Agri-products get protection under India-Malaysia FTA

Import of sensitive agri-products like palm oil, coffee, black tea and pepper from Malaysia will remain subject to high duty despite India operationalising free trade agreement (FTA) with the South East nation.

The plantation items, mostly grown in South India, have been kept in the'Special Product' category under which import duties have been cut by a small margin and will remain high enough to protect domestic producers.

The bilateral Comprehensive Economic Cooperation Agreement (CECA) covering trade in goods, services and investment has come into force from July 1.

The sensitive agri-products will now attract duties ranging between 66 and 94% from 80-100%.

The duties on these products will be reduced in a phased manner but will still remain in the range of 37.5-45.0% even in 2019, according to the CECA.

The protection to the plantation producers comes in the backdrop of protest by some political parties and farmers' organisations when India had started negotiating the free trade agreements with the Association of Southeast Asian Nations (Asean), including Malaysia.

The Southeast Asian countries are quite price competitive in these crops.

Meanwhile, the India-Malaysia CECA will give Indian professionals like accountants, engineers and doctors access to the key Southeast Asian nation.

In addition, exports of items of considerable interest to India, like basmati rice, mangoes, eggs, trucks, motorcycles and cotton garments will attract lower or no duty in Malaysia.

The CECA will facilitate temporary movement of business people, including contractual service suppliers and independent professionals in accounting, architecture, engineering services, medical and dental, nursing and pharmacy, computer services and management consulting.

The agreement will also help boost cross-border investment between the two countries, which achieved bilateral trade of $10 billion in FY11.

With the help of the opening of trade in goods and services, bilateral trade between India and Malaysia is expected to reach $15 billion by 2015, the Commerce Ministry said in a statement.

"The CECA creates an attractive operating environment for the business communities of both countries," it said.

An agreement for freeing trade in goods has already been implemented with the 10-nation Asean. The pact with Malaysia will lead to tariff liberalisation beyond the India-Asean FTA commitments, which were implemented by both countries on January 1, 2010.

India has also freed trade with South Korea, while a similar agreement with Japan will come into effect from August 1.