FTA: India-Asean may meet half-way

Import duty of 60% offered on refined palm oil against the demand for 30%.

With Prime Minister Manmohan Singh indicating more flexibility in talks on the foreign trade agreement (FTA) with Asean, sources in the know of the developments said the two sides could meet half-way on the contentious issue of duty rates on some farm products.

The talks are deadlocked as Asean has been asking India to lower duties on the highly sensitive list of farm products, which includes crude palm oil, refined palm oil, tea, coffee and pepper. "Indian offer on import duty on crude palm oil is around 50 per cent while the Asean demand is 40 per cent. Both could agree at 45 per cent," said a source.

India has offered to bring down the import duty on refined palm oil to 60 per cent against the demand "" mainly from Indonesia and Malaysia "" for reducing it to 30 per cent. On tea, coffee and pepper, India has offered a rate of 50 per cent, against the demand of 40 per cent by Asean countries like Vietnam.

Meanwhile, officials brushed aside the plantation sector's fear of cheaper imports from the 10-nation bloc. "The government is in the process of launching reforms in the plantation sector at a cost of Rs 8,000 crore. This will mainly involve replantation, which increases productivity and makes the sector competitive. Meanwhile, the duty cuts on items in the highly sensitive list will be effective after 10 years. This is enough for Indian farmers to be prepared for imports from Asean countries," said the source.

Also, other measures will help cut costs. According to commerce ministry estimates, nearly 12 per cent of the cost of producing tea is due to social commitments of the companies in areas like education and health. "State governments will share this burden," the source said.

To increase productivity in the coconut sector, which fears cheaper palm oil imports from Asean, the ministry is finalising a Rs 4,800-crore package for replantation and rejuvenation. The amount will be spent over 10 years.

Replantation and rejuvenation of tea gardens has already started and more than 212,000 hectares of tea plantations will be targeted in the next 15 years, say ministry sources.

Moreover, in the 11th Plan period, Rs 700 crore is likely to be allotted to the coffee sector. At least 70,000-80,000 hectares of coffee plantations are likely to be replanted. Also on the cards are replantations on 200,000 hectares of pepper plantations under the National Horticultural Mission in the next 10 years.