High-level meeting to look for ways of easing gold supply strains

Top officials of the commerce and finance ministries are meeting in New Delhi today to look for ways of making gold available to jewellers and exporters, following a complete halt of gold imports and a spike in the prices  of the precious metal.

Gold imports into the country stopped altogether following the 22 July notification of the Reserve Bank of India (RBI) imposing certain conditions on gold imports.

The meeting, which will also see participation of major gold importers and industry officials, will look for ways to break the two-month impasse on gold imports that has crimped supply and pushed up prices in the world's biggest gold consumer.

Gold imports into India came to a standstill after the RBI notified the 80:20 rule for continued gold imports into the country. The 80:20 rule makes it mandatory for gold importers to re-export a minimum 20per cent of the imported gold as value-added products such as jewellery.

Also, the RBI has prescribed that there should be no bunching of imports. Gold importers now fear that in the absence of operational guidance on how the rules work, chances are that these import consignments get stuck at airport customs.

Also, as per the new rules, imports will now have to be brought into a customs-bonded warehouse before being sent to the buyers.

Gold imports into the country, although liberalised at present, except for the duty impost, has, however, not been very transparent. Only yesterday, customs officials in Kerala have bumped into a consignment of contraband gold brought in by a Gulf-based NRI.

Jewellers, retailers and exporters are faced with severe shortage of the precious metal and have placed fresh orders with importing agencies or are in the process of doing so. However, importing banks are reluctant to process them in the absence of further clarification on the rules.

Meanwhile, nearly a tonne of gold shipped to India is stuck at airports and is awaiting clearance from customs, according to Pankaj Kumar Parekh, vice-chairman of the Gems and Jewellery Export Promotion Council (GJEPC).

The customs authorities are also not clear how to implement the 80:20 principle, say market sources.

Commerce secretary S R Rao said the agencies responsible for import and supply of gold to exporters and jewellers seem confused about the rules for import. All major importers will be at the meeting, he added.

Jewellery exports from the country have fallen sharply since the RBI notified the 80:20 rule for importers cramped supply routes.