Centre finalising gold policy reforms, Budget rollout likely

Calls meeting of stakeholders today to finalise national bullion board and exchange

The Centre has called a meeting on Monday to finalise a proposal to set up a National Bullion Board, an umbrella body to implement gold policies and reforms, as well as a gold spot exchange.

Industry stakeholders, representatives from the Indian Institute of Management Ahmedabad (IIM-A)'s India Gold Policy Centre and officials from the commerce and finance ministry will attend the meeting, which comes a week ahead of the Union Budget for 2016-17. According to sources, finance minister Arun Jaitley will announce several measures in the meeting, intended to reform the gold trade.

Apart from these two major issues, the finance ministry will also consider duty on dore (unrefined gold) imports, in view of some cases of misuse of concessions in import duty by some refineries in excise-free zones. The move is aimed at ending a one per cent arbitrage by way of lower duty to refineries in excise-free zones.

According to sources, the ministry is also considering a proposal to relax the Gold Monetisation Scheme (GMS) to ensure a better response. The Central Board of Direct Taxes had clarified that during raids by the income tax department, gold up to 500g cannot be seized. The finance ministry might allow such gold to be monetised under GMS without producing evidence of purchase.

Sudheesh Nambiath, lead analyst-precious metals, GFMS, Thomson Reuters, however, says certain factors might be missing in deliberation on gold policies. "In these deliberations, I haven't noticed willingness by policymakers to allow banks to buy gold bars from the market, allow banks to export refined gold bars and make banks operate as a bullion bank, instead of just being a channelising agent. Unless these basics are worked out, the concept of a spot gold exchange or the need to have a bullion board is not worth it."

India Bullion Jewellers Association has tied up with the BSE to set up a gold exchange. The finance ministry is considering a study done by IIM-A professors Jayant Varma and Joshy Jacob. According to the study, the proposed exchange should be under the Securities and Exchange Board of India's regulations.

The study also recommends it be set up in the finance special economic zone coming up at GIFT City near Ahmedabad and all foreign participants be allowed on it, while Indian players can participate according to the provisions of Foreign Exchange Management Act. The study has not favoured setting up of exchange by industry participants such as jewellers, refiners and traders. The stakeholders' meeting will discuss this report from IIM-A.