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LIMITED PAYMENTS AGREEMENT BETWEEN THE GOVERNMENTS OF INDIA AND PAKISTAN [1959] INTSer 17

LIMITED PAYMENTS AGREEMENT BETWEEN THE GOVERNMENTS OF INDIA AND PAKISTAN

Karachi, 3 December 1959

The Government of India and the Government of Pakistan, animated by the desire to develop and strengthen trade between the two countries and promote closer economic relations, have agreed to the exchange of certain commodities on a self-balancing basis under the following Payments Agreement. This Agreement shall be in addition to the normal trade under the existing Trade Agreement between the two countries.

Article I

All payments in respect of the sale and purchase of the commodities listed in the schedules at Annexure I upto the values mentioned therein, shall be made by Pakistan and India in nonconvertible Indian rupees.

Article II

For the exclusive purpose of facilitating such payments, the National Bank of Pakistan, Karachi, shall open a separate Clearing Account (hereinafter referred to as Account 'A' with the State Bank of India.

Article III

Payments in respect of the sale and purchase of the commodities listed in the said schedules, shall be -cleared through Account 'A'.

Article IV

All transactions in the commodities listed in the said schedules for the purposes of Account 'A' shall be valued either on FOR or C&F basis depending on the terms of the contracts entered into.

Article V

Account A' shall be a self-balancing Account with a swing limit of Rs. 25 lakhs (Rupees Twenty five lakhs only) on either side. When the outstanding amount in Account 'A' exceeds the swing limit, the

country running an import surplus may suspend imports temporarily, while the country running an import deficit shall take steps to expedite imports so that the imbalance is rectified. The rate of interest and technical details for the operation of Account 'A' shall be as settled between the National Bank of Pakistan and the State Bank of India as per Annexure 11.

Article VI

In order to facilitate the implementation of this Agreement, the two Governments shall review the working of this Agreement and other consequential problems arising therefrom at the expiry of three months from the date of signature and compare the debits and credits on either side to devise such measures as may be mutually agreed upon to rectify the imbalance, if any, in favour of one or the other country.

Article VII

In case of any change in the parity rate of the rupees on either side, the balance in Account 'A' shall be -adjusted in proportion to the change in the rate.

Article VIII

If at the close of the currency of this Agreement, there remains any amount outstanding in Account 'A' to the credit of either Government, the same shall be liquidated by the import of goods mentioned in the schedules by the country concerned except that if a small balance not exceeding say Rs. 1,000/- (Rupees one thousand only) remains unadjusted for six months after the termination of this Agreement, this amount may be adjusted by a remittance from Pakistan if the account is in debit or a remittance from India if the account is in credit.

Article IX

The list of commodities in the schedules may be amended from time to time by mutual consent.

Article X

This Agreement shall be valid for a period of one year with effect from the date of signature and may be extended for such further period as may be mutually agreed upon.

Article XI

This Agreement is signed in Karachi on the third day of December 1959 in two original copies in the English language, both of which are authentic.

For and on behalf of the Government of India.

Sd/-(K.R.F. KHILNANI)

Leader, Indian Trade Delegation.
For and on behalf of the Government of Pakistan.

Sd/-(IA.KHAN)
Leader, Pakistan Trade Delegation.

ANNEXURE I

i m a g e

The sale and purchase of' commodities exchanged under this agreement will be subject to laws, rules, regulations and procedures in force from time to time governing imports and exports in either country.

ANNEXURE II

BANKING ARRANGEMENT BETWEEN THE STATE BANK OF INDIA AND THE NATIONAL BANK OF PAKISTAN FOR FINANCING THE MOVEMENT OF GOODS UNDER THE LIMITED PAYMENTS AGREEMENT BETWEEN PAKISTAN AND INDIA DATED THE THIRD DECEMBER, 1959.

The National Bank of Pakistan, Local Principal Office, Karachi, shall maintain a special non-convertible Indian Rupee Account with the State Bank of India, New Delhi, for the purpose of making and receiving of payments in respect of the sale and purchase of commodities covered by the above Limited Payments Agreement dated the 3rd December 1959. This account shall be styled "NATIONAL BANK OF PAKISTAN CLEARING ACCOUNT 'A'."

2. All claims or adjustments in respect of goods exchanged under this Agreement as also all bank charges shall be settled through the said account.

3. The account shall have a swing limit of Rs. 25 lakhs (rupees twenty five lakhs only) on either side subject to the proviso that all outstanding Letters of Credit and other commitments on the part of either the National Bank of Pakistan or the State Bank of India shall be honoured, even if the balance, debit or credit, exceeds the said limit. The balance in the account, both credit and debit shall carry interest at 2 1/2% per annum on a daily product basis, and this interest shall be credited or debited monthly to the said account under the advice to the National Bank of Pakistan.

4. The handling of transactions under this agreement shall be restricted to the National Bank of Pakistan on the side of Pakistan and to the State Bank of India on the side of India. The inter-branch transfers in India for credit or debit to the Clearing Account shall be effected at par.

PROCEDURE:

5. EXPORTS FROM PAKISTAN TO INDIA

The Offices of' the National Bank of Pakistan handling export documents will send these documents under the covering schedule to the concerned office of the State Bank of India in India, and will at the same time send a copy of this schedule to the State Bank of India, New Delhi.

EXPORTS FROM INDIA TO PAKISTAN

The offices of the National Bank of Pakistan opening Letters of Credit will advise the credits through the concerned offices of the State Bank of India in India, and will send a copy of each such Letter of Credit to the State Bank of India, New Delhi.

Collecting offices of both National Bank of Pakistan and State Bank of India will advise the respective remitting offices on the other side of the payment of each bill received for collection. Copies of such advices issued by offices of the State Bank of India will in each case be sent to the National Bank of Pakistan, Local Principal Office, Nicol Road, Karachi.

The State Bank of India, New Delhi, will send weekly statements of account to the National Bank or Pakistan, Local Principal Office, Karachi. The statements will indicate the relative bill and Letter of Credit number against each item posted in the Statement; and also the name of the office of the National Bank of Pakistan concerned.

L E T T E R S

No. 1.

MINISTRY OF COMMERCE

KARACHI

3rd December, 1959

K.R.F. KHILNANI, Esqr.,

Leader, Indian Trade Delegation, Karachi

Dear Mr. KHILNANI,

You would recall that with reference to Article VII of the Limited Payments Agreement signed today, the National Bank of Pakistan had raised the point that the exchange guarantee under that article

should also cover the next forward commitment of the National Bank of Pakistan. You stated that it would not be possible for you to make any commitment on this point without consulting the Reserve Bank of India, but promised to take up the matter with them on your return to New Delhi. Should the Reserve Bank of India, for any reason, not find it possible to accept the point made by the National Bank of Pakistan, the matter would be raised in the Review Meeting contemplated under the Agreement.

I hope you will kindly confirmi that the above correctly sets out the discussions between us on this issue.

Yours sincerely,

Sd/- I.A. KHAN.

_____________________________

No. 2

MINISTRY OF COMMERCE

KARACHI 3rd December, 1959

K.R.F. KHINANI,
Esqr., Leader, India Trade Delegation, Karachi

Dear Mr. KHINANI,

We have to day signed a Limited Payments Agreement. The transactions under this Agreement shall be made in non-convertible Indian rupees. The purpose of this Agreement is to promote trade between two countries by exchange of commodities on a balanced basis without involving any expenditure of foreign exchange. With a view to achieve this end we discussed and agreed that every endeavour shall be made to transport goods, as far as possible, without involving expenditure of foreign exchange.

I hope you will kindly confirm 2 that the above correctly sets out the understanding reached between us.

Yours sincerely,

Sd/- I.A. KHAN.

_____________________________

No. 3

MINISTRY OF COMMERCE

KARACHI

Dear Mr. KHILNANI, 3rd December, 1959

Please refer to your letter of 3rd December, 1959, regarding the Limited Payments Agreement between India and Pakistan which reads as follows :

"The Limited Payments Agreement between India and Pakistan which we have just signed, will be without prejudice to any contracts or any movement of goods between the two countries independent of this Agreement in the normal commercial manner".

I shall be grateful if this is confirmed by you."

I confirm your understanding as set out in your letter quoted above.

Yours sincerely,

Sd/- I.A. KHAN

K.R.F. KHILNANI,
Leader, Indian Trade Delegation, Karachi

_____________________________

MINISTRY OF COMMERCE, KARACHI,

3rd December, 1959

Dear Mr. KHILNANI,

Please refer to your letter of 3rd December, 1959 concerning our discussion in course of negotiations on the Limited Payments Agreement, which reads as follows :

"I refer to our discussions regarding Limited Payments Agreement between the Governments of India and Pakistan to develop and strengthen trade ties between the two countries and develop trade in addition to normal trade under the existing arrangements between the two countries.

The two Governments, desirous of expanding the trade between the two countries as much as possible, like to provide adequate facilities for import and export of goods from and into either country

in accordance with the export and import and foreign exchange regulations in force from time to time in the two countries.

I had made a mention of India's capacity to supply the requirements of Pakistan of light engineering goods. India's export in these lines has been steadily growing and I expressed the hope that Pakistan also would be able to avail herself of the goods that India can supply competitively as to quality and price.

I made a special mention of the following items:

Domestic sewing machines and parts.
Cycle parts and accessories.
Diesel engines.
Electric motors.
Electrodes.
Transformers.
Bolts, nuts, screws and rivets.
Agricultural implements and accessories.
Umbrela ribs.
Transmision towers.
Textile machinery parts and accessories.
Steel lockers,
locks, vault doors and office equipment.
Flourescent tubes and fittings.
Aluminium foil
Aluminium sheets and circules.

Your delegation assured me that Pakistan Government will make arrangements that these goods would be covered under the heading

"Hardware and light engineering goods and machinery".

It was also agreed that we should explore new lines of trade as well as the old lines in which the trade has dwindled down and find out ways and means of furthering trade in those items.

I shall be grateful if this is confirmed by you."

I confirm that the letter correctly records the discussions we have had.

Yours sincerely.

Sd/- I.A. KHAN

K.R.F. KHILNANI

Esq., Leader, Indian Trade Delegation, Karachi.



India Bilateral

Ministry of External Affairs, India


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