India's proposed Free Trade Agreement with Asean has hit another roadblock, this time with Finance Minister P Chidambaram expressing concern over the revenue losses that would arise from it.
Chidambaram recently wrote to the Prime Minister's Trade and Economic Relations Committee and the commerce ministry in this connection, stating that losses on account of just one possible duty cut - on palm oil - would amount to Rs 1400 crore (Rs 14 billion) annually.
Chidambaram's communication comes after UPA Chairperson Sonia Gandhi voiced her concern regarding the FTA with Asean. Gandhi wrote two letters on the issue - first to Commerce Minister Kamal Nath and then to Prime Minister Manmohan Singh.
Chidambaram cautioned against the perils of an inverted duty structure and asked the commerce ministry to keep revenue considerations in mind while finalising tariff cuts under the FTA.
He pointed out that if India were to reduce import duty on palm oil by 50 per cent, the revenue loss from that alone would be Rs 1400 crore. The import duty on crude palm oil is around 80 per cent at present, while it is 90 per cent for refined palm oil.
India and Asean are scheduled to hold the next round of negotiations on the proposed FTA from May 30 at Singapore. Asean had earlier unilaterally called off the meeting.
Discussions between the two sides are stuck on two issues - Asean wants India to reduce its negative list of 991 items, while India wants a Tariff Rate Quota for items like palm oil, tea, coffee and pepper. India is not willing to reduce import duty on these items, which are sensitive for its domestic industry.
A negative list refers to those items on which there will be no tariff cuts under an FTA.
Under a TRQ, India will marginally reduce the import duty on products like tea or coffee up to a specific quantity. The commerce and agriculture ministries are yet to finalise the quantum of duty cuts under TRQs.
