Sunday, January 1 2006 11:30 Hrs (IST) - World Time -

New Delhi: South Asian Free Trade Area (SAFTA), paving way for free trade of goods among countries of the region, today (Jan 01, 2006) became operational, marking a historic milestone in the 20-year existence of the 7-member SAARC.

Operationalisation of SAFTA is a landmark in the history of the grouping, which includes India, Pakistan, Bangladesh, Sri Lanka, Maldives, Nepal and Bhutan, as this is for the first time it is keeping the date with an agreement.

SAFTA was agreed upon at the historic Islamabad Summit in 2004 and is being operationalised as per the implementation schedule.

Indian Cabinet had ratified the agreement on December 29. "Implementation of SAFTA will further strengthen our trade relations with the SAARC countries," Commerce Minister Kamal Nath had said.

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

New Delhi has a sensitive list of 884 items for non-LDCs and 765 for LDcs. These are those items on which tariff reduction would be carried out.

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, technical assistance. The LDCs include Bangladesh and Maldives.

LDCs would also be provided technical assistance in areas like 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.