New rule cuts gold availability

With gold import norms further tightened after Tuesday’s two-line clarification, it is estimated that barely 300 tons might be available over the next 12 months to the domestic jewellery trade. The Reserve Bank of India (RBI) has said gold supplied to units in Special Economic Zones (SEZs) and export units and to star/premier trading houses will not be treated as gold supplied to exporters under the 80/20 scheme — the allowing of import with the condition that a fifth must be supplied to exporters.
Pankaj Parekh, vice-president of the Gem and Jewellery Export Promotion Council, said: “We expect exports could be 70-75 tons in the next 12 months, with the policy-related ambiguities getting clarified. This could make 280-300 tons available for the domestic market under the 80/20 policy.” With RBI’s new clarification, exports might be higher but gold supplied to exporters from a Domestic Tariff Area (any place outside an SEZ or other units outside a Customs-bonded one), other than export zones and by export houses, will be considered as part of the 20 per cent policy. Such exports last year were estimated at 55 tons and this year could be higher, with improved demand.
RBI has plugged the loophole, said a jeweller. He said some traders had, to get a higher quota of import for use in the domestic market, been selling gold at a slight discount to the cost of imports. RBI has now said gold supplied to such units will not qualify for calculating the 20 per cent. However, Parekh said smaller jewellers in export zones who generally do handcrafted exports will suffer as their requirement is smaller and no one would be ready to supply them.
On Wednesday, the Customs department clarified certain procedures under RBI’s new gold import-export policy. Its notification says it has been empowered to allow more than one among the Nominated Agencies (for gold import) to keep their consignments in the same bonded warehouse. One provision of the notification has raised another ambiguity. An exporter will have to show a proof of export, including proof of inward remittance. Since the latter takes 270 days, waiting till then will mean the next export will be delayed. Exporters want that a proof of export be enough.
An analyst working with a bank dealing in bullion import said these clarifications and the revised policy should curb round tripping and allow only genuine export. However, the shortage of gold for domestic use through official channels will mean more smuggling. At the spot market here on Wednesday, gold prices fell by ` 570 per 10g, to close at ` 31,940 for 10g.
Source: Business-Standard
Source:Bullion Bulletin

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