Sri Lanka relaxes gold import norms
Amidst considerable concerns of local jewellers, Sri Lanka is taking a major step towards liberalising gold imports by introducing some procedural simplifications and changing regulations in the coming days.
The removal of gold import restrictions is on the cards and the end result for gold investors is an increase in demand for the yellow metal, the Finance Ministry claimed but local jewellers were of the view that it will lead to price manipulation and malpractices.
Sri Lanka will award 50 licences to import gold tax free, Finance Minister Ravi Karunanayake has said adding that the tax free import licences will be given through the Central Bank (CB). The gold will be used by goldsmiths to produce jewellery.
Local jewellery manufacturers who currently purchase gold from commercial banks will have to go after selected individual importers to buy their requirement, a leading member Sri Lanka Gem and Jewellery Association (SLGJA) told the Business Times adding that they cannot expect fair-play from such gold traders.
The Commercial Bank and Bank of Ceylon are the highest gold importers among banks at present but under the 2016 budget proposal, banks have been told to stick to their core business and are unlikely to be given import licences.
Import of gold on consignment account basis could be done only by a licensed commercial bank or any other limited liability company approved by the Controller of Exchange for that purpose at present. Jewellery manufacturers say they prefer the present system rather than buying it from importers selected by the government.
The SLGJA member said the new move may also lead to smuggling out to lucrative markets such as India, one of the world's largest purchasers of gold, creating a substantial profit for the select Sri Lankan gold importers.
Sri Lankan gold traders have been involved in buying the metal overseas and smuggling it into India.
According to National Gem and Jewellery Authority data, Sri Lanka's current gold needs are totally met by gold imports and the annual gold imports are in the range of over US$200 million (over Rs. 28 billion). More than six metric tons imported are used for domestic consumption as well as in export manufacture. No clear estimates are found on the domestic retail sector value The Cabinet Committee on Economic Management (CECM) has directed the Department of Exchange Control to inform the Import and Export Control Department on the implementation of norms relating to gold imports.
The relevant regulations would be published under the Import and Export Control Act, the committee report revealed adding that a decision is to be taken on the licence fee of selected gold importers soon.
Criteria for the selection of the 50 gold importers would be devised by the CB and it will issue licences to those importers by the Department of Import and Export Control on the recommendations of the CB.
A special committee appointed by the CB will be tasked with considering these applications amidst growing concern that the move would result in a monopoly in the business.
A gold merchant, who wished to remain anonymous, told the Business Times that most jewellers fear these licences would be given to a handful of businessmen with links to powerful politicians in the government while a large number of domestic jewellers will have to wade through choppy waters.