RBI, govt in talks to scrap import curbs on gold-silver alloy - sources

By Neha Dasgupta and Manoj Kumar

MUMBAI/NEW DELHI (Reuters) - The Reserve Bank of India and the finance ministry are in talks to scrap bulk import licences for a gold-silver alloy used by domestic refiners, months after relaxing curbs on gold imports, officials with direct knowledge of the discussions told Reuters.

Gold is India's second-highest import in value terms, and a jump in imports widened the current account deficit in 2013, sparking the country's worst currency turmoil since a balance of payments crisis in 1991.

An alloy of gold and silver, called dore, from which refineries produce pure gold, forms about 150 tonnes of imports each year and attracts a duty of 8.24 percent, which is less than the duty of 10.30 percent on refined gold.

The RBI wants to remove all restrictions on refiners while the finance ministry has raised concerns over tax evasion, the sources said.

Government and RBI officials met late last month to examine the proposal.

"The finance ministry is not in favour of relaxing conditions for import of gold dore as it could lead to tax evasion," said a senior finance ministry official, who declined to be identified because he is not authorised to speak to the media.

Government officials worry that buyers may try to exploit the difference in import duties by declaring pure gold as dore.

"As of now, refineries like us need to get a licence from the Directorate-General of Foreign Trade to import bulk of gold dore," said Rajesh Khosla, the managing director of MMTC-PAMP, India's biggest gold refiner.

"This policy was to prevent any misuse as dore gets a concessionary import duty. Now there is a possibility of scrapping the need for a licence for dore as gold can be imported freely anyway."

In November 2014, the government scrapped an unpopular rule, the 80:20 requirement that forced traders to export 20 percent of all gold imported into the country.

Separately, India now plans to issue sovereign bonds linked to the bullion price, in a bid to divert some of the estimated 300 tonnes of annual demand for gold bars and coins.

(Additional reporting by Krishna N. Das; Editing by Douglas Busvine and Clarence Fernandez)