Bad Money Creates Parasitic Culture in J&K
by Ajay Chrungoo on 13 Mar 2009 1 Comment

On 24 January, an Enforcement Directorate official, Saji Mohan, was arrested by the Maharashtra ATS for allegedly trying to sell heroin in Oshiwara. Saji Mohan, a 1995 batch Indian Police Service officer of Jammu & Kashmir cadre, was in-charge of J&K, Himachal Pradesh and Punjab during his previous posting as Zonal Director, Narcotics Control Bureau, Chandigarh.

Saji was arrested with 12 kgs. of heroin in a club, after a tip off by Vicky Oberoi and Rajesh Kumar, previously arrested by ATS Mumbai on 17 January; 1.85 kgs. heroin was recovered from them. Both were linked to notorious Parminder Singh who used to smuggle narcotics from Pakistan and Afghanistan. After investigating Saji Mohan, ATS recovered a further 25 kgs. of heroin at Naigoan in Central Mumbai. Saji Mohan had served J&K Police in different capacities, including Additional SP Baderwah, SP Doda, SP Ramban, and the Sher-i-Kashmir Police Academy.

Close on the heels of this arrest was a 13 kg. heroin haul by the BSF after an encounter with smugglers near border outpost Pul Kanjero in Attari sector, Amritsar. Two of the smugglers were from Pakistan; they sneaked across the border, crawled up to the barbed wire fence and using ropes, tried to push the consignment through a PVC pipe used by farmers to water agricultural fields between the fence and border. A few days earlier, a woman, Saddiqiquan, who had made a fake passport to visit Pakistan, was arrested along with AkhtarAbbas in the Attari sector and 8 kgs. of heroin worth Rs. 40 crores recovered from their possession.

The arrests bring to the fore the deep roots of the narcotics trade with Jammu & Kashmir. Yet the State’s illegal economy and its implications for the polity and society is not even a peripheral concern for Kashmir analysts and think tanks.

Regular seizures of drugs along the LoC and IB, hawala money, counterfeit currency, are a regular feature of counter-terrorism operations in the state, but the Indian political discourse on Kashmir eschews this dimension. Yet experts of international repute have taken serious note of the links between terrorism in Kashmir and its financial support through the drug trade.

Yousuff Bodansky, highlighting the pan-Islamist links of terrorism in J&K, reports about the master plan for Islamist insurgency in Caucasus and Kashmir, drawn at Mogadishu, Somalia in 1996, in which Osama bin Laden and high-ranking Irani intelligence officers were present. As per Bodansky, Javed Ashraf of ISI was asked to provide arms and ammunition and pay for transporting Islamist fighters from the training camps in Afghanistan, Pakistan, Lebanon and Sudan to the new jihad fronts in Chechnya and Kashmir. Drug support for this endeavour was easy given the poppy fields of Afghanistan and parts of Pakistan.

Drugs and Narcotics

Narcotics hauls by J&K Police provide an insight into the magnitude of the problem. The arrests of Vicky Oberoi, Rajesh Kumar and Saji Mohan, along with heroin, indicate the entrenchment of narcotic cartels. These are not isolated cases.

On 15 November 2008, Ferozepur police recovered 2 kgs. of heroin worth Rs. 10 crores. The J&K Police cracked a well-knit racket of Indo-Pak trans-border narcotics smugglers operating from Jammu and Sailkot districts; three persons, all residents of Arnia, were arrested. Interrogation revealed that consignments of pure heroin totalling 60-65 kgs. were transferred to India in one year alone – its value Rs. 65 crores.

Samba Police recovered 12 kgs. of poppy straw on 11 August 2006, along with 4 kgs. of charas. Poppy straw or husk is a local variety of narcotics called bhukki, consumed mostly by drivers in north India. Both charas and bhukki are grown in Kashmir Valley.

In December 2006, the BSF recovered 25 kgs. of heroin along the international border in RS Pura area of Jammu sector. In July 2006, 4 kgs. of charas was recovered from a smuggler in Doda town. J&K Police recovered 26 kgs. of poppy husk (bhukki) and 6.5 kgs. of charas in Talab Tillo area of Jammu city on 3 June 2005. In April the same year, more than 10 kgs. of charas was recovered from a drug peddler in Kud, Udhampur.

In November 2004, in one of the biggest narcotics hauls in Jammu city, police recovered 11 kgs. of heroin worth Rs. 11 crores. In January 2002, Phagwara police arrested five persons, including two surrendered militants of Hizbul Mujahideen, with 20 kgs. of charas. In May 2003, Narcotics Control Bureau Delhi arrested Mohd. Amin Jaffer of Anantnag, a member of Al-Jihad, with 25 kg of charas.

The narcotics hauls listed above are neither exhaustive nor complete, but indicate the state of affairs. While areas adjacent to LoC and IB in Jammu sector are mainly involved in heroin smuggling, charas and the local bhukki are mainly produced in the Valley. Reports of poppy cultivation in south Kashmir and the hinterland of Wullar Lake surface occasionally.

This is only the tip of the iceberg – the number of drug addicts is daily increasing in Kashmir Valley and Jammu.

The death of a Class XII student in mysterious circumstances at Dalgate, Srinagar, in January 2004 brought the extent of drug culture in the Kashmir Valley to the fore. The dead body of the student, Mehfooz Ahmad Khan, son of Ghulam Mohi-ud-din Khan of Sanat Nagar, was recovered by a patrol party of Ram Munshi Bagh station from a parked Maruti car. Police recovered the identity card of one Shuja Rasheed, a son of a senior police officer from the car. People suspected the death was due to drug overdose.

Hawala money


‘Hawala’ money has over the years emerged as an important component of the State’s illegal economy. ‘Hawala’ has been critical in funding separatist coffers and feeding terrorist regimes. Acting as an alternative banking system for illegal transactions, a very elaborate network of hawala agents and innovative methodologies have evolved.

A prominent Pandit who visits Kashmir Valley frequently was amazed this summer when a Muslim friend took him to a ready-made garments shop in Srinagar city to observe the sale transactions. The Pandit noticed that out of many counters in the shop, only one counter was crowded with customers. After purchasing garments here, many customers tore off the brand labels after leaving the shop.

Enquiry revealed that this was a sophisticated hawala procedure. Instead of sending hard cash, hawala agents send branded ready-made garments to the Valley, which are sold at prices lower than the market value to ensure total sale. To disguise the operation, a local brand label is pasted over the original – the sale proceeds go to the earmarked destination, and the sales outlet earns a hefty commission. The process appears like normal business and circumvents the risk of sending huge sums of cash through hawala agents. Hawala operations invariably require a chain of over-ground workers and subversive tentacles.

Hawala operation came to public view via the Jain Hawala Scandal. Its Kashmir connection was visible. Jamali Khan, a Hawala operator, G.M. Bhat, a close aide of separatist leader Syed Ali Shah Geelani and legal advisor of Hurriyat Conference, and Delhi-based businessman R.K. Jain were booked after Jamali and his wife were arrested while transporting Rs. 50 lakh hawala cash to Srinagar. As per reports, all three confessed having pumped hawala money worth more than Rs. 8 crores in Kashmir Valley at the behest of Gulf, Pakistan and England-based businessmen for almost three years. This hawala operation was a part of a racket operating in the entire country.

Nasir Safi Mir, considered the financial muscle of Hurriyat Conference, was arrested for ferrying Rs. 55 lakhs, and explosives, in February 2006. Mir is Dubai-based and owns a carpet showroom and money exchange firms in the Gulf. He was spotted publicly with Hurriyat moderate leader Mirwaiz Umar Farooq. Mir’s father was arrested in 2001 for funding militant groups in Kashmir Valley.

The Mumbai 11 July 2006 serial blasts were also financed through the hawala channel. A Saudi Arabian operative, Rizwan Ahmad Davre, an IT professional, is believed to have financed the entire operation from Riyadh by channeling funds sent by LeT Commander Azam Chema from Pakistan to Mumbai. Davre single-handedly bankrolled the operation to the tune of over Rs. 1 crore that he kept sending Faizal Sheikh, suspected Mumbai LeT chief.

Police arrested one Naseer Ahmad from Bhatt Dhar in Mendhar for being part of a hawala network busted in Rajouri in September 2006. He was suspected to be transferring money to Jaish-e-Mohammad network. In July 2006, militant Aijaz Hussain was arrested in South Delhi with 2.5 kgs. of RDX and Rs. 49 lakhs of hawala money.

Police in April 2006 arrested top Hizbul Mujahideen functionary Mohammad Shafi Sheikh at Doru Sopore. He was a trained terrorist and financial controller of HM, who had distributed Rs. 41 lakhs to various local militants. The same month, a hawala network linked to Pir Panchal Regiment of Hizbul Mujahideen was busted. Its main functionary advocate Aijaz Zaki was arrested with three accomplices.

In Jan 2005, the Intelligence Bureau captured a hawala operator of Kashmir for smuggling cash consignments from New Delhi to Doda. Mushtaq Ahmad of Srinagar was arrested with Rs. 50,000 hawala money. Three other militants were arrested with hawala money of Rs. 9.38 lakhs, meant for terrorists at Bari Brahma, Jammu.

One of the main financers of terrorists in the Valley was Ayub Thakur, who died in 2004. He had created a UK-based World Kashmir Freedom Movement (WKFM) for clandestinely funding a secessionist movement in J&K. Indian officials gave the British government evidence of clandestine funding by WKFM of terrorist groups in J&K.

The UK-based Thakur’s charity failed to conceal the flow of funds into J&K for separatists and terrorists. The funds came through Standard Chartered Grindlays Bank and Development Credit Bank. A Srinagar-based newsman received Rs. 484,875 into his account in Standard Chartered Bank and Rs. 119,800 in Development Credit Bank.

On 15 November 2003, police revealed that HM financer Khalid Hussain had given a consignment of Rs. 10 lakh to Ali Mohd and his sister Nadir Tabassum (Sweety) in Sidhra, Jammu, but a major part of it was looted or misappropriated. The brother-sister duo was arrested. They had to transfer the money to Jamaal Din of Gool, the deputy financial chief of Hizbul Mujahideen for Pir Panjal range.

The ‘hawala’ transactions reveal the modus operandi of money transactions and the elaborate network of over-ground workers of this elaborate subversive network which is transforming the Kashmir Valley into a den of illegal economy and causing irreparable damage to society.

Fake Currency

By far the most important aspect of illegal economy in J&K, particularly the Valley which has received minimum attention, is the introduction of fake currency Indian notes. During the last decade, the role of fake currency seems to have crossed the boundaries of clandestine operations and is becoming part of the socio-economic culture. While the drug trade, despite its enormous role in sustaining the separatist campaign, continues to be a social taboo in the public realm, fake currency does not carry the same connotations.

Interactions of people living in Jammu with Kashmiris in the Valley reveal the widening role of fake currency there. A handicrafts trader, who after displacement shifted to Himachal, was casually told by his Valley supplier to use fake currency to increase his margin of profit! “How much do you earn in a month? Don't you want to double your earnings?” Baffled, he retorted, “You know it very well that our family has been doing this business for last six decades. We have done well by the grace of God. I have around 20 employees to pay. Yet I can’t imagine a way to double the earnings in my business in a short span of time. Are you talking about some magic?” He was stunned when told, “Take this currency (fake) and spend it gradually through your sale outlets. You will double your earnings.”

At a party, a gentleman boasted that in the mid-1990s he had seen money deposits from various post offices in the Valley done in a Jammu bank: “The post office official along with the deposits in the bigger bag handed over a smaller bag to the official in the bank.” The deposits in the bigger bag were perhaps fake currency and the money in the smaller bag was genuine, a commission to the officials in the loop of the racket.

Recently, a gentleman shared an interesting anecdote: He had received Rs. 30,000 in a business transaction, and went to deposit it in a bank. The notes were all fake. The bank official immediately questioned him; he revealed the source of the money, whereupon the businessman who had given the notes was called to the Bank premises. The said businessman came arrived nonchalantly, accepted that he had given the money, and as everyone listened with amazement to his frank admission, he calmly lifted the lid of the bukhari (room heater) and put all the 30,000 fake notes inside! Then he turned to the Bank official and said the matter was over. The Bank thought it prudent not to report the matter.

These coffee table anecdotes provide an insight into the public discourse and the realities which come to the fore from time to time. On 29 January 2009, the BSF seized 13 kgs. of heroin and Rs. 33 lakhs in fake currency notes in Attari sector. In November 2008, police arrested smugglers with heroin and fake currency worth Rs 50,000 in Ferozepur, Punjab. The same month, two smugglers were arrested with arms, narcotics and Rs 21 lakh fake currency notes. Four Kashmiri youths were arrested on 18 November 2006 with Rs. 3 lakh fake currency in denominations of Rs. 500 and Rs. 1000 in Jammu city. Incidents of recovery of fake notes have been going on for years. In January 2004, J&K police unearthed a mini composed unit for making fake currency in Trikuta Nagar from a police official’s son and recovered over Rs. 34,000 fake Indian notes.

In February 2004, Delhi Police recovered fake currency worth over Rs. 12 lakh from three persons; equipment for printing was also seized. In March 2004, J&K police arrested three racketeers in Jammu city and recovered Rs. 8.5 lakh worth fake currency from them. In December 2004, the Directorate of Revenue Intelligence seized fake currency valued at Rs. 46 lakhs and arrested four persons, including two Bangladeshi conduits.

Injection of fake currency into the Indian economy has started receiving some attention now. In August 2008, Uttar Pradesh police uncovered over Rs. 4 crore worth of fake currency notes from two State Bank of India branches in Domariaganj. It was the largest seizure of high-value currency notes and this forced a joint meeting of Intelligence Bureau, Directorate of Revenue intelligence, Ministry of Finance, Central Bureau of Investigators, and Central Economic Intelligence Bureau in September 2008. The meeting concluded that, the problem had long slipped out of criminal activity and entered the realm of national security.”

Indian Intelligence leaks suggest that in 2008, Rs. 50,000 crore fake currency notes were being pumped into Indian economy per month. These notes are printed in currency printing presses in Pakistan and are difficult to detect. The money earned from such ventures subsidizes the Pakistani economy.

Sadly, the role of the illegal economy including fake currency has not received the importance it deserves in Jammu & Kashmir, despite regular seizures of narcotics, hawala money and fake currency notes. This is intriguing considering the fact that J&K continues to be the core target for the proxy war waged by Pakistan.

Army officials say, “Earlier fake currency was handed out to allow terrorists to sustain themselves when they entered the Valley. However in the past two years it has taken on a larger objective of hurting India’s economy.” Experts admit that in J&K, a mix of fake currency with genuine money is used by terror organizations to pay their cadres and enlist clandestine logistic support from locals.

Apparent affluence

Prof. Dipanker Sen Gupta of Jammu University feels, “The state's response to an economy damaged by militancy developed along predicted lines. As in North East India, the Central Government came in with packages aimed at reviving economy through grants intended to restore infrastructure as well as other parts of economy. The effect of all this was to create an economy whose State Domestic Product (SDP) defied common logic. The ultimate twist to this bizarre economic history was the revelation by National Sample Survey Organization that Jammu & Kashmir ranked highest of all states when it came to per household asset ownership in the country with Rs. 10.87 lakhs per household.” In an economy ravaged by violence of the worst kind, how is this possible?

Meat consumption in Kashmir is three times higher than the national average. The state has the capacity to meet barely 30 percent of its demand of meat and imports nearly 70 percent from Rajasthan and Gujarat. On an average, the state consumes meat worth around Rs. 600 crores. An interestingly feature of the economic  paradox emerged in 2006 when the state accepted that despite referring 12,200 posts to Public Service Commission (PSC) and Subordinate Services Recruitment Board (SSRB) for advertisement and filling up, thousands posts were lying vacant in different state government departments, including over 7600 gazetted cadre posts. How is it possible when all respective governments identify unemployment as the main cause driving youth to militancy?

The percentage of population below poverty line in Jammu and Kashmir is 5.4%, against a national average of 27.50%. While the general public seems to be moving towards affluence, economic productivity in the state is declining. The contribution of J&K to the national Gross Domestic Product has decreased from 0.87 percent in 1999-2000 to 0.78 percent in 2005-06. The apparent affluence in the state and the unproductive economic status cannot be understood unless one factors the interplay of the illegal economy.

Illegal economy destroys entrepreneurship in society and creates a parasitic culture. Such symptoms are manifest in Jammu & Kashmir. Uttar Pradesh Police recognizes that the fake currency circulation is as high as 30 percent of the total currency in circulation; the situation is being described as a national security threat. In J&K, despite the manifest role of narcotics, hawala money and fake currency in sustaining violence and instability, no definitive estimates of illegal economy are available. Experts say, “the absence of an established quantity of fake currency in circulation has led to a regime of denial which has in turn prevented regulation.”

With the opening of the LoC for trade, the question arises that if the economic logic of such a trade does not suit separatists and Pakistan, why do they support it? Mirwaiz Omar Farooq gave a baffling statement: “It is the first step towards Kashmir's economic independence.” JKLF leader Yasin Malik said, “Freedom is closer.” The issue cannot be addressed unless there is a clear understanding about the importance which the pan-Islamist economic mafia attaches to the increased porosity of the LoC in J&K in relation to the drug grade, hawala transfers, and injection of counterfeit money.

The interest shown by Dubai-based Kashmir traders in cross-LoC trade has to be thoroughly analyzed. The implications of direct flights to Dubai as a starting point of international air traffic to Kashmir in the light of entrenchment of the illegal economy in the State needs to be viewed from a wider perspective of economic subversion of India.

Dr. Ajay Chrungoo is chairman, Panun Kashmir


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