COLOMBO. Mar 4: Diplomats yesterday mulled over renewed bids to salvage a Indo-Lanka free trade treaty that was set to Collapse as India withdraw promised preferential treatment to Srl. Lanka's main export commodities, reports AFP.

Officials said there could be talks between Sri Lanka and India on the respective 'negative lists' which specify commodities to be excluded from tariff concessions in line with the treaty that should have gone into effect on Monday.

"Within a matter of few weeks we could try and sort out the differences," an official involved in hammering out the trade agreement said. Tea and rubber were the main issues holding up the treaty.

Sri Lankan trade officials who went into, a huddle Wednesday argued that India’s backtracking on concessions to tea. Sri Lanka’s main export, and rubber was unacceptable to the government.

"The Indian's have very clearly displayed bad faith." a Sri Lankan private sector official said. "From the very beginning we maintained that the

agreement was a step in the right direction, subject to negative lists."

Trade officials said India's backtracking had led to the virtual collapse of the treaty that was to be a landmark pact and strengthened arguments here that the agreement was in favour of India from the start.

Sri Lanka and earlier zeroed in on tea in a bid to reduce the huge trade gap that favours India in a 13 to 1 ratio.

The agreement signed December 28 in New Delhi between Sri Lankan President Chandrika Kumaratunga and Indian Premier Atal Behari Vajpayee had been shrouded in secrecy.

The Sri Lankan Chamber of Commerce first heard details of the agreement two weeks after it was signed, the details came from Indian High Commissioner (ambassador) here. Shivshankar Menon, and not from Sri Lankan officials, most of whom were unaware of the details till the last minute.

The Indian envoy had gone on public record here that tea and rubber will not be included in India's negative list allowing the two commodities easier ac-

cess to the vast Indian market.

On the basis of Menon's assurances. Sri Lanka at the time planned to export around five to 10 million kilograms (11 to 22 million pounds) of tea of India, the world's largest producer as well as the biggest consumer of tea.

It has been trying hard to sell tea to India to make good the losses suffered as a result of the currency Crisis in Russia, a key buyer of Sri Lankan tea.

In New Delhi, a top executive from India's state-:run tea board, meanwhile, said the Indian U-turn was a result of massive political pressure put on Vajpayee's coalition government by the three main teagrowing states.

'There was tremendous pressure on the government to do away with this import relief from the industry as well as from the main tea-producing state, the executive from the apex tea trade chamber said.

"Indian tea planters were particularly sore that the government had taken such a stand at a time when the tea Industry was trying to boost its volumes,"

he told AFP on condition of anonymity.

The Indian tea association on Wednesday hailed the step as a "welcome decision."

"We have been urging the government not to allow duty-free import, of tea from Sri Lanka as it would adversely affect the Indian tea industry," Association chief PK Bhattacharya said.

The state government of Assam. which accounts for 55 percent of India's output, also welcomed the step.

"A level playing field is necessary to any competitive scenario and now the Indian tea industry can compete with the world tea market without any problems," it said.

The trade pact envisages India eliminating some of the import tariffs on Sri Lankan products within three years from Monday while Sri Lanka will take years to reciprocate.

However. Sri Lanka's import tariffs, which are already lower than those of India’s, are to be brought down across the board by next year, making some of the concessions to India redun-