Ministries debate allowing export of refined pure gold
Finance Ministry of the view India can be stakeholder in determining global prices
Ever since Finance Minister Arun Jaitley announced the creation of a comprehensive gold policy, differences of opinion have surfaced among various ministries on key issues pertaining to the precious metal.
One issue on which the commerce and industry ministry and the finance ministry have argued is whether the export of pure gold processed by Indian refiners should be allowed.
The Budget has been silent on the details of the upcoming gold policy. However, apart from setting up of a gold board and spot exchanges for the yellow metal, sources have said this might involve the government allowing export of gold refined by Indian companies. While an inter-ministerial panel has for years looked at pain points in India’s gold market and international trade, it is only recently that export of pure gold has become a topic of discussion, the sources said.
The finance ministry had argued that by developing India’s export capabilities in the segment, the country will be a stakeholder in determining gold prices globally. India is currently the world’s largest gold consumer after China. But the commerce ministry has countered this view by arguing that such a move would also exponentially increase import of raw gold.
The country’s gems and jewellery exports contracted by 4.65 per cent to about $25 billion during AprilDecember this fiscal year, owing to demand slowdown in major markets, including the US. According to the Gems and Jewellery Export Promotion Council (GJEPC) data, exports stood at $26.1 billion in the corresponding period last year.
Creating the ecosystem for exporting gold may also be tricky. “The impact of any such move may be minimal as the demand from the domestic market is so large that it will always take precedence. Refiners would always have a large market available at their doorstep and they will sell to it first,” said Prathamesh Mallya, chief analyst, commodities & currencies at Angel Broking.
Last August, the government had banned the export of gold products with purity above 22 carats in a move to reduce irregularities in the trade. This was mainly aimed at stopping the round-tripping of gold coins and medallions, which were imported and then exported with minimal value addition.
Now, in case the government allows export of 24-carat gold, refiners would have to comply with international standards to ensure industry best practices, a senior commerce department official said. India is currently developing the Indian gold standard in association with the London Bullion Market Association. Gold refineries will, in any case, have to be registered with the Bureau of Indian Standards (BIS) from July, in order to meet BIS requirements.
The move is also expected to change the jewellery export industry, which has complained of the high import duty remaining capped at 10 per cent in the last Budget. “As of right now, traders are finding it difficult to cope with the large-scale blockages in working capital since the goods and services tax refunds have not unilaterally started coming in,” Sabyasachi Ray, executive director of GJEPC, said.
The government should focus on promotion measures for jewellery exports, the international market for which is currently established and plays to India’s export strengths, he said. The labourintensive export sector contributes about 14 per cent to the country’s exports.