17/1/07 (Hindustan Times) - India has conceded some more ground during the negotiations for a free trade agreement (FTA) with the Association of South East Asian Nations (Asean). Both sides have agreed to bring down the tariffs on items covered under the sensitive list to a 0-5 per cent range by 2018.

The two sides are negotiating to get to a consensus formula that would speed up the signing of an Indo-Asean FTA by July 2007.

Earlier, the Indian side had proposed to bring down the tariffs on items covered in the sensitive list to 5 per cent by 2015 but the Asean counterparts were reluctant to a deadline earlier than 2018.

"We have agreed to settle for a later deadline of 2018. However, of the sensitive list which items will be brought to zero level and which remain in the 0-5 per cent tariff range will have to be decided through further negotiations," Commerce secretary GK Pallia said on board the special aircraft during his return from the Fifth Asean Summit and the second East Asia Summit in the Philippines.

For items under the normal channel that covers nearly 77 per cent of the Indian tariff lines, India has offered to bring down the duty to zero by 2015, barring the CLMV (Cambodia, Laos, Myanmar and Vietnam) nations where it has concurred to an earlier deadline of 2011.

The Asean, however, is keeping the heat on to convince India to bring at least 85 per cent of tariff lines to zero by 2015 as is offered by the rest of the nations in the regional group. "This aspect also remains to be thrashed out through further official-level talks," he added.

Of the highly sensitive list of four items - black tea, pepper, refined and crude palm oil - India is likely to give Asean some more leverage by taking off the five-year moratorium on tariff that it is at present insisting on.

"But that will only happen if the rest of the pieces fall into place. We do not want to be rigid on this account but other things have to fit in first," said Pallia.

The formula is to bring down the tariff on crude palmoil from 65 per cent to 50 per cent by 2022. The duty on refined palmoil would be cut from 75 per cent to 50 per cent, while that on tea would be reduced to 50 per cent from the preset 100 per cent. Pepper will see a duty cut from 60 per cent to 50 per cent by 2022.

However, the tariff reduction will be on the duty levels that exist when the FTA is finally formalised. "The tariff rationalisation will happen in a phased manner, possibly in equitable installments," Pillai added.

Earlier, Asean kept the negotiations going by agreeing to India's proposal for maintaining a negative list of 490 items with trade coverage not exceeding 5 per cent by both sides.

Within the overall cap of 5 per cent (that is a sort of an average spread across all the 10 Asean majors), the percentage contribution of each participant will be worked out through negotiations depending on the level of India's trade with the individual country.