'Pvt Bonded Warehouses Can Boost Bullion Trade'

One of the biggest bullion dealers in Dubai has asked the ministry of finance and the Reserve Bank of India to open bonded warehouses at Indian ports or airports from where non-resident Indians (NRIs), special import licence (SIL) holders and gold jewellery exporters can buy gold and silver off-the-shelf. Such warehouses, if allowed to be opened, would offer gold or silver to legal importers on payment of prescribed duty.

The bonded warehouses operated by the State Bank of India and the MMTC, at present, had not succeeded in attracting customers on account of its procedural delays and heavy commission charges.

 

Harish Pawani of M/s Bin Sabt Jewellery LIc, which was established in Dubai over 100 years ago and has a global network of offices including in Mumbai, has made a proposal to the government to such open bonded warehouses.

Pawani's firm, which controls almost three-fourths of the bullion trade in Dubai, felt a lot needs to be done to curb smuggling of precious metals and the practice of using non-resident Indians as carriers by Dubai operators. He has suggested that like the special import licence, the Exchange Earners Foreign Currency (EEFC) account also should be transferable so that genuine local dealers in possession of such accounts could use the bonded warehouse facility.

The present system of payment from EEFC balances restricts competition and leads to undesirable practices like buying for exports to show EEFC balances. The export of junk materials was deliberately done to create the EEFC account which was manipulated for laundering money, he said.

According to him, the nexus of the Dubai-based syndicate and NRI carriers, which causes a heavy loss of foreign exchange revenue to the exchequer, could be easily tackled if the Dubai-based suppliers were allowed to open bonded warehouses in India and operate them under strict supervision of the Customs authorities.

The advantage of bonded warehouse system will be that the cost of freight for sending the precious metals to India will be considerably reduced and metals would be available off-the-shelf at international prices ruling on the day of purchase without any premium charges on small bars.

This would benefit retail consumers and jewellery manufacturers who export their products, he said.

It was also suggested that the NRIs, who at present shun silver because of weight, might also be interested in buying it from the bonded warehouses.