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India and Pakistan on Friday announced a long-term plan to reduce the list of sensitive items for trading to 100 by 2017 in a move to boost economic ties.

While India will prune its sensitive list under the South Asian Free Trade Area (Safta) pact of Pakistani items to 100 by April 2013, its neighbour will do the same by 2017, the two nations said in a joint statement after the seventh round of talks on commercial and economic cooperation held in Islamabad between the commerce secretaries.

India has already reduced its Safta sensitive list for Pakistan by 30% to 614 tariff lines. India has promised to cut its sensitive list by another 30% after Pakistan notifies the removal of all restrictions on trade through the Wagah-Attari land route by December.

Pakistan said it has moved a cabinet note to partially remove restrictions on trade through the land route and will notify this by October. Currently, it allows only 137 items to be traded by land.

Pakistan currently has 936 tariff lines in the Safta sensitive list. As India cuts the sensitive list to 100, Pakistan will also simultaneously notify dates of transition to bring down its Safta sensitive list to a maximum of 100 tariff lines within five years.

“Thus, before the end of 2017, both India and Pakistan would have no more than 100 tariff lines in their respective Safta sensitive lists. Before the end of year 2020, except for this small number of tariff lines under respective Safta sensitive lists, the peak tariff rate for all other tariff lines would not be more than 5%," the joint statement said.

Both sides decided to hold the next round of talks in India in April. In the meantime, the joint secretaries of commerce from both sides will meet in December in Islamabad.

Nisha Taneja, a professor at the Indian Council for Research on International Economic Relations, said this shows both sides are serious about normalizing bilateral trade. “The interesting thing is that both India and Pakistan are committing a reduction in the sensitive list under Safta. This will give Safta a new lift," she said.

The commerce secretaries have also reviewed the progress on enhanced trade in petroleum products, trade in power, and reciprocal opening of bank branches. Based on this review, the commerce secretaries exhorted the officials concerned on both the sides to speed up mutual consultations so that concrete progress can be made within the next six months.

During the review, Pakistan said India’s offer to export 5 million cu. m of gas per day for an initial period of five years is being considered. Bharat Heavy Electricals Ltd has also offered to work with Pakistan in setting up 500-2,000 megawatts (MW) capacity in coal, hydro or gas power plants. India has also indicated its willingness to cooperate with Pakistan in areas of wind and solar energy and offered to supply as many as 100 locomotives to Pakistan Railways.

On exploring the possibilities of opening new land routes for trade, Pakistan said that a working group on Munabao-Khokhrapar has been constituted. India has already conveyed the constitution of a working group. It was agreed that a meeting of the joint working group on Munabao-Khokhrapar would be held in the fourth week of October in New Delhi.

Both the sides signed three agreements, including the redressal of trade grievances accord, mutual recognition agreement and customs cooperation agreement, and directed the relevant authorities to frame rules and procedures to implement these pacts.

As part of the talks, civil aviation officials of the two nations discussed ways to ensure air connectivity between New Delhi and Islamabad. While there are an average of about 23 flights per week between New Delhi and other important national capitals of the South Asian Association for Regional Cooperation (Saarc) countries, there are no direct flights between New Delhi and Islamabad. Both sides agreed to form a joint working group before 15 November, which would arrive at a more liberalized regime for commercial flights to ensure economic viability of these air routes. Saarc is a grouping of India, Pakistan, Sri Lanka, Bhutan, the Maldives, Nepal, Bangladesh and Afghanistan.

Preliminary discussions were also held on possibilities of better telecommunication links, keeping in view the requirements of business communities on both sides for international roaming facilities. “It was agreed that separate sub-groups on either side would take forward this dialogue. Commerce secretaries would review (this) thereafter," the joint statement said.

The commerce secretaries also noted the decision that was taken by the commerce ministers to form a joint business council as an additional institutional framework for regular and sustained dialogue between the business communities.

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