Financial Daily from THE HINDU group of publications
Wednesday, Mar 10, 2004
Financial Daily from THE HINDU group of publications Wednesday, Mar 10, 2004 |
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Agri-Biz & Commodities
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Gold & Silver Delay in bullion import norms irks traders G. Chandrashekhar
Mumbai , March 9 UNCERTAINTY in bullion import trade despite the Government decision to allow direct import of gold and silver is leading to distortion of the market and there is suspicion of some kind of cartelisation by local dealers and designated agencies, players are complaining. Even 40 days after the Government threw gold and silver imports open to every one, players are still wondering how to go ahead with business because the Reserve Bank of India (RBI), which is supposed to issue guidelines for regulating bullion imports, is yet to make its regulatory mind known. On January 28, the Commerce Minister, Mr Arun Jaitley, announced the new import policy for bullion. Free import of gold and silver means the role of designated agencies — 15 of them including four Government parastatals and some banks — is over. Any one can import without going through any of these nominated entities and that is where the rub seems to be. In trade circles, questions are being raised about the inordinate delay on the part of the RBI in announcing guidelines for import. The bullion market is agog with talks of some vested interests either delaying the issue of guidelines or exercising undue influence in the drafting of guidelines. Meanwhile, the nominated agencies are having a field day, with their service charges going up by leaps and bounds. Some of the Government parastatals that were charging 0.07 to 0.15 per cent service charges till September last year raised the rate to 0.35-0.5 per cent in November. Now, in addition to the delay in announcement of RBI guidelines, the service charges have gone up further to an unprecedented 0.5-0.7 per cent; and this time the hike is said to be with the consent of the Commerce Ministry. In other words, in about six months time, the service charges have been hiked 8 to 10 times by the designated agencies. Tremendous resentment is said to be building up among market functionaries over constricted business opportunities. A player in the bullion market told Business Line that the import business was routed through a small group of suppliers, four or five, and only select bullion dealers enjoyed the privilege of opening letters of credit. This is leading to unhealthy concentration of business in a few hands and chokes supplies to the interior regions of the country. According to Mr Bhargav Vaidya, well-known bullion analyst, many traders are frustrated in dealing with the nominated agencies. "They do not respond in time and even if one is in a position to find a reputed supplier and a major nationalised bank to open a letter of credit, the agencies test the patience of the applicant with their inexplicable stony silence," he remarked. The expansion of LC bullion import has grown significantly in recent months. The activity takes advantage of the interest rate and forward dollar/rupee arbitrage. As a result of this arbitrage, the agencies have been able to earn a premium of around two per cent on the value of gold.
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