Reserve Bank scraps 80:20 norm for gold imports

Trade cheers at easing, says decision will curb smuggling, cut red tape

The Reserve Bank of India announced withdrawal on Friday with immediate effect of the gold import restrictions popularly known as the “80:20” scheme.

Introduced in August last year to control the country’s widening current account deficit (CAD), the rule enjoined all gold importers to supply at least 20 per cent of the quantity brought in to jewellery exporters. Permission for subsequent import would be given only on fulfilment of this export obligation. The RBI action follows the government’s decision to ease the restriction. With this, supply of gold should ease and smuggling get a significant check. It will also reduce the documentation work at Customs offices, helping jewellers.

“Scrapping of 80:20 will automatically control gold smuggling. It will also ease supply for local jewellers and exporters,” said a pleased Haresh Soni, chairman, All India Gems and Jewellery Trade Federation.

Gold import was considered a major contributor to a widening CAD. Import through official channels had indeed declined since the 80:20 rule but its supply through smuggling had risen several-fold. The World Gold Council had, early this month, forecast gold smuggling to meet 25 per cent of India's supply in 2014, of an estimated overall demand of 850-950 tonnes.

“The rule multiplied documentation work many times. At every level, questions were raised, translating into legal issues everywhere. Now, jewellers will focus on business,” said Rajesh Mehta, managing director of Rajesh Exports, one of India’s largest gold ornament shippers.

Mehul Choksi, managing director of Gitanjali Gems, said: “Now, the major focus of the government should be to reduce import duty.” Gold import currently attracts a tariff of 10 per cent.

“The 80:20 scheme was a major impediment for jewellers like us. Gold sourced through importers had to be kept in bonded warehouse until proof of earlier export consignments were presented to the customs department. Now, business will be smooth. We want the government to ensure seamless supply of gold to jewellery exporters,” said Pankaj Parekh, vice-chairman of the Gem and Jewellery Export Promotion Council.