State gold importers refrain from bulk sale

The state trading corporations importing gold are increasingly refraining from bulk sale to few parties.

According to officials close to the development, the trading corporations are not even selling to same party for both import and export.

In order to curb import of gold, the RBI has made it mandatory for the gold importers to export 20% of the total import under the 20:80 schemes. At the same time, the DGFT registered importers have been entrusted with the responsibility of monitoring. Therefore, as a prudential measure, many trading corporations thatare in charge of importing old are desisting from selling to a single party for both import and export.

“There have been reports of circular trading in gold where jewellery is exported to fake parties overseas and imported back. Besides, the domestic market in gold has turned into sellers market with more sellers than buyers. Therefore demand for gold is more and hence the premium charged has substantially shot up to $70-100 per ounce as against $4-5 per ounce earlier. Thus, gold meant for export is increasingly getting diverted into the domestic market,” said official sources.

Thus, in order to check such diversion, the importing bodies are desisting from selling gold in bulk to few parties. Even if, they are selling to parties, such importers are refraining for selling it to the same entity both for export and import.

Meanwhile, domestically, gold has turned into sellers market, the importers are changing the premium charged for sale every week. Earlier, it used to be fixed as there were many buyers and they could buy it at any price margin due to vibrant domestic demand irrespective of the global price trends. Now, depending on the domestic market conditions and gold price overseas, the premium is changed every week, said traders.      

Export of gold jewellery from India fell 6.9% on month in October to $608.95 million according to an industry body.

The government has taken several steps this year; including raising the tax on gold imports three times- four to 6%, 6-8% and then 8-10%, to curb import of gold to reduce its trade deficit. Besides, the Reserve Bank of India mandated an export of 20% of the total quantity of gold imported by a party as a precondition for import of gold by gold traders and jewellers.

These duty restrictions resulted in a sharp fall in the imports in September this year at 12-15 tonnes which is estimated to be much lower than in the same month last year. The overall import bill for the July-September quarter on account of gold will be $2.7 billion as against $11.9 billion in the same period last year. That should help keep the current account deficit under control, said experts.