Bullion dealers for re-export scheme

Say it is imperative to address surge in unofficial imports in recent months

Bullion dealers and experts are proposing several measures to address the situation of sliding official imports and a surge in ‘unofficial’ channels.

The aim is to disincentivise the use of undisclosed money in gold buying, helping banks earn foreign exchange by exporting gold bars and to promote bullion refining in the country.

Harish Acharya, secretary, Bullion Federation of India, says: “Export of gold bars assayed and stamped by refiners with LBMA (London Bullion Market Association) accreditation should be allowed at least till the India standard is developed.”

The Bureau of Indian Standards is introducing a BIS mark for what comes out of Indian refineries, to be announced along with rules and details for making hallmarking mandatory.  

The recommendation made by the federation, if accepted, banks and even Indian refineries will be able to export gold. Several other commodities like sugar, pulses and spices are imported in raw form, refined or processed and re-exported. The similar facility can be allowed for gold. However, had this been allowed earlier when gold was quoted at a discount of $50 to 100 per ounce, “India would have earned precious foreign exchange,” said Sudheesh Nambiath, lead analyst with GFMS TR. Even today, market is quoting around $30 per ounce discount to cost of imports and exports are still viable.

When the Indian gold standards are implemented, refineries will get an additional business to import dore (unrefined or semi-refined gold), refine it and re-export. Some  copper smelting units, where gold is a by-product, are exporting gold bars, said an expert.

Acharya, while addressing a global gold convention at Agra on Thursday, said, “Domestic refineries should be further incentivised with a discounted duty on dore, with a difference of one per cent from the landed cost. There is a need to distinguish the licence limit for silver dore and gold dore.”

The Federation (representing 90 per cent of bullion import and trade, and including banks), he said, also proposes that dealing in gold be only through banking channels, at least on a wholesale level. And, that cash-based trading of gold be brought under the ambit of the Prevention of Money Laundering Act.

In the past six months, according to data from the Union commerce ministry, gold import has come down by half, to 205 tonnes. Says Acharya, “Fifty per cent of the retail business has gone underground (or is unaccounted) in the past five months, due to heavy destocking of unaccounted gold.” That includes smuggling.

He suggested the import duty on gold be cut to five per cent. It could be gradually raised to 10 per cent when the dust around the issue of excise on jewellery is settled.