'Indian farmers should not fear deal'...

Sections of corporate India as well as farmers are nervous about the impact of the Indo-Asean free trade agreement, talks for which concluded on Thursday at Singapore. Today, Commerce Secretary Gopal K Pillai told Rituparna Bhuyan that there was no reason to worry as India would get enhanced market access to the fast growing Asean economic bloc. Excerpts:

How does India stand to benefit from the Asean FTA?

We will have access to the Asean market, which is fairly large. The 10 Asean nations put together have a high level of per capita income. Now, we will have better access to the market. Within these markets, many joint ventures are already there. We will have access to Chinese, Japanese, South Korean and even Australian and New Zealand markets, with whom Asean already has FTAs.

What are the broad product categories where Indian exports will increase?

There is a fairly large number of items with export potential. Import tariffs on 80 per cent of the goods will be brought down to zero in a phased manner. Steel, some categories of auto components, engineering goods, among others, will have greater access in the Asean market.

Today, trade is roughly $16-17 billion for both sides. there is no doubt that some of our tariffs are slightly higher than Asean tariffs, especially bound rates. From the point of view of applied rates, we will not be cutting down much. By and large, most of the industrial goods in India have import duties in the range of 10-12.5 per cent. Some industrial goods even have tariffs of 7.5 per cent.

Overall, Indian industry is not comfortable with the FTA as it feels Asean goods will swamp the country...

We have had extensive discussions with Indian industry on this issue. Concerns of the industry have been taken into account by the way of putting items in the negative list (which are goods that do not see any duty cuts). In other cases, we have put items in the sensitive tariff list where tariffs will not be slashed completely and be brought down to 5 per cent from 7.5 to 12.4 per cent levels in a phased manner by 2015. Reduction in these items will not be even a percentage point every year.

There are also concerns on diversion of investments to Asean. How do you respond?

It could happen in one or two sectors. But, even without an FTA, Indian firms have been investing in Asean. Large investments have been made in Malaysia, Indonesia, Singapore and Thailand. Moreover, Indian companies are also seen investing in countries with which we do not have FTAs — like China, where over 2,500 Indian firms are present.

What happens in the case of a surge in imports into India from the Asean?

We have a separate chapter on safeguard mechanisms built into the FTA. We have a highly sensitive list of farm goods, where duties will not be abolished, as demanded by Asean. For example, for pepper, import duty will be reduced to 50 per cent in a period of 10 years from 70 per cent.

For tea and coffee, duties will be reduced by about 5 per cent in a 10-year period to 45 per cent from 100 per cent. Duty cut in palm oils is theoretical as, currently, it is already zero. We have said in the next 10 years import duty for crude palm oil will be brought to 37.5 per cent from 80 per cent.

Indian farmers are not comfortable with the proposals...

They should not fear the FTA. As I mentioned, duty on palm oil is already zero and, in effect, the duty levels committed by us does not matter. In tea, coffee and pepper, the duties will be brought down to the committed levels in the next 10 years.

It is not that the reductions will take place next year itself. Moreover, in tea and coffee, we have a replantation scheme worth more than Rs 4,000 crore, which is meant to replace all the bushes. The replanted bushes will be ready for harvest in the next six to seven years. This will make the tea and coffee sector more competitive.

Source: Business Standard