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Lankan envoy allays fears on tea front

Our Bureau

KOLKATA, May 7

INDIAN tea industry need not fear on excess supply of Sri Lankan tea into the Indian market in the wake of the Free Trade Agreement (FTA) between Sri Lanka and India initialled in February 2000.

Participating in an interactive session on India-Sri Lanka Economic Relations organised by the Calcutta Chamber of Commerce here on Monday, Mr Senake Bandaranayake, High Commissioner for Sri Lanka in India, said the Lankan Government was conscious of the concern of the Indian tea sector.

He assured that Lankan exporters had a well established market to cater to, and a good balance between supply and demand was being maintained. Under any case, South Asia as a whole was a huge market for tea and garments, Mr Bandaranayake pointed out.

He also advocated joint marketing of both tea and garments to open the emerging South and South East Asian markets in a big way. Calling for a proactive approach, he suggested that the edifice has to be built on a basis of understanding between the two c ountries.

There was a need to look at the FTA from a much wider economic perspective for development of the entire South Asian region.

Under the FTA, Sri Lanka is permitted to export 15 million kg of tea and eight million pieces of garments to India annually, out of which six million pieces must be made out of Indian fabric (per year).

India will be removing its applicable customs tariff over a period of three years, subject to a negative list, and Sri Lanka in return will remove the tariff on imports from India over eight years.

The Indian negative list now contains 340 items, while Sri Lanka's contains nearly 1,200 items including agri products. Under FTA, products having a domestic value addition content of at least 35 per cent will qualify for preferential market access.

Some 50 per cent of Indian investments within the SAARC region was in Sri Lanka, and there was a need to boost industrial investment into Sri Lanka, especially for third-country exports, he pointed out.

In this context, he said Sri Lanka was being developed now as a major communication centre in South Asia, if it has to emerge as an gateway to South East Asia, Southern Africa and the West Asia, and expected foreign investments in this sector.

Stating that Sri Lanka was actually looking beyond FTA, and bilateral trade (which was in India' favour in the ratio of 13:1), the envoy pointed out that his Government was now seriously viewing invetsment by Indian businessmen in Sri Lanka.

If intra South Asian trade has to be encouraged, then the countries of South Asia have to open up their economies much more, he pointed out.

The Colombo port is a major transhipment centre for external trade in the region. Plans include faster turnaround of vessels there and a new port in the south eastern tip of the island in the private sector.

As for SAARC's future, he quoted from the vision document (Vision of SAARC in 2020) to say that the SAFTA (South Asian Preferential Trade Area) agreement would come into play within the first decade of the 21st century.

SAARC cannot realise its full economic potential unless India and Pakistan settle their political differences amicably. He, however, described the India-Sri Lanka FTA as a test case for the success of SAARC.

According to Mr P.D. Tulsiyan, president of the chamber, the major items under India-Lanka FTA related to tea and garments, and both needed to be carefully handled.

Sri Lanka could maximise its export potential in these two products alone by earning foreign exchange to the tune of $70-80 million per annum. In 2000, Lanka could export only four million kg of tea to India, Mr Tulsyan said.