Saturday, December 31 2005 16:28 Hrs (IST) - World Time -

New Delhi: South Asian Free Trade Area (SAFTA), which paves the way for free trade in goods among the SAARC member countries comes into effect tomorrow (Jan 1, 2006).

As per the agreement, India, Pakistan and Sri Lanka will bring their customs duties to 0-5 per cent by 2013 while the Least developed members Bangladesh, Maldives, Nepal amd Bhutan will do it by 2018.

India being the larger and relatively developed economy will be providing concessions to Least Developed Countries (LDCs) including a mechanism for compensation of revenue loss due to reduction in duties. The LDCs, which will be compensated, include Bangladesh and Maldives.

Indian Cabinet had ratified the agreement on December 29,2005.

As per the Agreement of SAFTA, trade liberalisation programme would not apply to the tariff lines included in the sensitive list.

India has finalised two separate lists a longer list for non-LDCs like Pakistan and Sri Lanka containing 884 items and a shorter for other like Bangladesh, Bhutan, Maldives and Nepal with 763 items.

LDCs would also be provided technical assistance in areaslike capacity building in standard, protect certification, training of human resources, improvement of legal system and administration, custom procedures and trade facilitation.

As per the agreed rules of origin, twin criteria of change in tariff heading at four digit level and value addition of 40 per cent for Non-LDCs and 30 per cent for LDCs would apply.