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Preferential trade agreement with Mauritius on anvil

Economic Times, India

Preferential trade agreement with Mauritius on anvil

Deepshikha Sikarwar & G Ganapathy Subramaniam

5 MAY 2007

NEW DELHI: In a bid to further deepen their historic relations, India and Mauritius would soon ink a preferential trading agreement (PTA). This would be the first step towards eventually signing a Comprehensive Economic Co-operation and Partnership Agreement covering goods, services and investment on the lines of India-Singapore pact. New Delhi will provide a host of concessions to the island nations which will allow it duty-free export of three million pieces of garments, refined sugar and rum to India.

A proposal in this regard is expected to be taken by the Cabinet Committee on Economic Affairs. According to the proposal, Mauritius would be able to export one million pieces of garments to India without any sourcing condition for yarn. However, for the next two million pieces there would be a condition on sourcing of yarn. For one million pieces, yarn would have to be sourced from India and for next one million, yarn would have to be from Mauritius.

However, if there is a shortfall of yarn, it can be sourced from India. Besides, Mauritius would also be able to export 1,50000 of rum and 15,000 metric tonne of sugar duty free. New Delhi would also reduce or eliminate duties on 70 tariff lines, a move expected to boost exports from Mauritius into India. Mauritius’ total exports to India stood at Rs 32 crore in 2005-06.

The Trade and Economic Relations Committee under the chairmanship of Prime Minister has already given its go ahead to the PTA last year. Investment and economic co-operation would be a key plank of the CECPA which would lay down the road map and modalities for encouraging Indian investments in Mauritius and joint India-Mauritius investments in the region. The agreement is being modelled after the Comprehensive Economic Co-operation Agreement that India has with Singapore.

It would include agreement on trade in goods, services, investment, general economic co-operation and customs co-operation. So far both sides have only been able to finalise the agreement on goods. Mauritius has offered to give ease work visas norms for various Indian professionals especially finance professionals to allow them to work there. It has already amended its laws to allow Indian chartered accounts to audit accounts of global business companies and has proposed to grant permanent resident status to financial sector professionals from India.

Mauritius has recently given approval to India’s Financial Technologies, the promoter of multi-commodity futures exchange, to set up a pan-African commodities exchange there. However, both sides are still to come to a common ground on tax treaty, which is holding up movement talks in other areas especially an agreement on investments under CECPA. India wants a review of the tax treaty to prevent its misuse like treaty shopping.

But, Mauritius does not want any review of the pact. About 35% of FDI flows into India comes from Mauritius as does most of its FII money. Most of the investors set up a global business company in Mauritius which serves as the investment vehicle to make investments in India.