Gold trade to glitter as govt plans easy import norms

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New Delhi: The government is likely to soon ease gold import norms to allow more agencies to import the yellow precious metal. According to traders and gold exporters, the current norms as well as the limited number of institutions and banks who can import gold is hurting India’s gold jewellery exports.

As per Gems and Jewellery Export Promotion Council (GJEPC) exports of gold jewellery from Domestic Tariff Area (DTA) during April – September 2008 at US$ 1.02 billion is showing a decline by 17% as compared to US$ 1.25 billion in corresponding period of previous year.

At present, only around 30 nominated agencies and banks are allowed to import gold. These include government institutions like State Trading Corporation Of India, MMTC Ltd, Handicraft And Handloom Export Corporation as well as major banks like the State Bank Of India, Punjab National Bank, ICICI Bank, HDFC, Bank Of Nova Scotia, Canara Bank, Allahabad Bank, Bank Of India, UTI Bank and Dena Bank.

Gold also enters the country through the Non Resident Indian-route and using Special Import Licence.

But the move is to allow GJEPC and Indian Diamond Association to import gold to meet the specific demands of the sector with a view to boost exports.

A Committee of Secretaries recently discussed this proposal forwarded by the commerce ministry, highly placed sources said. The finance ministry would soon hold discussions with the Reserve Bank of India in this regard and to help the government take a final decision, they added.

Gold demand surged in global markets in the third quarter of 2008 because of fears of an economic meltdown and the metal’s allure as a safe-haven investment.

According to the World Gold Council (WGC) dollar demand for gold soared to an all time quarterly record of $32bn in the third quarter of 2008 as investors around the world sought refuge from the global financial meltdown, and jewellery buyers returned to the market in droves on a lower gold price.

This figure was 45% higher than the previous record in Q2 2008.Tonnage demand was also 18% higher than a year earlier. WGC said that one of the biggest contributors of this surge was India, which is the largest market for gold demand. The July-September quarter this year witnessed a phenomenal 66% increase in the demand for gold in the country as against the corresponding period last year to take it to a quarterly record of Rs 30,600 crore.

In terms of tonnage, it jumped from 190 tonne from July-September 2007 to 250 tonne in the same period this fiscal. Interestingly, the surge in gold imports is not translating into an equivalent rise in exports, despite stable domestic consumption.

Meanwhile, citing shortage of gold in several parts of the country, gold jewellery exporters have been demanding that registered exporters of gems and jewellery should be allowed to import gold directly.

“Many exporters in the country are not able to get gold on time to be used in jewellery export items and due to this gold jewellery export in the last quarter saw a decline of 27% over the same period last year.

This is forcing some of them to reduce workforce. To ensure that there is no shortage of the commodity; major exporters in our sector should be allowed to import gold.

The government can make it mandatory that such recognized export houses should use the imported gold only for export purposes,” said Vasant Mehta, Chairman, GJPEC.

However, several others are not ready to buy the claim of exporters that that there is a shortage of gold in the domestic market.

Ashish Mundhra of Mundhra Bullion said, “For a short period of time, international suppliers were not able to supply to the demand. But that was a temporary phase. Currently there is no shortage.”