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SRINAGAR, India, Dec 5 (AFP) - Carpet makers in Indian-administered Kashmir say their industry has been shattered since the September 11 terrorist attacks in the United States, with around 50 percent of their looms closed down.

Kashmir is well-known for its carpets and the industry is a major export for the territory, which has been wracked by a 12-year-old insurgency to end Indian rule.

The September 11 terrorist attacks in Washington and New York have crippled trade with Americans and Europeans, the major potential buyers, preferring not to travel to India and certainly not to Kashmir in the wake of the continuing war in Afghanistan.

"There are no takers for our carpets and 50 percent of units have stopped carpet production," said Yusuf Wani, the president of the Carpet Manufacturers Association.

"Our stocks are biting the dust, despite the fact that we are ready to sell our products at very low prices," Wani said.

Faiz Ahmed, a carpet salesman, said September used to be the peak month for Western carpet buyers.

"The terror attacks in the US have brought curtains on this season at least," he said.

More than one million Kashmiris are directly or indirectly earning their livelihood from the traditional carpet trade, officials said.

Wani said it costs 450 rupees (9.40 dollars) per square foot to manufacture a Kashmiri carpet and that producers were willing to sell for 425 rupees (8.88 cents).

Prior to the onset of the Muslim insurgency in Kashmir in 1989, thousands of Western tourists used to visit Kashmir and found Kashmiri rugs the key souvenir to buy for their homes in Europe or North America.

As Western tourists started avoiding blood-soaked Kashmir, the main carpet showrooms in Kashmir shifted to New Delhi and other Indian cities.

"Thanks to Allah we were doing a very good business in New Delhi," said Rafique Wangnoo of the National Cottage Emporium, Kashmir's leading carpet exporter.

"After the events of September 11 the business has taken a nosedive," said Wangnoo, whose shop in New Delhi's Maurya Sheraton hotel sold rugs to then US president Bill Clinton during his tour of India in March 2000.

"Sales have dropped by 70 percent," said Wangnoo, who added that he prays for the return of peace to Afghanistan so that Western tourists will resume travelling -- and buying rugs -- in India.

A spokesman for the government of Indian Kashmir acknowledged a decline in the state's key product.

"Even the overseas orders placed before September 11 attacks have been cancelled."

The manufacturers, who complain of exploitation by traders and other rug-selling outlets, have appealed to the Kashmir state government to buy carpets from them to save their families from financial collapse.

"The government will have to come to our rescue or we are ruined," Wani said.

"There are buyers who offer us very low rates, and if we comply we will incur huge losses."

But if nothing is done, Wani said the time may be approaching when carpet makers will have no choice but to succumb to the exploiters.

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