13/1/07  ( Business Line) Cebu (Philippines)  -  Malaysia and palm oil may turn out to be the sticking points in the attempt to hammer out a Free Trade Agreement between India and the ten-member ASEAN group.

The Prime Minister, Dr Manmohan Singh, flew this evening into the island beach resort of Cebu in the Philippines for another summit meeting with leaders of the ASEAN, conscious of the difficulties down the road.

"I believe that the India-ASEAN FTA is an important initiative to promote this greater economic synergy and I shall use this opportunity to explore steps that both sides can take to hasten the conclusion of this important agreement," he said in a statement released before his departure.

The negotiations on the FTA that began more than three years ago have stumbled over the issue of how high a duty India can set on specifically four sensitive farm goods imported from the ASEAN: crude palm oil (80 per cent), refined palm oil (90 per cent), pepper (70 per cent) and tea (100 per cent).

Under sustained pressure from edible oil growers and producers, India's negotiators have been unable to provide any assurances that it will wind down the rates as quickly as ASEAN and its principal exporters, Malaysia and Indonesia, want. India says it might bring them down by 2022; ASEAN wants it done by 2015 with reasonable reductions by 2011.

India imported about 2.5 million tonnes of palm oil, both crude and refined, in 2005-06. Even after the high duties levied, these work out to be one of the cheapest edible oils in the wholesale market at around Rs 45 a kg. Any reduction of the duties would drive down prices of not just palm oil but more critically the margins for producers of mustard, groundnut and kardi oils.

The Commerce Minister, Mr Kamal Nath, who arrived in Cebu a couple of days ahead, has tried to persuade the ASEAN leaders to recognise the sensitivities of the farm sector in India. But his attempts have not yet brought the ASEAN around.

The Prime Minister is scheduled to meet separately with the Malaysian Prime Minister, Mr Abdullah Bin Ahmad Badawi, on Sunday ahead of the summit meeting with the ASEAN leaders.

The FTA was originally supposed to have been implemented a year ago. The indications for now are that it may not be brought into play for at least another six months.