South Aston FreeTrade Area (Safta), which paves the way for free trade in goods among the Saarc member states, comes into effect today.

As per the agreement, India, Pakistan and Sri Lanka will bring their customs duties to 0-5 percent by 2013. The least developed members Bangladesh, the Maldives, Nepal and Bhutan will do it by 2018.

India being the laiger and relatively developed economy will be providing concessions to the least developed countries (LDCs) including a mechanism for compensation of revenue loss due to reduction in duties.

The LDCs to be compensated include Bangladesh and the Maldives. Indian cabinet ratified the agreement on December 29.

As per the agreement, trade liberalisation programme will not apply to the tariff lines included in the sensitive list.

India has finalised two separate lists -- a longer list for non-LDCs such as Pakistan and Sri Lanka containing 884 items and a shorter for other Saarc members with 763 items.

The LDCs will also be provided technical assistance in areas like capacity building in standard, protect certification, training of human resources, improvement of legal system and administration, custom procedures and trade facilitation.

The Saarc (South Asian Association of Regional Cooperation) includes Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka.