India, Sri Lanka sign free trade pact

By Our Special Correspondent

NEW DELHI, FEB. 2. India and Sri Lanka today finalised the details of the free trade agreement between the two countries which was initialled by the Prime Minister, Mr. Atal Behari Vajpayee, and the Sri Lankan President, Ms. Chandrika Kumaratunga, during the latter's visit to India on December 28, 1998. The agreement would now come into force from March.

According to the details finalised during discussions here between the Commerce Secretary, Mr. P. P. Prabhu, and the Sri Lankan Finance Secretary, Dr. P. B. Jayasundera, India would phase out its tariffs on a large number of items within three years. Sri Lanka, on the other hand, would do so in eight years. The two sides would also maintain negative lists of items on which no duty concession would be given. These would include items on which protection to local industry was considered necessary but the two countries would reduce the items on the negative lists through periodic consultations.

Under the agreement, products having a domestic value addition content of 35 per cent would qualify for preferential market access. Sri Lankan exports with a domestic value addition content of 25 per cent would also qualify for entry into the Indian market if they had a minimum of 10 per cent Indian content.

India also agreed to permit import of Sri Lankan tea to the extent of 15 million kg per annum at a fixed tariff preference of 50 per cent. It would also allow import of eight million pieces of garments a year from Sri Lanka at a fixed tariff preference of 50 per cent. Of this, for six million pieces, fabrics would need to be sourced from India. A ceiling of 1.5 million pieces was prescribed for individual categories.

The two sides also held detailed consultations regarding the modalities of implementing the agreement since arrangements have to be made to check on the conditionalities introduced in it like the quantum of value addition, etc.

According to official sources, the free trade agreement marks a landmark in bilateral relations and it is felt that the finalisation of the details would enhance trade between the two countries as well as expand and diversify cooperation in a range of economic activities, including investments.

India would maintain a negative list of 429 items while Sri Lanka would have 1,180 items on its negative list. India would exempt 1,351 items from duty while Sri Lanka would provide duty exemption to 320 items.

India would provide 50 per cent duty concession to 2,800 items which would become duty free in three years. Sri Lanka, on the other hand, would extend 50 per cent duty concession to 889 items and these duties would be phased out in eight years. It was also decided that India would extend 25 per cent duty concession on nearly 500 textile items, but this duty would not be phased out even after the three-year period.

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