Gold & Silver

To beat the 80:20 rule, bullion trade gets ‘innovative’ in exporting gold

MR Subramani Chennai | Updated on November 25, 2017


Gold imports treble in August, jewellery exports double in April-August

A section of the bullion trade is resorting to “innovative” ways to export gold in value-added form to overcome the hurdles posed by the 80:20 rule in importing the yellow metal. The 80:20 rule makes it mandatory for anyone importing gold to re-export 20 per cent of it in value-added form.

“Traders have become very innovative. If the Centre doesn’t take notice of things, then the 80:20 rule could spell trouble for it,” said an industry source, who did not wish to be identified. “Suppose a trader imports five bars of 1 kg gold, he will have to re-export one bar in value-added form. Some people are converting one gold bar into a cheap, long chain using machinery and exporting it by showing it as value-addition. The chain is then converted back to a bar and finds its way back in another consignment,” the source said.

According to industry players, the value-addition norm for gold jewellery made by machinery is 1.5 per cent and that of hand-made jewellery is three per cent.

The source pointed out at two separate data released recently to prove how the trade had overcome the 80:20 rule.

Imports treble

The Commerce Ministry trade data, released earlier this month, show gold imports trebling at $2.04 billion in August compared with the same period a year ago. In August last year, imports totalled $739 million after the RBI imposed the 80:20 rule.

According to the Gems and Jewellery Promotion Council’s provisional data, gold jewellery exports have doubled during April-August this fiscal compared with the same period a year ago. Data show exports rising to $2.12 billion against 1.04 billion in the year-ago period. Commerce Ministry data show gold and other precious metals jewellery rising nearly 25 per cent during April-July at ₹23,776 crore compared with the year-ago period. Gold imports, on the other hand, are down nearly by half during the period at ₹53,021 crore.

“We are aware of what some bullion traders are doing. But the problem is that we can’t be opening each and every export consignment to check what they are doing or whether the value-added norm is being met,” said a Finance Ministry official, on condition of anonymity.

A bullion trading firm official, when asked how the 80:20 rule was being complied with, said: “We have learnt to live with it.”

On the other hand, the trade is complaining that gold smuggling is affecting their business badly.

“When I ask jewellers how they are managing to get gold, they say that 70 per cent of their demand is met through smuggling,” said Satish Bansal, Managing Director of MD Overseas Ltd, at a gold convention in Pune recently.

He denied that traders are resorting to cheaper exports to meet the 80:20 rule.

According to the World Gold Council, about 200 tonnes of gold were smuggled into the country last year after the Government imposed curbs on imports by raising Customs duty to 10 per cent and imposing the 80:20 norms.

The Government began imposing curbs on gold imports after the current account deficit rose alarmingly last year following trade imbalance.

Published on September 24, 2014

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