Sri Lanka`s trade relations with India marked a historic milestone when the India-Sri Lanka Free Trade Agreement (ISFTA) was signed on 28 December 1998 as Sri Lanka`s first bilateral free trade agreement. The ISFTA came into force on March 1, 2000. The ISFTA is now fully implemented, with both parties fulfilling their progressive obligations under the Tariff Liberalisation Programme (TLP), as explained below. The Indo-Sri Lanka peace agreement was an agreement signed on 29 July 1987 in Colombo between Indian Prime Minister Rajiv Gandhi and Sri Lankan President J. R. Jayewardene. The agreement was expected to resolve Sri Lanka`s civil war by allowing Sri Lanka`s 13th Constitutional Amendment and the 1987 Provincial Council Act. Under the agreement , Colombo agreed to a transfer of power to the provinces, Sri Lankan troops should be withdrawn from their northern barracks and Tamil rebels should surrender their weapons.   The agreement provides for the upgrading of 12 border crossings, seven stops and 78 crossings between Maho and Omanthai. The declaration indicated that this would be the first upgrade of the 130-kilometre rail line in more than 100 years. The agreement was signed between IRCON International Limited and the Sri Lankan government under the concession financing system in India, as reported by the Indian High Commission in Colombo. The agreement provides for the revaluation of a distance of 130 km, more than 100 years old, between Colombo and Jaffna, in the northern majority province of Tamil.
Faced with the possibility of active intervention by India and a population increasingly tired of war at home, Sri Lankan President J. R. Jayewardene offered to talk with Rajiv Gandhi`s government about the next steps.  The siege of Jaffna was quickly lifted, followed by a round of negotiations that culminated in the signing of the Indo-Sri Lanka Agreement on 29 July 1987 which resulted in a temporary ceasefire. The ceasefire conditions established that Sri Lankan troops were withdrawing from the north and disarming Tamil rebels and saw the introduction of the Indian peacekeeping force in Sri Lanka. [Citation required] India and Sri Lanka signed a $91.26 million contract on Thursday to upgrade the 130-kilometre rail line between Maho and the island state`s umate city.