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India, Indonesia close to sorting differences

India is believed to be working out a trade off with Indonesia on palm oil, the last hurdle to a Free Trade Agreement that New Delhi has been negotiating with ASEAN for several years.

business Updated: Jun 29, 2008 11:28 IST

India is believed to be working out a trade off with Indonesia on palm oil, the last hurdle to a Free Trade Agreement that New Delhi has been negotiating with ASEAN for several years.

The trade off, however, may harm interest of India's exporters of textile and few other top traded items which may be denied access to the Indonesian market in return for the Indian palm oil turf being defended.

Palm oil is the single largest export item for Indonesia and it had been resisting the ASEAN-India FTA on the ground that the agreement should pave way for opening the large edible oil market in India.

Though India has lately scrapped duty on crude palm and soya oil because of inflationary pressures, it wants to retain an option to protect the domestic growers as and when the commodity cycle results in surpluses at home.

"We are almost near settling the issue of palm oil and we expect the FTA to be signed by late July or early August in Jakarta," an official said.

Indonesia is coming round to India's stand of maintaining 40-45 per cent protection level for palm oil in return for New Delhi allowing Jakarta to restrict its market for few Indian products by putting them in the 'highly sensitive list'.

Along with Indonesia, India had differences with Malaysia which not only sought higher market access for palm oil but also wanted to export crude oil to India at zero duty over a long period of time, as the FTA would provide for.

However, India has assured only Brunei of zero duty for its crude petroleum and not Malaysia. "For Brunei, crude oil is the only export item. This is not so with Malaysia," the official said.

India had signed a framework agreement with the 10-nation ASEAN in October 2003 for the trade pact, which was to be concluded in 2006.