NEW DELHI, 28 October 2006 — Taking yet another step toward improving ties with Pakistan, India yesterday approved a plan to restore direct cargo shipping links with Pakistan after a gap of 35 years, officials said.
The decision by India’s Cabinet is expected to substantially boost trade between the two neighbors. Previously, all ship cargo between the countries had to be routed through other ports such as Singapore and Dubai.
The decision was taken at a meeting of the Cabinet Committee on Economic Affairs chaired by Prime Minister Manmohan Singh. The Cabinet gave its nod to the proposal for signing revised protocol on shipping services between the two countries.
“This is a very important decision since it will increase the volume of trade and eventually bring down shipping rates,” senior minister Priya Ranjan Dasmunshi said.
In addition, ships flying Indian and Pakistani flags will be allowed to transport third-country cargo from each other’s ports, Dasmunshi said. There was no immediate word on whether the new rules would also apply to passenger and cruise ships.
Yesterday’s decision follows an agreement reached between the two countries in December to allow direct transport of cargo by ships. Direct shipping and ship visits between India and Pakistan were halted after a 1971 war that led to the creation of Bangladesh — until then the eastern part of Pakistan.
The Cabinet decision comes weeks before top officials from India and Pakistan are to meet in New Delhi to resume peace talks that were put on hold after the July bombings of Bombay’s commuter rail network. India blamed Pakistan’s spy agency and a militant group for the July 11 attacks, and has accused its neighbor of arming and training militants. Islamabad has denied the allegations.
Annual trade between India and Pakistan reached nearly $1 billion this year. But informal trade, a euphemism for cross-border smuggling, is estimated at nearly $2 billion, according to Indian industry groups.
Business leaders from both sides complain that barriers to trade are being removed too slowly and are preventing the two countries from reaching their trade potential.
Common complaints include the high cost of shipping goods between the two countries, tough visa rules that restrict business travel, and insufficient transportation links. The two neighbors, who share a 2,897-kilometer border, resumed direct trade by road only in July last year after a gap of 40 years.
