MUMBAI - In a bid to kickstart India’s flagging gold refineries, which have been operating at only 25% of installed capacity, the government is looking to relax some of the conditions currently imposed on the import of gold dore by refiners, finance ministry officials told members of the media.
According to official sources, with India's current account deficit compressed significantly, this can be seen as a first step in reducing the import duty on gold in a calibrated manner,.
The import of gold dore is permitted only against a licence issued by the Directorate General of Foreign Trade (DGFT).
On August 13, the government hiked the import duty on gold for a third time this year to 10%. Duties for silver and platinum were also increased to 10%. Customs duty on gold dore bars, ore or concentrate, were also increased to 8% from 6%.
Traders privy to the discussion said the
DGFT was concerned that if the import duty on dore bars, which is an alloy of gold and silver used by refineries to produce pure gold, was not raised from the current 5% in sync with the hike in the gold import duty in August, unscrupulous traders would take undue advantage of a wide tax arbitrage between dore and refined gold.
Data showed that traders imported as much as 100 tonnes of dore, out of the total gold purchases of 850 tonnes from the overseas market, in the last fiscal year through March.
Among the new rules instituted in August, one related to gold dore. Of the gold extracted by refining gold dore, only 80% was to be provided for domestic use, while the remaining 20% had to be exported. Proof of export also had to be shown before the next consignment was imported, said traders.
Gold dore had become an attractive import between April 2012 and January this year, when the government doubled the tax on refined gold purchases to 4%, but kept the duty on dore unchanged at 2%.
India's high current account deficit, or the gap between foreign exchange earnings and spending, has partly been fuelled by high gold imports. Advocating relaxation of gold import norms to check smuggling, Commerce and Industry Minister Anand Sharma too has asked the government to take appropriate action.
Speaking at a seminar on December 25, Sharma said though a balanced approach was needed, gold imports were being allowed for industry usage. The government, he said, needs to ensure that the genuine demands are met and at the same time imports are curbed to save foreign exchange and bring down gold smuggling.
Senior officials in the finance ministry also reiterated that the government is looking at a step-by-step reduction in gold duty, following a record trade deficit of $191 billion. They added that the higher duty has helped curb the appetite for the precious metal.
Gold and silver imports in November dipped over 80% to $1.05 billion from $5.4 billion in the same period last year, helping to narrow the trade deficit to $9.21 billion in the month, the second lowest in the current fiscal.
Gold imports in 2011-12 hit a record $56.5 billion, sharply up from $40 billion in 2010-11 and $28 billion in 2009-10.
Source : mineweb.com