Stringent gold import norms may be relaxed

Owing to 10% customs duty and import curbs, the govt is expecting gold imports to be below 750 tonnes this year - a drop of 11% from last year

The government and the Reserve Bank of India (RBI) are considering easing the 80:20 principle for import of gold. The rule requires importers of the commodity to supply at least 20 per cent of their imports to exporters.

Traders have said this is inhibiting imports and have made a presentation to the government to relax the condition. They have argued that it is troublesome for them to show proof of export for every lot of imports and as a result their consignments often get held up at customs warehouses.

“Some discussions are going on to relax the rule. The government is considering a proposal whether importers can be allowed to make the declaration less frequently, say on an annual basis,” said a finance ministry official, who did not wish to be identified.

On July 22, the RBI had said that a fifth of the gold purchases by importers in every lot would have to be exclusively made available to exporters. It said only 80 per cent of the imports could be used for domestic purposes, and that too for entities engaged in jewellery business, bullion dealers and banks.

Traders and jewellers have argued that the rule is putting them under pressure to export at any given price, and as one would try to recover the loss on domestic sales this would make gold costlier.

In a letter to Finance Minister P Chidambaram last month, All India Bullion & Jewellers Association said the formula was not practical. It said agencies nominated by the government for gold imports were charging from them a “hefty premium” instead of a nominal service charge.

Exports of gold jewellery in quantity were in the range of 35-40 tonnes per quarter in the last six months. Imports, on the other hand, stood at 335 tonnes in the June quarter and 71 tonnes in the September quarter. Due to 10 per cent customs duty and import curbs, the government is expecting gold imports to be below 750 tonnes this year — a drop of 11 per cent from last year.