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| Refineries seek import duty cut on raw gold |
| Dilip Kumar Jha / Mumbai Jul 03, 2009, 00:35 IST |
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National Spot Exchange Ltd, an associate of the country’s largest commodity exchange the Multi Commodity Exchange (MCX), has urged the government to waive two per cent customs duty on raw gold imports for stimulating domestic refineries.
Although NSEL is not directly involved in gold refining business, it has sent a memorandum to the government on behalf of the gold refining industry in India as the spot commodity exchange has floated the India Bullion Markets Association (IBMA), a panorama of bullion traders in India.
The refinery business is fragmented so far in India. Therefore, no major representations have been done to the government. Now, since the IBMA has incepted in line with the London Bullion Market Association (LBMA), the world’s single largest gold certifying and benchmarking agency, we have taken the lead, said Anjani Sinha, MD of NSEL.
Confirming the development, Harmesh Arora, a senior executive of Mumbai-based NIBR Bullion and vice president of the Bombay Bullion Association (BBA), said, “domestic refineries are currently operating with 20-30 per cent of their capacities due to the lack of raw materials. Since, these refineries survive only on re-melting of scrap gold sold back to the market, there capacity utilisation is minimal.”
Since customs duty makes the “dore” (unrefined gold) import unviable to be processed in domestic market because of lower levy on refined gold imports, the government should cut duty on raw material imports, Arora said.
Used gold supply also remains uncertain in India which moves in proportion of price movement. If price goes up, scrap sales also move up and vice-a-versa. Customs duty on pure gold imports is currently prevailing at Rs 10,300 per kg constituting less than one per cent (0.75 per cent) of the market price at Rs 14.60 lakh per kg.
Spread across all significant consuming centres in the country, domestic refineries have the capacity to produce 100 kgs of pure gold everyday. But, since refining with imported gold dore is not viable currently and scrap gold selling cycle is long, their capacity remained under-utilised.
Currently, South Africa, Australia, Angola and America are major gold miners in the world. But, the yellow metal is refined in mostly in Zuric, Switzerland for producing LBMA approved gold bars and coins. Since, LBMA standard gold bars have been globally recognised, all trading activities are executed on the price announced by it.Indian refineries have the capability to produce LBMA standard gold bars. But, since gold is not refined through ore processing, the yellow metal produced in the country is not standardised to the globally recognised level. Hence, locally produced gold is sold at a discount to the same purity of the precious metal of foreign origin.
India’s household gold holding is estimated a hefty between 20,000 - 25,000 tonnes. Still, the country’s appetite of gold continues thereby, increasing import of the yellow metal.
Set up to standardise India origin gold, IBMA has recognised four refineries — National Refineries, NIBR, Gujarat Gold Centre and Gujarat Bullion. It has also received applications from over half a dozen refineries including Chennai and Kolkata for recognition.
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