Zero-duty unrefined gold imports take the shine off local players

Some refineries stayed away from giving an undertaking to govt. for not importing unrefined gold from LDCs

The continuous import of gold dore (or unrefined gold) by some refineries under zero duty from the least developed countries (LDCs), despite the government warning against it, is hurting the domestic market. Bullion trade has been reeling under illegitimate imports for over a year and the yellow metal is trading at a discount of about $25 per ounce in the official market compared to its cost of imports for several months.

Six months ago, the government had asked all bullion refineries to provide an undertaking that they would not import gold under zero duty from LDCs. While some refiners responded positively, some stayed away from giving such an undertaking and continued to import gold dore. For over a decade, imports of several items under the DFTP (duty-free tariff preference) scheme from LDCs continued, but the government noticed that even gold dore was being imported at zero duty against the normal duty of 14.35 per cent. Following this, in July 2023, the government wrote a letter to all bullion refineries to submit their original licences for restricted imports. The government letter also said that a licence was needed for suitable amendment to specific licence conditions.

Among a handful of refineries that did not give the undertaking was MMTC-PAMPS, which took a stand not to provide the undertaking and rather waited for the government to give them written instruction, said an industry official.

A query sent to MMTC-PAMPS to clarify their stand remains unanswered.

A senior counsel handling foreign trade cases also said that “imports from LDCs were under international treaty. Institutions like the United Nations or World Trade Organization facilitate such treaties and hence it is not easy for the government to restrict imports from these countries.”

However, one of the refiners who gave the undertaking stated that “there must be a level playing field for all refiners and those who continue to benefit from zero duty import should also be asked to fall in line. Government has taken a stand that gold dore at zero duty should not be imported from LDCs which they should categorically say rather than asking importers to give undertakings.”

Industry officials said that such imports continue and although the preventive wing of customs is taking action, it is difficult to impound the goods going by the relevant notification and licence condition in cases where the undertaking was not given by refiners.

In the past, in the name of platinum blending, gold was also imported which was later disallowed. The latest is the import of gold findings at a lower duty. Estimates suggest that 300-500 kg of gold is being imported daily.