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Impact of internet shutdown in Kashmir: Losses Rs 178.78 billion, 500,000 lose jobs

Reproduced below is the chapter “Enterprise runs Aground” in the 125-page report “Kashmir’s Internet Siege”, published by the Jammu Kashmir Coalition of Civil Society (JKCCS), calling the communications blockade as an act of “digital apartheid”, a form of a form of “systemic and pervasive” discriminatory treatment and “collective punishment”:
In Jammu & Kashmir the months between August and December are critical for tourism, horticulture, and handicrafts, which together constitute a major segment of its economy. The shutdown of August 2019 had severe economic consequences and the losses suffered by various businesses in the five months after were estimated by the Kashmir Chambers of Commerce and Industry (KCCI) at Rs 178.78 billion. The KCCI report also estimated that more than 500,000 people lost their jobs in the valley in the same period. 
The communications blockade that accompanied the lockdown also made apparent how reliant business, trade and manufacture in Kashmir had become on the internet. A report from the Indian Council for Research on International Economic Relations (ICRIER 2018) had previously drawn attention to the fact that internet curbs between 2012-2017 had cost Kashmir’s economy Rs 40 billion. In comparison the first five months of the 2019 shutdown cost the economy more than the intermittent shutdowns of five previous years.


Accustomed to the frequent disruptions in physical movement in the region, including those caused by curfews and hartals, small business and trade in J&K had quickly adapted to e-banking. J&K Bank, a prominent bank in the region, first introduced e-banking around 2007, and its convenience and cost-effectiveness can be measured by the fact that almost 1.1 million traders and businessmen have signed up for these services with the bank. Most retail shopkeepers in Kashmir have also moved their cash collection to Point-of-Sale machines, which rely on mobile internet. One sharp indicator of the distress caused by the shutdown was the increase in defaults in instalment payments to the J&K Bank: they rose from 125 before August 5th, 2019 to 11,578 in September 2019.
For the retail consumer the internet shutdown disabled access to all modes of netbanking, as well as various online payment portals, including mPay and Paytm. For those who had children studying outside Kashmir, or family members in hospitals far away from home, this meant that the speedy transfer of money through online services came to a dead halt. Locally too there were immediate repercussions. "The number of utility bills we used to handle had dropped significantly as people would pay these online," a JK Bank official told the Economic Times, "But now everyone has to come to the bank, resulting in long queues, which has affected our productivity also."
This loss of e-banking had other direct costs. For any bank the average ‘cost per transaction’— depositing cash or a cheque, or transferring money—is approximately Rs 70-80. Conducted via ATM, this cost drops to Rs 18-20. Online banking brings per transaction costs down to around Rs 4-5. In J&K Bank where 80% of the transactions are to do with funds transfer and cash (withdrawal or deposit), e-banking is more than a convenience for retail customers. These savings play a crucial role in shoring up the bottom-line of the Bank, JKCCS researchers learnt.
Operating within a conflict zone has provided bankers in Kashmir with some training for such internet shutdowns. However the August 2019 shutdown was unprecedented in the complete disabling of broadband, mobile telephones as well as landline phones. Without access to email or SMS, J&K Bank had to place notices in newspapers to reach out to their customers. (Even to place the advertisement someone had to physically carry the material on a pen-drive to the newspaper office.) Within the bank, only the controlling office had a leased line, and working internet. For the rest, drivers and peons were assigned the job of carrying information from one office to another, and from the headquarter to different zones. Eventually the Bank had to revive a long-neglected intranet, a privately owned network for communication within the organisation. In order to access important clients in other cities and across the world, officials in J&K Bank were reaching out to their colleagues in other branches. Until the end of October, they were running parallel offices in Mumbai and Delhi, JKCCS researchers were told, incurring huge costs, and facing the loss of many clients due to their inability to provide services.


The internet siege caused major disruptions in the handicrafts sector, a major industry in Kashmir with more than 250,000 registered weavers and artisans. The President of KCCI estimated that 60,000 to 70,000 of these artisans had been rendered unemployed. For the handicrafts industry the months of August and September are the main period when orders flow in from all across the world, in preparation for the winter and Christmas holiday season. Kashmir Box, an online store for Kashmiri handicrafts, which ships local products to over 50 countries worldwide, reported lost orders to the tune of $420,000. "We’ve seen more than 400 shutdowns," founder Muheet Mehraj told the New York Times, "this has been the worst of them all." Incoming orders could not be received, he added, and communicating with suppliers was impossible – with 25 employees idle, the extended shutdown would soon put all of them out of work. Omaira, co-owner of an online venture called Craft World Kashmir has been working to revive the art of crochet. Without the overheads of a retail presence she has developed a vast following on social media sites with nearly 40,000 followers (and potential buyers) on Twitter alone. Without orders she was unable to pay any of her employees during the shutdown, she told Newsclick. "Artisans work on looms, do embroidery at home and all of them are dependent on a constant supply of material and work orders," Pervaiz Ahmed Bhat, President of Artisan Rehabilitation Forum told Outlook, "What happened due to the lockdown and communication blockade is that artisans had no contact with suppliers and they couldn’t complete their work," he said. The President of the Chamber of Commerce and Industries Kashmir (CCIK), Ghulam Mohiuddin Khan, estimated a loss of Rs 10 billion to the industry since August 5th. "We couldn’t even send photographs of sample products over email or WhatsApp to customers and prospective buyers outside the state," he told The Wire.
Meanwhile, V K Saraswat, a senior member of the NITI Aayog, the Government of India’s top policy think tank, was reported as saying, "What difference does it make if there’s no internet in Kashmir? What do you watch on internet there? What e-tailing is happening there? Besides watching dirty films, you do nothing there. If there is no internet in Kashmir, it does not have any significant effect on the economy."


The most severe impact of the internet shutdown in Jammu & Kashmir fell upon the tourism industry. A KCCI report for the first 120 days in 10 districts of Kashmir division alone shows the services sector taking the biggest cumulative hit of Rs 91.91 billion, with job losses estimated at 140,500. Around 1100 hotels had reported zero occupancy (against a normal-year average of 60-70% for the months August to October.) The lockdown also affected thousands employed in operating House Boats, Shikaras, Taxis, as well as those working as Photographers, Pony-wallahs, Guides, in Rafting and Adventure Sports, and other allied services. Apart from Inbound tourists, losses suffered by Outbound Tour Operators were also assessed, with the latter servicing over 40,000 Kashmiris who travel abroad for the Hajj pilgrimage every year. With everything to do with travel—including online visa processing—no longer possible, this too had taken a hit.
Immediately after the August 5th travel advisory was issued, asking tourists and pilgrims to cut short their trips, Business Today reported that flight prices for travelling from Srinagar had sky-rocketed, with airlines such as IndiGo, SpiceJet, GoAir and AirAsia charging between Rs 10,000-22,000 for a one-way direct flight to Jammu (typical prices are around Rs 3000-5000.) With the Internet shutdown in place, travellers from Srinagar were faced with a situation of black marketeering and over-pricing of air tickets, as they could not buy tickets or verify prices online (or even go to the Airport to purchase tickets in person due to the prevailing mobility restrictions.) Kashmir Observer reported that administrative authorities tried to persuade private airlines to open booking counters at the Tourist Reception Centre (TRC) in central Srinagar, which they refused citing logistical issues. Eventually, this task was given to the Tourism Department which in turn allotted counters to seven major private tour operators, leading to widespread customer allegations of irregularities in the allocation, exploitative over pricing, and price manipulations.


J&K exports around 200,000 metric tons of apples every year, most of which is headed to the markets of north India. The horticulture industry as a whole is pegged to be worth around Rs 80-90 billion annually, and contributes 10% of the state’s gross domestic product (GDP). As profitability in the sector has grown, the area under horticulture has gone up steadily over the years. In an area like Sopore, Indiaspend reported, a family with five acres of land under apple trees could get a yield of 5,000 boxes every year, fetching a profit of approximately Rs 500,000.
When the internet and communication shutdown was put into place on August 5th 2019, many growers were about ready to go to the market with their produce. "I had the best fruit of my life but I could not coordinate with the market," Shahnawaz Khan of Pinjura, Shopian told JKCCS researchers. "The buying of fruit is all done through commission agents, most of whom are them in the Azadpur Mandi in Delhi, and the absence of phones made things very difficult. I had to go to the DC office to make calls, but lines were so long that it took me 2-3 days to even make that call," he said, speaking of the facilities set up by the administration to allow phone calls. The loss of Whatsapp access was even more critical for apple growers. They would normally use WhatsApp to send photographs of their produce to commission agents, and depending on the quality would be able to obtain an approximate rate. (An eventual variation of Rs 10-20 on a final price was acceptable for the growers, Shahnawaz pointed out.)
When they had access to the phone and internet, growers had options for selling, negotiating with several traders before dispatching the fruit. In August 2019, with the local Mandi shut and phone communications blocked, the commission agent in Azadpur Mandi, Delhi sold Shahnawaz’s first consignment at Rs 500 (per 10 kg), when it should have sold for anything between Rs 700-1200.
It was only in the middle of September, after Shahnawaz’s personal landline got working and he called the agent asking him to transfer the money—and cancel the next deal—that he was able to better it to Rs 750. "The genuine rate for what I gave him should have been at least Rs 1000," Shahnawaz told JKCCS researchers, "If I had internet and phone I could have negotiated and told him I can sell to someone else – could have sent to Bombay or another state, not Delhi."
Other Whatsapp groups are equally important for those in horticulture. In the winter of 2019 the fruit crops suffered heavy losses and fruit trees suffered permanent damage due to the heavy snowfall and the non-availability of weather updates, which are usually made available through Whatsapp. Communications between apple growers in Kashmir and commission agents, as well as with officials from the horticulture department, also rely on the popular messaging service. Scientists from the Sher-i-Kashmir University of Agricultural Science & Technology would also recommend good practices via Whatsapp, including timely suggestions for new techniques of harvesting.
The communications blockade affected the transportation of produce too, as coordinating with truck owners and drivers became difficult. Tariff shot up, and transport that would cost Rs 60-70 per box was now costing Rs 180 per box. Even the simplest of things became difficult, Shahnawaz pointed out, including just finding the truck driver: "I had to constantly go to his house to find him. I went to his house but he was not there and his family said he’s at a shop... I spent half my day looking for the truck driver!"
The Saffron industry in Kashmir also relies heavily on the internet, for it is interlinked with multiple markets for Kashmiri saffron - international, Indian, local Kashmiri, and tourist. In each of these segments the bulk of communications is via WhatsApp or email. Buyers ask for photos and videos of the product and only then make purchases. Iqbal Ahmed Ganai, who is involved in the saffron business in Pampore, told JKCCS researchers. "I needed a phone and internet to contact the producers and the clients. Without both, my business was completely gone. Even payments to the producers was online via mPay. After the internet shutdown, we had to give them cheques which made things very difficult because payments were delayed and there was a lot of running around involved. We lost 70% of our sales due to the internet shutdown."
Buyers from Delhi and Gujarat who were accustomed to buy saffron after looking at pictures of the product were reluctant to send large amounts of money without being sure of the material. When phone services restarted many buyers got back in touch with traders like Ganai. "But we could still not send photos so we could not make any sales. Even after 2G started, it did not get better for us as internet speed was too slow to send videos and photos. Sending videos of saffron or of processing the saffron, that is, cleaning and cutting them, was also not possible," he said. Saffron producers also lost business due to their inability to check market rates via trade sites like IndiaMART, which previously enabled them to negotiate their selling price with buyers. Domestic buyers shifted to the competitor, Iranian saffron, which sold for Rs 55,000 per kilogram while Kashmir Saffron, while being of better quality, with higher crocin content, was still selling at Rs 72,000.
In Kargil, where the apricot trade generates revenue of up to Rs 320 million annually, the produce is normally routed through the horticultural trade of the Kashmir valley. Growers here also faced major losses after the August 5th shutdown, Newsclick reported.


Although Kashmir is not a major industrial zone, manufacturing still generates significant economic activity. The largest of these industrial pockets is at Rangreth, the SIDCO Industrial Estate and Electronics Complex on the outskirts of Srinagar, and houses 193 units spread across 1147 kanals of land (approximately 143 acres). Apart from Cold Storage Units, and spice processing factories (including Kanwal Spices with a turnover of close to Rs 1 billion) it houses several small units that manufacture local essentials, including electric blankets, heaters, and wires. During the Covid-19 crisis several manufacturers located here were drawn in to provide essential supplies, including oxygen cylinders and masks, which continue to be in acute demand due to the pandemic. Several Small & Medium Scale Enterprises working in the Information Technology sector are also located within the Rangreth Estate. (See next section)
For local manufacturers the shutdown of August 2019 came on the back of a series of setbacks that began in September 2014 with unprecedented floods that inundated several industrial areas, shutting them down for close to six months. In July 2016 large-scale public protests in the aftermath of the killing of the militant leader Burhan Wani brought business to a halt for several months. In November 2016 the sudden demonetisation of currency notes caused massive economic dislocation in the consumer base. Finally in July 2017 the shift from the Value Added Tax (VAT) to Goods & Services Tax (GST) caused serious losses to most of these entrepreneurs.
"Our ease of doing business was hampered massively," Nasir Bukhari, manufacturer of electrical cables at the Shalteng Industrial Estate outside Srinagar told JKCCS researchers. "We relied on WhatsApp and E-mail heavily for communication, for example, even sending a photo of a bill which included quantities and cost of all material." Without the internet the need to physically interact with suppliers of raw materials as well as customers made everything more time consuming. "The work that I used to do, involving sheet metal work, most of it was on WhatsApp. I used to send photos to the person who used to make the final material. He used to instantly check it and reply. That instant communication was gone" he said. With a strong customer base in remote places like Gurez and Kupwara, where cellular network connection remains poor even in normal times, Nasir Bukhari would rely on the internet for communication, using WhatsApp or Email: "We lost complete touch with our customers in those areas" he reported after the Internet Shutdown. At the Rangreth Industrial area manufacturers eventually arranged for a dedicated line from a private internet service provider (ISP) but after the killing of Riyaz Naikoo on May 8th 2020, that too was snapped, and was restored only much later.
Filing the complex GST returns is essential for all businesses and only possible through an online portal. Despite the absence of the internet, there was no relaxation on filing GST returns for business, and the government instead announced the setting up of public ‘kiosks’, meant to service students, job applicants, contractors filing tenders and others. "Although the government has set up facilitation centres at various places, these are not enough," a businessman told Economic Times. "For example, I have to shut my shop for a day to be able to give GST returns. It is not only cumbersome but humiliating as well."
"I had to go all the way to Pathankot to file my GST returns. I drove 400 km to Lakhanpur and only when I reached Madhopur, I got internet connection. I parked the car on the side of the road and as soon as I got connected, I did my work," Iqbal Ahmed Ganai told JKCCS researchers about his experience of filing his GST. It took him three full days to file it – he spent the nights at Jammu, driving across the border to Madhopur (in Punjab) every morning, and after finishing his internet related work, including filing GST returns and checking emails, returned to Jammu. "The kiosk set up at S.P. College used to get so crowded, the rush was too much. People had to wait for 2-3 days for their turn," Iqbal Ahmed said. He added, "If we only spend time filing GST then when can we do other work?"


The nascent Information Technology industry in Kashmir, with an estimated revenue of Rs 4.5-5 billion, and employing 25,000 people across the Valley, was heavily impacted by the shutdown. YSS Microtech Pvt. Ltd., a software development and technology support company lost contact with their clients for almost four months: they eventually forfeited 150 of their 400 hard-won clients. Its founder, Shahid Nazir Shah spoke to JKCCS researchers of their venture into Diagnostic Labs. With its heavy dependence on the internet, it had to be wound up after the August 5th shutdown despite the fact that it had several premium clients in Kashmir.
At the end of January 2020 when the company’s internet connection was finally restored, access was conditional and "mac-bound," with restrictions on exactly which terminals could access the connectivity. The responsibility for restoring connections lay with ‘Nodal officers’, who usually had little insight into the technical requirements of business entities to whom internet access was being provided. Users were further restricted to a ‘white-list’ of 150 (later expanded to 400) websites, few of which were useful for software developers. The list included Zomato, a restaurant aggregating website which does not operate in Kashmir, while those essential for business remained unavailable. It was only when 2G services were restored in Kashmir in mid-January 2020 that YSS Microtech was once again able to access the open source websites that are critical for their work.
Other IT firms tried to shift to New Delhi and Chandigarh, in what was referred to as ‘internet migration’, but relocation costs far exceeded revenues. The head of an IT company, with more than 150 staff and clients spread across the world, told Quartz magazine about moving out of Kashmir: "We had to spend more than we earned. We had to do it so that our clients retained their faith in us."
The cost of shifting business outside Kashmir was too high for small companies like YSS technologies and they had to instead lose clients and lay off workers – with 12 employees before the lockdown the company was left with only 5. A young woman entrepreneur who runs a center where students from across Kashmir take online exams like the TOEFL, told Buzzfeed "I’ve pleaded so many times before [the authorities]. I told them to give it to us on just one laptop. I told them, ‘Track the usage on that computer if you want.’ But no. They haven’t budged," Ismat Salaria said. "This is the worst thing that could have happened to my business," she said with regret.
In August 2019, immediately after the internet was shut down, a senior official of a Rangreth based IT company and ISP was detained by authorities, and kept for eight days in a cell six feet long and six feet wide. He was charged with keeping communication lines open for an hour after an official shutdown was ordered, the CEO of the company told Buzzfeed. "I can’t tell you how worried his family was," he said. "I will speak to you to unburden myself and because they [government] cannot harm us more than they already have," a software entrepreneur at the Industrial Estate at Rangreth, who spoke on conditions of anonymity told IndiaSpend. The entrepreneur had left a well-paying job at an American multinational and returned home to set up his own enterprise, with 174 skilled employees, most of them of Kashmiri origin. He estimated that there are about 12 other similar companies in Rangreth, and 50 other software companies in Srinagar, earning a revenue of Rs 5 billion and employing 1,500 men and women. "The IT sector in Kashmir is dead," he told Indiaspend.


In 2018 the government had made public a ‘J&K Start-up Policy’ to buoy the entrepreneurial spirit of Kashmiri youth, aiming to "facilitate and nurture the growth of at least 500 new start-ups in J&K in the next 10 years." The internet shutdown certainly put an end to those plans. Fastbeetle, an online "courier and parcel service company" for local businesses in Kashmir suffered a major loss in its customer base of over 15,000 at the start of August 2019. "Internet is the oxygen for start-ups. The Centre pulled that plug on August 5th. The virtual world was our space for growth. Now that’s gone," Sheikh Sami Ullah of FastBeetle told The Hindu. Lalchowk, a valley based online platform for books, had to shut down their operations and the founders were forced to leave Kashmir to find other jobs. Captivating Kashmir, founded by young Kashmiris as a digital marketing platform also had to suffer major losses, and lost all their partnerships after the internet shutdown, co-founder, Zaid Qureshi told JKCCS researchers. Unable to provide service they had to refund all payments received. Another business initiative of online delivery of groceries too had to be shut down after the communication blockade, he said. Seven months of work came to a grinding halt as soon as the internet snapped and Zaid soon joined the ranks of the ‘internet migration’, compelled to move to Delhi to finish his pending projects. Kashmir Art Quest, an online initiative that brought 435 local artists together to display contemporary art on social media to prospective buyers across the world also went under. "The Internet provided a rare window to young artists in Kashmir to highlight their work. We managed to develop economic linkages for artists. People started buying local art," Mujtaba Rizvi, its founder told The Hindu, "All that collapsed. There is no communication. We are fast losing the network we had managed to put together since 2010."


With almost all government work mandated to be tendered online, or involving procedures that require online intervention, these projects were badly hit by suspension of the internet. Those hit hardest by the shutdown included some of the most vulnerable sections of society, including those covered under the Mahatma Gandhi National Rural Employment Guarantee Act. Aimed at enhancing livelihood security in rural areas, MGNREGA attempts to provide at least 100 days of wage employment in a year to every household whose adult members volunteer to do unskilled manual work. J&K State has over 1.55 million active workers under this scheme, a substantial number of them in the Kashmir division. One official told the Indian Express that "According to Government of India rules, all the work at the rural level, whether through panchayats or the MGNREGA, has to be geo-tagged. Pictures of projects need to be uploaded at different stages of work completion and digital signatures are required for approval of payments. These can happen only after an SMS is received on the registered mobile number. None of this is working as of now, so no work can take off either."
With an aim of bringing about greater transparency, tendering for Government projects has also moved online in J&K. Despite the communication lockdown e-tendering however continued, adversely affecting bidders from the region. The tenders covered the improvement of road surfaces, construction of culverts, manholes and drains, and a range of other developmental works. Registered contractors, The Tribune reported, were told that the date and time of bids would be notified on the website and conveyed to the bidders through email, neither of which was available to them due to the shutdown. Bidders were also instructed to download the ‘bid submission manual’ from this website, and told that "the bids of responsive bidders shall be opened online on the same website." The notifications made it clear to bidders that "No bid will be accepted in physical form." Months later, and even after basic internet services became available via crowded government-run internet kiosks, there was no significant improvement. One contractor told Kashmir Reader that "for OTP generation while filing tenders it is necessary to have a functional mobile. That is why we have to visit other states to file tenders."
In February, 2020 Jammu & Kashmir’s Geology and Mining department announced that ‘sand blocks’ in Pulwama, Srinagar and Baramulla districts had been auctioned against a bidding amount of Rs 720 million for a period of five years. This was a record high and for the first time ever individuals and companies from outside Kashmir had bagged a majority of contracts for the extraction of minerals from its water bodies. More than 200 mineral blocks in the Jhelum and its tributaries, across all 10 districts of the valley, had been opened up for the mining of boulders, gravel, sand and other river bed material, The Wire reported.
Applications for the auction had been invited online in December 2019, had reported earlier, at a time when internet connectivity in Kashmir was completely blocked. The auction was particularly significant as J&K’s erstwhile special status had barred businesses from outside the state leasing or renting local mineral blocks. With the scrapping of Article 370 individuals and private companies from outside J&K were allowed to participate in these auctions for the first time in October 2019. It is noteworthy that this happened despite recent recommendations to the contrary by the Central Water & Power Research Station, as well as by a World Bank supported study that said that dredging and sand mining of the main channel of Jhelum was not advisable and may cause difficulties for flood management. The environmental concerns seemed not to be a priority for the department. "The revenue realisation will be far higher. It was in lakhs of rupees in the past, now the revenue will jump to crores of rupees," Imtiyaz Ahmad Khan, joint director of the Geology and Mining Department told The Wire. "The higher the revenue, things will be better for the government," Khan told reporters.
Although many of the local contractors and sand diggers associated with the extraction had participated in the bidding, waiting for hours outside crowded ‘e-kiosks’ in Srinagar, or travelling to other parts of the country to complete the formalities, most were deprived of a level playing field. Given the backdrop of transformations of land ownership and citizenship laws against which the internet shutdown was occuring, Kashmiri fears of a resource grab deliberately benefiting outsiders seem well founded. Speaking to The Wire, a contractor who had been in the field for the past 26 years summed it up: "It seems the government wanted us out of this business to leave the field open for outsiders. Else, how will they justify inviting tenders online when there was no Internet in Kashmir?"
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By IMPRI Team  A panel discussion on “The Great March of Migrants During The National Lockdown: Lessons Not Learned and Missed Opportunities” was organized by the #IMPRI Center for Human Centre for Human Dignity and Development (CHDD), IMPRI Impact and Policy Research Institute, New Delhi on the occasion of International Migrants Day, i.e December 18, 2022. Inaugurating the session, Ms Aanchal Kumari, a researcher at IMPRI, welcomed the speakers and participants to the program with an introduction to the eminent panellists. The event was moderated by Dr Devender Singh, a Visiting Senior Fellow at IMPRI. The panellists included Prof. R.B Bhagat, Professor and Head, Department of Migration and Urban Studies, International Institute for Population Sciences, Mumbai; Prof Arun Kumar, Distinguished Economist, a Former Professor Jawaharlal Nehru University (JNU), New Delhi and Malcolm S. Adiseshiah Chair Professor, Institute of Social Sciences, New Delhi; Ms Akriti Bhatia, Founder of People