India may relent on FTA talks with Asean

New Delhi: India is bending over backwards with regard to its free trade agreement (FTA) talks with an ostensibly disinterested Asean. Sources say the commerce ministry is now considering breaking India’s 709-strong sensitive list with a view to shifting some of them to the normal track, which entails elimination of tariffs latest by 2015. Further, tariff on a sizeable number of products on the sensitive list will be eliminated by 2018. As per the new proposal, for a majority of these products the tariff would be reduced to 5% by 2018 but some products would be subjected to tariff elimination.

According to sources, the commerce ministry has already written to administrative ministries of the industries concerned, including the ministries of heavy industries, textiles, agriculture and food processing, seeking their views on the new proposal.

The move comes close on the heels of the Asean’s insistence on including some more items of its export interest in the tariff elimination schedule. Asean has also said India should make available at least two of its five “special products”, namely crude and refined palm oil, for reasonable tariff reductions. Since this is not politically palatable at home, New Delhi is contemplating more flexibility on other fronts.

The question that Asean negotiators raise during exchange of views with their Indian counterparts is about the alleged shallowness of India’s insistence on keeping five products of export interest to Asean countries like Malaysia in the special products list. As regards items on this list, India needs to reduce tariffs to 50% by 2022, a very flexible schedule compared to other tariff lines being covered in FTA.

India has already ceded a lot of ground during the various rounds of FTA talks with Asean. It had pruned its negative list, items on which no tariff reduction will be offered, sharply to 490.

On the other hand, the consolidated negative list of Asean countries (after avoiding tariff lines getting repeated in the separate lists of Asean countries) has gone up from about 600 initially to 1,000 plus. Asean, it may be noted, keeps a smaller negative list for its FTA with China.

As per the proposal agreed upon by both sides on the sidelines of the Asean meeting in Philippines a few months ago, 5,224 tariff lines (described in five digits) were to be covered in FTA. Both sides had also agreed to finalise the agreement by July 2007.