Though the sentiment of domestic jewellers has been lifted with the removal of gold import curbs, exporters are bound to lose the privileged treatment they were enjoying for the last one year under the 80:20 scheme.

Banks and star trading houses, authorised to import gold, have been offering exporters special treatment in order to sell 20 per cent of their gold shipments, and were pushing the remaining 80 per cent of the consignment in the domestic market at a premium.

Pankaj Parekh, Vice-Chairman, Gem and Jewellery Export Promotion Council, said in the last 10 years, very few banks were comfortable with lending gold to exporters, because of the tight trail of records they had to keep on shipments and payment received.

Exporters borrow gold from banks based on the bank guarantee they produce, and have to ensure that they receive the payments within 90 days after shipment. If the criterion is not met, banks have to pay the custom duty and applicable VAT (value added tax) by dipping into the bank guarantee provided by the exporter.

If exports happen in a staggered manner, then banks have to set a 90-day alarm for receiving payment for each shipment. It becomes a tedious job for banks, said Parekh.

However, he added, the removal of import restriction would improve domestic supply and bring down the premium on gold to $1-2 an ounce from $18 an ounce. This would not only lead to lower price for domestic consumers, but also discourage hoarding, he said.

Surprise timing

Somasundaram PR, Managing Director, World Gold Council (India), said though the timing of the development (removal of gold import curbs) was surprising, it would definitely boost confidence of the jewellery industry. He added that the sharp import hikes in recent months were not triggered by changes in demand estimates. The official supply situation would now ease to the benefit of genuine exporters and manufacturers of gold jewellery, he said.

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