India and South Korea commenced on Tuesday discussions on their initial offers in the Comprehensive Economic Partnership Agreement aimed at opening their markets to each other through reduction as well as elimination of duties.

The official level discussions will take up a host of issues including how a particular item would qualify for duty reduction through the process known as 'rules of origin,' covering substantial items of trade.

According to official and industry sources, Indian negotiators would have to tackle the conflict of interest between Korean firms like LG and Hyundai, which have set up large manufacturing base here, and their compatriots in Seoul which are keen only to sell goods to Indian consumers without investing in setting up facilities.

"However, in the long run, the conflict can square off when forces of cost advantages come into play. India has so far maintained the cost advantage not only in services but manufacturing as well," an official of industry body Ficci said.

The two countries had started talks on CEPA -- similar to a Free Trade Agreement -- in March 2006.

After a green signal from a Joint Study Group, Seoul and New Delhi have held several round of technical level talks. Both India and South Korea are in the process of signing a large of number of FTAs covering merchandise goods, services and investment.