The Prime Minister of Sri Lanka held wide-ranging discussions with Prime Minister Shri Atal Bihari Vajpayee. Deputy Prime Minister and Ministers of External Affairs, Commerce & Industry, Civil Aviation and Petroleum & Natural Gas called on Prime Minister Wickremesinghe. The discussions were substantive and held in a cordial atmosphere, reflective of the close relations between the two countries.

The two Prime Ministers expressed their happiness that the Free Trade Agreement, which became operational in December 2001, had enabled bilateral trade to cross the US$ 1 billion mark in the financial year 2002-03.

A decision to go beyond the Free Trade Agreement was taken during the last visit of the Prime Minister of Sri Lanka in June 2002. An India-Sri Lanka Joint Study Group was set up to make recommendations for the establishment of a Comprehensive Economic Partnership Agreement. The Co-Chairmen of the Joint Study Group presented their recommendations tothe two Prime Ministers on 20th October 2003. Expressing their satisfaction on the speed with which the Joint Study Group prepared its comprehensive report with its far-reaching recommendations, the Prime Ministers congratulated the members of the Group and directed that negotiations begin immediately, with the target of concluding the Comprehensive Economic Partnership Agreement by the end of March 2004. This would enable the two countries to reap the early benefits of freer trade in goods and services and enhanced investment and economic cooperation.

The two Prime Ministers noted the successful holding of the 5th session of the Joint Commission Meeting, co-chaired by the Foreign Ministers, in Colombo on 15th October 2003 and the signing of the Agreement to release the second tranche of US$ 30 million out of the US$ 100 million Line of Credit extended to Sri Lanka. They agreed that further Lines of Credit for infrastructure projects could be discussed.

The two Prime Ministers expressed satisfaction that existing understandings on dealing sympathetically and humanely with fishermen who stray into each other's maritime zone were working well. It was noted that a number of Indian fishermen had been released by the Sri Lankan side and several Sri Lankan vessels detained at Nagapattinam had been released for repair and escorted back to Sri Lanka. It was agreed that while it was important that the fishermen should be released early, the boats may be held till the judicial processes in the two countries are completed. The Prime Ministers agreed on the need to undertake enhanced surveillance to minimize incursions, institutionalize assistance for salvage operations of released vessels, pay attention to ecological and conservation aspects and consider licensed fishing within a bilateral Memorandum of Understanding on Fisheries.

The two Prime Ministers expressed their satisfaction at increased civil aviation links between India and Sri Lanka. They noted that Sri Lankan Airlines had increased the number of its weekly flights to Indian destinations from 29 to 44 since their last meeting. Without prejudice to already existing arrangements, India offered to Sri Lanka the facility of daily air services by its designated airlines between Colombo and the metropolitan cities of Delhi, Mumbai, Chennai, Bangalore, Hyderabad and Kolkata. In addition, unlimited access would be available for air services to and from 18 tourist destinations in India. It was agreed to do away with the existing requirement of Commercial Agreements between designated airlines of the two countries for asymmetrical operations. With a view to increasing tourist flow and connectivity, it was also decided to encourage private scheduled airlines of India, who operate only in the domestic sector at present, to extend their operations to airports in Sri Lanka. The Sri Lankan Prime Minister agreed to reciprocate in terms of the access that airlines from India could have to Sri Lankan airspace.

The Sri Lankan Prime Minister proposed commencement of a ferry service linking Colombo with Kochi (Kerala).

The Prime Ministers noted with satisfaction the significant contribution made by the India-Sri Lanka Foundation towards fostering exchanges in cultural, educational, scientific and technological areas and announced a further contribution of Rs. 1 crore each to enable the Foundation to sustain its diverse activities.

Taking note of the continuing acts of terrorism worldwide and in our region, the two Prime Ministers emphasized the need for concerted opposition to terrorism in all its forms and manifestations. They agreed that there can be no justification for terrorism, be it political, religious or ideological. They recalled the obligations devolving on States, inter alia, under Security Council Resolution 1373 and the International Convention on the Suppression of Financing of Terrorism. The Kathmandu Declaration adopted at the 11th SAARC Summit held in Kathmandu on 6 January 2002 on criminalization of financing for terrorist purposes and the need to prevent the abuse of financial systems of States was also recalled. They reaffirmed the need to finalize and adopt, at the earliest, the proposed Comprehensive Convention on Terrorism, which would send a strong signal that the international community was united and determined in its efforts to eliminate the scourge of terrorism. Furthermore, they also urged the early conclusion of the proposed Additional Protocol to the SAARC Convention on Suppression of Terrorism.

The two Prime Ministers discussed the ongoing cooperation in training and the supply of equipment to the Sri Lankan defence forces and agreed that the two sides will commence discussions with a view to concluding a defence cooperation agreement at the earliest.

The Sri Lankan Prime Minister apprised the Indian leadership of recent developments in the peace process and proposals made by his Government for the establishment of an Interim Administration. India expects that the response to the proposals made by the Sri Lankan Government in July 2003 will be reasonable and comprehensive. India supports the process of seeking a negotiated settlement acceptable to all sections of Sri Lankan society within the framework of a united Sri Lanka and consistent with democracy, pluralism and respect for individual rights. It believes that an enduring solution has to emerge purely through internal political processes.

India will maintain an abiding interest in the security of Sri Lanka and remains committed to its sovereignty and territorial integrity. India would welcome a resolution of the current impasse in the peace process and an early resumption of negotiations. Any interim arrangement should be an integral part of the final settlement and should be in the framework of the unity and territorial integrity of Sri Lanka.