India-Oman FTA: No Duty Concessions on Liquor, Cigarettes

New Delhi, Jan 19 (PTI) India is not seeking customs duty concessions on over 100 product categories such as liquor, and cigarette in the proposed free trade agreement (FTA), which is under negotiations between the two countries, sources said.

They also said that though the FTA negotiations were concluded, Oman has sought revision of its market access offers on some products.

The two sides have discussed three to four issues flagged by Oman, and any potential changes would be minimal, they said.

India is expected to gain greater market access for about 98 per cent of its goods in Oman, along with significant access to the services sector.

"There could be about 125-130 tariff lines (or product categories), where we have not asked for duty concessions and that included goods like liquor, and cigarettes," they added.

On January 14, India and Oman held the fifth round of talks for the agreement, which is aimed at boosting bilateral economic ties.

The negotiations for the agreement, officially dubbed as Comprehensive Economic Partnership Agreement (CEPA), formally began in November 2023.

Oman's import duty ranges from 0 to 100 per cent along with the existence of specific duties. On specific meats, wines and tobacco products 100 per cent duty is applicable.

According to industry sources, India should not extend duty concessions on petrochemical products, a key demand of Oman.

Indian petrochemical industry which comprises both large public sector units and private players have raised their serious concerns and requested the government not to accede to this demand of Oman, they said.

"In petrochemical sector, feedstock constitutes a significant portion (about 65-70 per cent) of the total product cost such as Polyethylene (PE), Polypropylene (PP), Polyvinyl Chloride (PVC), Polyethylene Terephthalate (PET) etc. Therefore, feedstock pricing makes a critical determinant of overall competitiveness in the petrochemical industry," the industry sources said.

They added that Oman has a distinct feedstock cost advantage due to its abundant natural resources and has a significant exportable surplus of petrochemical products with minimal domestic demand.

"Any tariff concessions to Oman would lead to an influx of low cost petrochemical imports, adversely affecting the Indian petrochemical industry," they said.

Oman is the third largest export destination among the Gulf Cooperation Council (GCC) countries.

According to the think tank GTRI (Global Trade Research Institute), Indian goods worth USD 3.7 billion like gasoline, iron and steel, electronics, and machinery will get a significant boost in Oman, once both sides reach a comprehensive free trade agreement.

Currently, over 80 per cent of its goods enter Oman at an average of 5 per cent import duties, a GTRI report has said.

India already has a similar agreement with another GCC member UAE which came into effect in May 2022.

On the imports front, India's merchandise imports from Oman dipped to USD 4.5 billion from USD 7.9 billion in 2022-23.

Key imports are petroleum products and urea. These account for over 70 per cent of imports. Other key products are propylene and ethylene polymers, pet coke, gypsum, chemicals, and iron and steel.

The bilateral trade has declined to USD 8.94 billion in 2023-24 from USD 12.39 billion in 2022-23. India's exports stood at USD 4.42 billion in the last fiscal.

In such agreements, two trading partners either significantly reduce or eliminate customs duties on a maximum number of goods traded between them.

They also ease norms to promote trade in services and attract investments.