The India-UAE Comprehensive Economic Partnership Agreement (CEPA) signed in 2022 is giving substantial fillip to imports of silver through that route in recent months. In the first three months of the calendar year, over 40% (1,542 tonnes) of silver import in India in 2024 far has been come through the UAE route.
This is largely due to the duty difference. As against 15% under other routes, silver imports attracts 8% under the CEPA route. Till March 2023, it stood at 9%.
This comes at a time when silver imports have shot up substantially. According to data provided by Metal Focus, a London head quartered bullion research firm, India has imported 3,730 tonnes of silver in the first three months of 2024 – already higher than 2023 when 3,475 tonnes were imported during the entire year. In 2022 when imports were at a record high of 9,450 tonnes.
In the past, UK and Hong Kong were biggest suppliers of the white metal to India. But that is all set to change, said experts. Chirag Thakkar, director, Amrapali group and a leading player in silver industry said that due to the lower duty silver bullion is sold at a discount of Rs 4,500 per kg in domestic market. The demand is high from plates used for solar energy.
According to a recent World Silver Survey 2024 , “The duty differential on import from UAE will continue to widen with 1 per cent reduction every year. In the absence of any policy change or a reduction in Indian silver import duties for the rest of the world, the UAE is expected to remain the biggest supplier of silver to India in the coming years.”
However, a few conditions have to be fulfilled. Indian silver importer using this route has to must provide documents to prove that the silver has been refined in the UAE with a Certificate of Origin (COO) and a 3% value addition has been done. Since the UAE does not mine silver, local refineries are converting bars into grain, processing the metal to ensure it meets the 3% value addition norm. Bullion trade is buying this silver imported in grain form.
While there has been rise in the industrial uses of the white metal, investment seems to on the decline. According to the World Silver Survey report, physical silver investment in India was 3,435 tons in 2015. Since then, investment in quantity terms has been lower.
In 2023 it was 1534 tons down 38 per cent from 2740 tons in 2022. However, Chirag Sheth, principal consultant, Metal Focus said that while on a quantity basis, investment demand looks low but if prices are considered than it has doubled from 2015 and still investment is high. “This is because, unlike gold silver is not seen as a protector of wealth and higher prices can lead to a lot of profit booking also. As a result, net investment looks low,” he added.