NEW DELHI : Gold shipments from the United Arab Emirates (UAE) have nearly halved from the previous year to a two-decade low in the year ended 31 March 2023 despite the concessional duty offered under the bilateral comprehensive trade pact that came into force in May last year.
Under the India-UAE free-trade pact, a concessional tariff is applicable on the first 120 tonnes of gold imports in the first year, referred to as the tariff rate quota (TRQ).
In FY23, India imported only about 52.81 tonnes of gold from Abu Dhabi, one of the seven emirates that constitute the UAE, the data showed. That is 47% lower than 99.86 tonnes imported during the previous year. It is also the lowest annual gold import from the UAE since FY03, when it was 18 tonnes.
However, India’s overall gold imports dropped by 23% in FY23 to 677 tonnes from 878 tonnes in the previous year. During this period, Switzerland, India’s largest source of gold imports, saw its shipments fall by 39% to 220 tonnes from 360 tonnes in the previous fiscal.
Gold imports from the UAE had fallen last year as clarity around TRQ was expected, said Colin Shah, a former vice chairman of the Gem and Jewellery Export Promotion Council (GJEPC). “Till last year, the modalities of import under TRQ were not clear. There was no clarity, no SOPs (standard operating procedures), and customs, and due to the lack of clarity for nominated agencies /importers, the benefits of the rebate were not seen. This (financial) year onwards, these (challenges) are clear,” Shah said, adding that he expected higher growth in gold imports from the UAE during FY24.
Industry experts also attributed the fall to the increase in import duty on 30 June 2022, which, they said, encouraged the smuggling of gold.
The Centre then hiked gold import duty to 15% from 10.75% to check the widening current account deficit owing to a surge in imports of the yellow metal.
A loophole in regulations allowed many to import refined gold as platinum alloy, as the latter attracted a 10.75% duty compared to 15% on gold.
This was finally stopped in October, with the government hiking duty on platinum alloys to 15.4%.
Around 25 tonnes of such imports were recorded during September and October, according to an industry representation reviewed by Mint. However, after the duty hike on platinum to deter imports, the value of such inbound shipments of the precious metal moderated to just $1.13 million in November.
“One reason (for the fall in gold imports during FY 23) may have been due to the focus of the government to reduce imports. Secondly, much of our gold imports are exported,” said Arpita Mukherjee, professor at the Indian Council for Research on International Economic Relations (ICRIER). “So, (gold) imports will rise when exports will increase and vice versa.”
A 1% duty concession for gold imports from the UAE can be availed under India’s bilateral comprehensive trade pact with UAE. During the first year, the quota for concessional gold is 120 tonnes. On a pro-rata basis, it is 110 tonnes as the pact came into effect in May 2022. For the second year, the limit is 140 tonnes, 160 tonnes in the third year, 180 tonnes in the fourth year, and 200 tonnes in the fifth year.
Spokespeople for India’s ministry of commerce and industries, and the UAE’s ministry of economy didn’t respond to queries.
The bilateral agreement between India and UAE also extends zero-duty access to 90% of Indian products and 65% of products from the UAE. Over 10 years, 97% of Indian products will get zero-duty access to the UAE market, and 90% of UAE products will have duty-free access to the Indian market under the agreement.
Source : Mint