With Prime Minister Manmohan Singh declaring that time has come to write a "new chapter" in the history of two countries, India today decided to move towards a Preferential Trade Agreement with Pakistan as both sides agreed to put in place a liberalised visa regime soon.

The decision to move towards a Preferential Trade Agreement with Pakistan under SAFTA that will lead to zero customs duty on all traded goods by 2016 came as Singh met his counterpart Yousuf Raza Gilani on the margins of the 17th SAARC summit here.

The two leaders also agreed that bilateral trade will be conducted on Most Favoured Nation (MFN) basis.

During their hour-long meeting, both leaders decided to put in place a liberalised visa regime that is being negotiated at the earliest and revive the Indo-Pak Joint Commission that has not been in operation since 2005.

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The South Asian Free Trade Area (SAFTA) is an agreement reached in the 2004 SAARC summit in Islamabad which created a free trade area of 1.8 billion people in Bangladesh, India, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.

The decision to take the bilateral engagement to a new level came in the two Prime Ministers' third meeting in the last 18 months after their talks at the 2010 SAARC summit in Thimphu when they decided to resume bilateral dialogue.

It also comes on top of Pakistan deciding to confer MFN status to India, 15 years after New Delhi granted such a status to Islamabad.

After some flip-flops in Pakistan following its last week decision, it has been clarified at the highest level in Pakistan that it will not backtrack on its decision.