In a major leap in bilateral economic relations, India and Thailand on Friday finalised modalities for implementing the first phase of the Free Trade Agreement between the two countries from September this year under which they will start tariff reduction on 82 agreed items in three years.

Prime Minister Manmohan Singh, in Bangkok for the BIMSTEC Summit, met his counterpart Thaksin Shinawatra to sort out the thorny issues and finalised an agreement on Rules of Origin, paving the way for FTA implementation.

Under the first phase of the FTA agreement called the "Early Harvest Scheme", in the first year, tariffs would be reduced by 50 per cent on the 82 items, and in the second year by 75 per cent. From September 1, 2006, both countries would have duty free regime on all these items.

The second phase of the Free Trade Agreement would begin from then onwards and the two countries would have free trade regime by 2010.

Breifing newsmen on the outcome of Friday's Indo-Thai bilateral meeting at which the Free Trade Agreement figured prominently, Commerce Minister Kamal Nath said the Early Harvest Scheme has now been finalised after sorting out one or two thorny issues.

After completion of appropriate formalities on both sides, the protocol for implementing the Early Harvest Scheme would be signed by the commerce ministers of the two countries when the Thai Commerce Minister Watana Muangsook visits India in August this year.

A joint statement issued at the end of the Singh-Thaksin meeting said the two leaders welcomed the completion of negotiations for implementing the Early Harvest Scheme under the Framework Agreement for establishing a FTA between India and Thailand from 2010.

This would be second such Free Trade Agreement for India. The first one was with Sri Lanka four years ago.

India had certain concerns with regard to Thai Free Trade Agreement as Thailand had similar agreements with China and Australia. This was precisely why Rules of  Origin for items were important so that Chinese goods did not enter through backdoor into India.

The 82 items, which come up for tariff reduction under the Early Harvest Scheme included gearboxes, television picture tubes, wrist watches, parts of seats, compressor type refrigerators, textile spindles, spinning rings, flyers, machinery for moulding, pipes, boiler shells, ball bearings, flywheels, pulleys, signalling equipment and printed circuits.

Some of the other major items in the list included air conditioners, certain types of plywood, several plastic items, self-adhesive plates, precious stones, dust and powder diamonds, articles of jewellery, semi-precious stones, fans, aluminium and its alloys, table, floor, wall, windows and some electrical goods including fans.

Asked about Singh's assertion that the United Profressive Alliance government would take a "hard look" on various FTA agreements, Kamal Nath said relook and review did not mean wholesale changes or amendments.