14/1/07 (The Hindu)  Cebu -  The "contentious" Free Trade Agreement between India and ASEAN is likely to be ready by July this year, Commerce Minister Kamal Nath announced on Sunday, but there was no clear word yet that Malaysia was ready to accept the terms offered by India on palm oil.

Speaking to the media at the conclusion of talks with leaders of ASEAN here at the tropical Philippines resort, Mr. Nath said that the two sides agreed to have a list of products that would not be subject to any tariff cuts till 2022. The traded value of these products would not exceed 5 per cent of the total. India is expected to bring into this list some 490 items that include rubber and coconut. ASEAN would also have its own sensitive list.

On all the other goods that would make up 95 per cent of the trade, there would be either elimination or reduction of duties.

The least cuts in duties would come on the four items — crude palm oil, refined palm oil, pepper and tea — which both sides found highly sensitive and for different reasons. The duties on these will be brought down to 50 per cent by 2022. On tea, for instance, it will come from 100 per cent to 50 per cent. India says the duty reductions on these goods will commence only after five years, but ASEAN is apparently seeking an earlier date.

Mr. Nath was at pains to note the special significance of palm oil because of its influence on the domestic prices of edible oils. Palm oil forms 20 per cent of India's imports from ASEAN. India imported $1.7 billion worth of crude palm oil a year from Malaysia and Indonesia. "When we exclude palm oil, we are offering 90 per cent of the traded items in the normal track for reduction in duties," he said.

The duties on sensitive items, which comprise another 700 items, including many engineering and chemical products, will fall to between zero and 5 per cent by 2018.

On all the other goods that will be on the "normal" track, import duties will be reduced from the date the agreement is signed. India will bring these down to zero by 2011 for less developed countries in the ASEAN and by 2015 for the other countries.

The Minister said: "For India and the ASEAN, a free trade agreement [which implies] a greater engagement in the economic area, both in trade and investment, is vital. The mass of economic activity is slowly shifting to Asia, both in terms of competitiveness and the growth in the manufacturing sector. It is important, therefore, that East Asian countries engage with one another not only with greater intensity but in more creative ways."