India, govt in talks to scrap import curbs on gold-silver alloy -sources

July 3, 2015 Posted by admin

MUMBAI/NEW DELHI, July 3 The Reserve Bank of
India and the finance ministry are in talks to scrap bulk import
licences for a gold-silver alloy used by domestic refiners,
months after relaxing curbs on gold imports, officials with
direct knowledge of the discussions told Reuters.

Gold is India’s second-highest import in value terms, and a
jump in imports widened the current account deficit in 2013,
sparking the country’s worst currency turmoil since a balance of
payments crisis in 1991.

An alloy of gold and silver, called dore, from which
refineries produce pure gold, forms about 150 tonnes of imports
each year and attracts a duty of 8.24 percent, which is less
than the duty of 10.30 percent on refined gold.

The RBI wants to remove all restrictions on refiners while
the finance ministry has raised concerns over tax evasion, the
sources said.

Government and RBI officials met late last month to examine
the proposal.

“The finance ministry is not in favour of relaxing
conditions for import of gold dore as it could lead to tax
evasion,” said a senior finance ministry official, who declined
to be identified because he is not authorised to speak to the

Government officials worry that buyers may try to exploit
the difference in import duties by declaring pure gold as dore.

“As of now, refineries like us need to get a licence from
the Directorate-General of Foreign Trade to import bulk of gold
dore,” said Rajesh Khosla, the managing director of MMTC-PAMP,
India’s biggest gold refiner.

“This policy was to prevent any misuse as dore gets a
concessionary import duty. Now there is a possibility of
scrapping the need for a licence for dore as gold can be
imported freely anyway.”

In November 2014, the government scrapped an unpopular rule,
the 80:20 requirement that forced traders to export 20 percent
of all gold imported into the country.

Separately, India now plans to issue sovereign bonds linked
to the bullion price, in a bid to divert some of the estimated
300 tonnes of annual demand for gold bars and coins.

(Additional reporting by Krishna N. Das; Editing by Douglas
Busvine and Clarence Fernandez)

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