The commerce ministry wants to allow refiners to directly import of gold dor?, an impure form of the metal which is currently imported only through state-run trading companies like MMTC and STC and a clutch of designated banks. The ministry has taken up the matter with the Reserve Bank of India.
The ministry reckons that since imported gold dore goes for domestic value addition and these imports are not for pure investment purpose, it doesn’t make sense to put refiners under cumbersome trade restrictions.
The finance ministry and RBI have recently taken measures to curb gold imports in the wake of the widening current account deficit and in line with the policy imperative that encouraging gold as an investment option might not help enhance the productive capacity of the economy.
The director general of foreign trade (DGFT) Anup Pujari told FE that giving refiners licence to directly import gold would help them save their operational cost. ?The office of DGFT has been receiving various representations from refiners (for direct import of gold); we have taken up the matter with RBI,? he said.
Currently, the import duty on gold dore is 3.1%, whereas finished gold attracts a higher tax of 4.12%. Despite the duty differential, gold dore imports have not risen because of the Customs bottlenecks.
Prithviraj Kothari, president of Bombay Bullion Association said: ?If the government allows direct import of gold, it would help big down domestic gold prices.?
According to RBI, the variety of gold ? gold dor? ? is an impure form of gold and is a substitute to gold bullion, thus it might increase bullion trading in the country.
Mainly formed at the site of a mine, a gold dor? bar is a semi-pure alloy of gold and silver which is further purified at refineries. After mining of gold ore, the first stage of purification produces a cast bar (gold dore), which is about 90% gold making it equivalent to gold bullion.
Explaining the problems faced by gold dore importers, National Spot Exchange CEP Anjani Sinha said: ?At times, the Customs inspectors exaggerate purity of this variety of gold, leading to questions of tax to be paid on the imports. Besides, the refiners would be best helped if direct imports, rather than through canalising agencies, are allowed.?
Other experts are of an opinion that once gold dor? is allowed to be import directly, the other benefit would be that it will bring down the prices of jewelery as it is mainly a raw material and there are no exchange-related worries with it.
The Finance Bill 2011 had said dor? with up to 80% gold content could be imported through nominated agencies, but under strict conditions.
Gold dore is available with as high as upto 95% of gold purity. Currently, the imports of gold dor? are only undertaken by RBI and its nominated agents.
The Centre for Monitoring Indian Economy has estimated that India’s consumption of gold will surge 50% to 1,200 tonnes a year by 2020. But the country produced and refined only a minuscule 2.46 tonnes in 2008-09.
The benefit would be availed by around 25 refineries which refine gold in India despite the fact that India produces just 0.5% of its annual gold consumption.
India currently, produces about 10 tonnes gold a year. Domestic refineries, including Hutti Gold, the only gold mining company in the country, contributes another two tonnes.
Gold is refined mostly in Zurich for producing bars and coins approved by the London Bullion Markets Association (LBMA).
India’s gold imports have climbed to the second slot, after crude, in the overall imports basket.