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'India needs more world-class gold refineries to attract foreign direct investment' |
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MUMBAI: Indian household, which has total holding of around 25,000 tonnes of gold, needs more gold refineries for monetising and attracting foreign direct investment (FDI) in the sector, according to industry experts.
"India's households have a total holding of around 25,000 tonnes of gold which needs to be monetised. Even if we target one per cent of gold for monetising, the quantity will come to around 250 tonnes which MMTC-PAMP cannot handle alone. Therefore, we need to have more world-class refineries through FDI investment in India," MMTC-PAMP managing director Rajesh Khosla said at the two-day seminar organised by the India Bullion and Jewellers Association (IBJA) here.
MMTC-PAMP is the first and the only London Bullion Markets Association accredited gold and silver refinery in the country. A joint venture between state-owned MMTC and Switzerland-based PAMP SA, has set up its refinery near Gurgaon.
Khosla stressed on the need to allow foreign direct investment (FDI) in the jewellery sector. He also supported the call for FDI in all value chains, including jewellery retailing.
India continues to be a major consumer of gold, often importing around 600 to 900 tonnes per annum, which is roughly 25 per cent of the global annual production of bullion. The raw materials for the industry is obtained from the recycling of old jewellery supplied by the jewellery shops as well as the gold loan agencies disposing of their defaulters accounts.
This refining of domestic scrap is undertaken by the medium and large scale gold refineries operating in the organised sector, as well as the hundreds of smaller refineries operating in the unorganised sector.
"Transporting temple gold from the South to Mumbai or Delhi is only through sea route. Hence, to avoid the risk of transportation, the gold should be refined locally for which refineries should be established there. There is no hurdle in FDI in retail. One can start a business through FDI directly," Gitanjali Gems managing director Mehul Choksi said.
Participants were broadly of the view that the jewellery sector has witnessed a 15 per cent decline so far this year due to gold import restrictions and feel that these restrictions should be removed.
The government must liberalise 80:20 rule being CAD under control and overall economic sentiment improving. Also, import duty proved a big hurdle and opened a parallel economy in terms of gold smuggling.
In such environment, jewellery industry cannot work. To protect the jewellery industry from peril, the government must lift restrictions and make long-term policy to ease business environment, they feel.
"Instead of import duty, the government would have achieved the same result through raising VAT to 10 per cent. Increase in VAT should have raised cost of gold for consumers without encouraging imports to fetch premium and higher cost through import of unofficial channel," Choksi added.
Somasundaram PR, managing director of World Gold Council (WGC), however, said that the curb on gold import has affected investment demand badly. But looking at the revival in the world economy, the jewellery demand has revived.
The WGC in its Vision 2020 document forecast 40 per cent of India's gold demand would be met through domestic stocks, and 60 per cent from imports and mining. Also, India's gold jewellery exports to increase five times to $ 40 billion from the existing $ 8 billion.
The meaningful thrust needed to enhance gold deposit schemes, extend duty benefit and import entitlement for domestic gold deposits. Also, 75 per cent of gold sold to be standardised and hallmarked which will fetch higher loan to value for loan against jewellery, the vision document said.
Source : economictimes.indiatimes.com
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