Govt to increase value addition norms for gold exports

Central government is considering hike in value addition for gold exports with an aim to discourage round tripping of gold and to plug loophole in gold import policy that was announced by the Reserve Bank of India (RBI) a fortnight ago which had linked imports with exports.Value addition norm for gold export at present os 3% according to official of ministry of commerce which is being raised to 5-6% of exports happen from the SEZ.If implemented, gold export will reflect only genuine exports which is estimated around 70 this financial year tons and out of total import of gold if 20% has to be for exports than in next 12 months total gold import could be only 350 tons out of that for domestic market only 280 tons of gold could be imported and RBI norms apply to gold refineries as well which means jewelers will have to cut business or find out other avenues like recycling of old jewelery.
A senior official in the department of commerce under the ministry of commerce and industry said that, “the government is planning to raise the rate of value addition for gold exports from SEZs to around 5-6% from 3% at present. This will be done to curb the fly-by-night operators who import gold, mint them into coins or crude jewellery and re-export it to Dubai.” This in that case is not a genuine exports as it is done only to increase trading of gold. He said, “while some are genuine exporters and do pay income tax, there are scrupulous operators as well.”In past couple of years artificial exports of gold jewelery which is also known as round tripping which was estimated around 180 tons in 2011 and 2012.
When RBI banned consignment import and said that all imports has to be against 100% cash margins, those who were in round tripping got stuck as for them round tripping was a tool to get dollar finance at lower rate of interest. However 100% cash margin clause close the window to get any type of credit for gold import.However when the RBI linked gold imports with exports that is 20% of all gold imports have to be for exports, a talk was going on in the industry to increase exports to be eligible for higher gold imports as country’s total gold demand for jewellery is around 500. For this total imports should be over 600 tons in a year.
But genuine exports only around 70 tons, total demand could not be met. If value addition norms are made more stringent and raise to 5-6% than only genuine exports could take place limiting import of gold for domestic market, said a veteran bullion analyst.

Source:Bullion Bulletin

Share on

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.