Here's what govt could do for a better gold policy

A few suggestions from various stakeholders in the precious metals sector

Former Reserve Bank of India governor Venugopal Reddy says there is need for a comprehensive policy on gold, owing to its role in the economy and in order to handle the precious metal in a better way.

Gold is a favourite subject for Reddy, having done a lot of work on policy in this regard. "It is time we have a positive approach to policy for gold," he said.

Business Standard spoke to various stakeholders in the precious metals sector. Here are some suggestions for the coming Union Budget and after.

* Form an umbrella agency to decide on policy, such as a Gold Board. It could also be an advisory body or work under the finance ministry but it must hear all stakeholders and recommend;

* Centralised information collection on imports -- sources from where gold and dore (unrefined gold) is imported, who imports how much and for whom, etc. How gold imported duty-free for re-export is utilised. If a gold board acts as a policy making body, record keeping can be done by another agency or a repository. However, reporting of all such data has to be centralised;

* Spot or physical trading of gold and bullion is as unregulated as with all other commodities. A spot exchange for gold was proposed by the Indian Bullion and Jewellers Association, along with the BSE. It has not been approved, simply on the issue of who will regulate it, there being no agency presently empowered to do so for spot trading. However, as with the launch of a platform for electronic trading of agricultural commodities, where major wholesale markets are to be integrated, a similar platform is required for bullion trading. The proposed gold board can form regulations for e-bullion trading;

* The import duty of 10 per cent on gold should be reduced by two to four per cent. With imports falling and demand subdued after demonetisation, revenue loss from a duty cut would lose much less than it would have a year before. And, it will hit smugglers. The finance ministry will have to consider the demand for its gold sovereign bonds, an alternative to physical gold investment. For, a duty cut means lower prices for physical gold and prices of listed bonds will also fall;

* The Gold Monetisation Scheme, launched a little over a year before, has so far collected barely six tonnes. The government should push banks to be more aggressive and address issues such as the process of collection, issuing of certificates by collection centres and refining. Development of an India gold standard will help.