New Delhi: A major disruption in the bullion market is underway, with a few private players now dominating India’s silver imports through the Gift City exchange, potentially leading to significant revenue losses for the exchequer over time. A trade research body has called for an investigation into potential conflicts of interest among export and import firms, warning of a broader impact on traditional import practices and market dynamics, The Hindu reported.
India’s silver imports have surged, with a staggering 87% coming from Dubai through the Gift City exchange in May, at a reduced duty of 8%. This trend has raised concerns about the rules of origin and potential conflicts of interest. The Global Trade Research Initiative (GTRI) has flagged these concerns, seeking a probe into the relationships between export and import firms.
India’s imports of gold and silver from the UAE have jumped 210% in 2023-24, reaching $10.7 billion, with silver imports standing at $5.4 billion. The Gift City exchange in Gandhinagar has been clearing all silver imports from the UAE since December 2023, while imports from other countries and ports have virtually come to a halt, the report mentioned.
The GTRI has expressed concerns about the rules of origin requirements specified in the India-UAE Comprehensive Economic Partnership Agreement (CEPA). While importers from other ports have failed to meet these requirements, the Gift City exchange has not found any issues with imports cleared through it.
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India levies a 15% import duty on silver, and only institutions nominated by the Reserve Bank of India (RBI) and the Directorate General of Foreign Trade (DGFT) are allowed to import the precious metal. However, the Gift City exchange does not limit imports to these nominated agencies, registering private traders and finding no rules of origin issues.
As the tariff is set to reduce to 0% over the next eight years, the GTRI has warned of a potential revenue loss of Rs 6,700 crore. The think tank has suggested renegotiating the CEPA terms, conducting more rigorous checks on Dubai exporters’ value addition claims by the Gift City exchange, and investigating potential conflicts of interest among export and import firms.
The GTRI has also suggested restricting silver imports to nominated agencies authorised by the RBI and DGFT to minimise the risk of misdeclared imports.
Further, the report highlighted instances where banks attempted to import silver from the UAE through other ports but were unable to comply with rules of origin requirements. “When banks like Yes Bank and RBL Bank attempted to import silver from the UAE at the concessional 8% duty through Chennai and Bengaluru ports, customs authorities demanded details on the rules of origin. The firms could not comply,” the GTRI report was quoted by The Hindu, adding that officials rightly required proof that the imports met the CEPA conditions, including evidence of 3% value addition and details of the value-addition process in Dubai.
As India’s bullion market faces this significant disruption, the need for transparency and scrutiny has become increasingly important. The warning signs are clear, and it is essential to address these concerns to prevent further disruption to traditional import practices and market dynamics.
