The Hindu Business Line : India-Asean FTA misses deadline for the third time

The “indefinite” postponement of the 14th Asean Summit in Thailand, following the sacking of the Prime Minister of Thailand, Mr Somchai Wongsawat, by the Constitutional Court on Tuesday, has led to the deferment of the signing of the India-Asean free trade agreement scheduled for the third week of this month.

Official sources told Business Line here that the statement made by the Asean Secretary-General, Mr Surin Pitisuwan, in Singapore that “the postponement of the 14th Asean Summit should not distract Asean member countries or detract from what Asean is doing for the welfare of the people in the region” has given a ray of hope that the 14th summit would be held before long.

Earlier deadlines

However, officials appear worried now because the India-Asean free trade agreement had so far missed the deadlines twice in 2005 and 2007 and was all set for a launch from January 1, 2008, if the 14th Asean Summit were to be held as scheduled from December 16 in the northern city of Chiang Mai when the Prime Minister, Dr Manomohan Singh, would formally ink the FTA with Asean on December 17.

Now with the convening of the 14th Asean summit itself is in abeyance, the meticulous and protracted works in wrapping up the India-Asean FTA for the past six years appear to await formal clearance for a further ‘indeterminate’ span, the sources noted.

The proposed FTA with 10 members would remove import duties on 71 per cent of products by December 2012 and on another 9 per cent by 2015, while duties on 8-10 per cent of products that would remain on the sensitive list would drop to 5 per cent. Bilateral trade between India and Asean annually amounts to about $38 billion and is likely to reach $50 billion by 2020.

When contacted, the Minister of State for Commerce and Power, Mr Jairam Ramesh, said that “at some stage the Asean-India summit is to be held and the FTA is bound to be signed. What we need now to do is to take proactive measures to ensure that the competitiveness of tea, coffee and pepper economy is bolstered so as to meet the low-cost competition from plantation crop producers like Vietnam.”

Mr Ramesh said that he has suggested a slew of measures to cushion the impact of post-FTA regime with Asean for Indian plantation sectors to the Prime Minister a couple of weeks ago.

Sharing some of the suggestions he had made to Dr Singh, Mr Ramesh said emphatically that these “proactive and precautionary” measures would be needed to deal with “the consequences of this FTA on our employment-intensive tea, coffee and pepper sectors”.

Since it is feared that the main competition for Indian tea is from Vietnam, tea produced in Tripura, Cachar Valley and in Tamil Nadu need to focus on cutting down production cost. He said the Department of Commerce has proposed a 50:50 cost sharing between industry and the Government for providing social infrastructure in tea garden areas.

The Government’s share is about Rs 1,400 crore over the next five years and the industry would chip in the balance of Rs 1,400 crore.

He said that though the UPA Government launched the Special Purpose Tea Fund (SPTF) as a 15-year productivity boosting programme, flexibility needs to be built into the SPTF norms to expedite implementation by 10 years to coincide with tea tariff coming down from the current 100 per cent to 45 per cent by 2018.

For coffee, he said, with competitors Vietnam and Indonesia being major Robusta producers, India’s policy initiative must perforce focus on building competitive advantages as a reliable long-time supplier of Robusta coffee.

In order to help small Robusta growers invest in quality gradation, the plan scheme providing 20 per cent subsidy in this area must be augmented to 40 per cent. Coffee Board would also be asked to take part more aggressively in global marketing of Robusta coffee, particularly in the US. He said for pepper too, similar productivity enhancement schemes must be undertaken.

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