India Wants ‘CEPA’ Again

India is interested in having a comprehensive economic partnership agreement (CEPA) with Sri Lanka states ‘The Economic Times’ of India. According to ‘The Economic Times, ’Indian Foreign Secretary Nirupama Rao had raised the issue of reviving CEPA when she met the Lankan leadership during her recent visit to Colombo.

Already, a working free-trade agreement (FTA) between Sri Lanka and India exists but India had proposed that it should be broaden and ‘CEPA’ revived. However, there was opposition stating such an agreement would harm Sri Lankan economy. Despite ‘CEPA’ was to be signed in 2008, due to opposition from various parties in Sri Lanka the agreement was shelved. As all elections have been completed the Sri Lanka’s President will not have any obstacle in signing the agreement states ‘The Economic Times.’ The newspaper hints that Rajapakse government had waited till the elections were over to sign the agreement.

Ms. Nirupama Rao has told The Economic times “I don’t see why the success of the FTA can’t be replicated through CEPA... It should work wonders in trade and services. It is time that Sri Lanka looked at these issues carefully.”

The objective of the agreement is to release from tax certain goods and services that are exchanged between the two countries. Under the agreement Sri Lanka will not levy taxes on 32 items imported from India while 20 services will be free of tax. India would open 114 items and agree tax relief on 80 services.

The agreement would destroy rural industries and give an opportunity to Indian economy to overpower economy in Sri Lanka say many Sri Lankan economists. Among the Indian goods that would be released of tax by Sri Lanka would be goods that are produced in Sri Lanka such as joss sticks, soap and biscuit and when tax is not levied for these products from India their prices would be lower than the prices of Sri Lankan products so that these local industries will have to be closed down they argue. Despite India giving tax relief for a large number of goods which include many products that are not produced in Sri Lanka such as brass and steel products, India would not have any disadvantage due to the agreement point out these economists.