post), in 2012 by the Union Home Minister P. Chidambram, as it was expected to boost bi-lateral trade. But the flip-flops in the government policies and lack of dialogue even during the peace years failed to facilitate the trade. An investment worth 120 crore has been drained in reaping the political gains by the governments in two countries”, said Bhagwan Bansal, a prominent ginner of north India.
Arun Jimmy, proprietor of Choice Associates, Tripunithura, Ernakulam said that importers like him are in dire straits as they took financial assistance from various banks and financial institutions for export business. He told Tehelka, “We import cement from various countries including Pakistan since the said country is declared as the Most Friendly Nation (MFN) by India for trade relations in terms of World Trade Organisation guidelines. We are doing the import of cement from Pakistan and we had thus placed orders for import of more than 90 containers of cement. When the shipment was effected, the notification no. Cus 50/2017 dated 30.06.2017 for Nil Basic Customs Duty was valid and only IGST was payable. Payments were effected before 8th February 2019 and containers were shipped out from Karachi port onto the vessel before 16.02.2019. That means cargo was on the international water to India when the notification no. 05/2019 dated 16.2.2019 was issued to increase duty to 200 per cent.”
He lamented that as the containers have reached Kochi port, they are burdened with the liability of 200 per cent customs duty as per notification. Their sale was concluded prior to notification and the same was in transit when this was notified. The said notification is intended to curtail the business of Pakistan but on account of the lack of clarity in Notification No 05/2019-Customs dated 16/02/2019, the importers like us are burdened with excess customs duty. The Government should have given leniency on the import cargo, which was already concluded/ payment effected/ shipped out from Pakistan port on the date of the notification.
The lack of clarity in the notification is the reason why the higher rate of duty fell on Exim trade that had been already dispatched from Pakistan even before the date of the notification, 16.2.2019. All those affected find it unfair on the part of Indian Government to impose a higher rate of duty on the cargo on international water destined to India on the notification date, just for the reason that it was originated from Pakistan. Union government should have given leniency on the import cargo that was already concluded/ payment effected/ shipped out from Pakistan port etc. on the date of the notification and there shall be a provision to allow them to enjoy the duty exemption prevailed at least, at the time of the physical loading of the cargo from Pakistan port.
As regards transaction, the exporters rue that the full payment has been remitted well in advance, neither Pakistan nor Indian Government is losing anything but only the Indian citizens, as the money is already sent to the seller and the Indian exporters now burdened with the liability of 200 per cent customs duty. Since the full payment has been already remitted and shipment has already been loaded on the vessel and sailed out from Pakistan Port when the notification was issued, it does not dilute the Union Government’s intention to restrict the import from Pakistan to India with effect from 16.2.2019.
“We, as a patriotic Indian, have no intention to make any deal with the Pakistan supplier on or after 16.2.2019 and there is no appeal for the same. Returning the cargo which is already en route to Kochi back to Pakistan will benefit only Pakistan, as they have already received the payment and they will get the cargo also. That means India has already remitted its foreign currency and now by returning cargo to Pakistan, they will lose cargo also. Pakistan will get double benefit in contrary to our Union Government’s intention that they will not get any further benefit from our country” said Jimmy.
Purpose of the Union Government has to be fulfilled but justice is to be done equally to all Indian citizens. This can be sorted out by making a clarification or one-time exemption in the notification that whatever cargo that left Pakistan before 16.2.2019 will be allowed to customs clearance at the duty applicable before 16.2.2109 and the new notification is applicable for cargo loaded from Pakistan on or after 16.2.2109.
With the support of the latest technology, it is easy to track whether containers have been loaded onto the vessel at Karachi on or before 15.2.2109, in this regard. Cement being a perishable cargo by nature needs immediate customs clearance/delivery; hence an urgent decision is required. The quality of the cement will be deteriorated if there is undue delay in customs clearance. Moreover, the delay will result in demurrage on the container by the port and detention charge on the container by the steamer line and it will be a big blow for the importer.
The recent customs rule that import document (bill of entry) has to be submitted to customs within 24 hours of vessel’s berthing at discharge port in India, otherwise customs fine @ 5000/- per doc per day for the first three days and thereafter 10,000 per doc per day for the subsequent days till the doc is submitted to customs has to be waived off in this case, as a special case. The shipper has been importing cement for a long time and they are filing documents without any customs fine however, the delay for filing the present case is only due to the recent notification no. 05/2019 to pay customs duty @ 200 per cent. Once the import doc( bill of entry) is filed, the customs system will automatically assess customs duty @ 200 per cent on the consignment, moreover, interest on the duty also becomes payable, if there is any delay for duty payment. Therefore, the Indian importer is now in darkness.
The Honourable Kerala High Court passed an interim order to protect the interest of the Indian importers whose goods were exported from Pakistan prior to 16-2-19, the Central Government shall take appropriate decisions and has necessary power under the Customs Act under Section 25(2) to exempt.
According to the exporters, if they do not receive Duty Exemption, Waiver of Customs Fine for the delay in filing Bill of Entry and Waiver of Shipping Line detention and waiver of Port detention charges else they will have to abandon the cargo and lose all the money.
“The Chambers of Trade and Commerce in India and Pakistan have been attempting to improve the bi-lateral trade by participating in the trade expos and other events but trade and prosperity of people is not on the minds of our leaders. We stand by country if our national security is under threat but such decisions (import duty hike) will not teach Pakistan any lessons rather add to the burgeoning unemployment of our country. So may small and medium units have either closed down or scaled down operation post demonetisation and new GST regime, instead of focussing on creating more jobs we are subverting the existing ones.”, said RS Sachdeva, President, Punjab Chapter, PHD Chamber of Commerce and Industry.
While trade ties with Pakistan has been undermined on grounds of political animosity, the same has not been replicated in case of another neighbour and trade partner, China who has been supporting Pakistan in its anti-India pursuits in the international political arena. While Indian traders have vehemently opposed China dumping its goods in Indian market; there has always been a lukewarm response from government on this issue.
China in a very clandestine manner has been successful in marketing its goods to Indian market in large quantity and being a cheaper product, though may not be of quality standards attract the consumers. In the wake of China constantly supporting Pakistan in every form, the Confederation of All India Traders (CAIT) has raised the issue of boycotting Chinese products. The CAIT has urged the Government to levy a custom duty ranging from 300 per cent to 500 per cent on import of Chinese goods. It has also demanded the Government to give a special package to traders and small industries to produce quality goods at a competitive price so that our dependency on the Chinese goods is minimized. It can easily be done since whatever material is imported from China do not require any much technique and our domestic producers are comfortable to produce same goods with good quality.
Praveen Khandelwal, Secretary General of CAIT told, “Since last one month we have sent several representations to Government and hope that those are being seriously considered as China has emerged one of the most prominent enemies of India by supporting Pakistan. As such the minimum import of Chinese goods will wreck the economic structure of China as India is World’s largest market for China. Our exports are very low in comparison to imports from China. This equation needs to be equated and in all cases our exports to China must increase.”
He added that the trade volume between India and China needs to be brought down to a greater extent. We need to educate traders and consumers through a national campaign that usage of Chinese goods are not in favour of our Country and its security as long as China continue its support to Pakistan which is being used by Pak to conduct terror activities in India. The veto of China in case of declaring Masood Azhar as global terrorist is one such live example and this has happened for the fourth time which speaks the language and mindset of China.
The fact very fact of imposing trade barriers on Chinese imports has not been evaluated seriously which is resulting into greater influx of Chinese material to India. Beside tariff, the Government needs to improve vigilance at Indian ports as most of the imports from China are arriving undervalued and the valuation officer at the Ports do not take trouble to cross check the declared value. Further many times, the nomenclature shown in the bill is entirely different from the actual material.
This fact needs to be looked into seriously and preventive steps should be taken by the Government to ensure that imports from China should be on actual value basis and custom duty and IGST should be levied at actual value. If it happens, automatically the Chinese goods will become higher than Indian goods and a fair competition can be held. It is well within the authority of the Government and it must execute this authority and break the nexus between officials and importers. It is also to be ensured that imports from China should not be forwarded to grey market.
Both countries, though understand the urgent need to restore peace on two sides of the Line-of-Control, yet a solution remains a pipe dream because political interests are paramount. The military escalation between the two nuclear-armed countries post Pulwama attacks and airstrikes conducted by India on terror camps in Pakistan has caused an immense damage, both in terms of casualities and diplomatic ties. Amidst the rhetoric and mutual condemnation of political elites, the predicament of those who are on fringes and politically trivial has been relegated to the insignificant level. Withdrawal of MFN status to Pakistan, while completely understandable, considering the circumstances has major implications on trade between the neighboring countries.