The Finance Ministry has called a meeting with the Reserve Bank of India (RBI) and other departments concerned on Thursday to review the ‘80:20’ scheme for gold imports. The scheme prescribes that any entity importing gold must re-export 20 per cent of it in value-added form.
“Finance & Economic Affairs Secretary Rajiv Mehrishi will chair a meeting on November 13 to review the 80:20 scheme to be attended by key officials from the RBI, Revenue Department and Commerce Ministry. The meeting has been called in the wake of the sudden spurt in gold imports and increase in gems & jewellery exports,” a senior Finance Ministry official told BusinessLine .
The scheme was introduced in July last year to curb gold imports so that the widening current account deficit (CAD) could be checked. CAD is the difference between the payment received and made in dollars. A higher CAD makes the economy vulnerable to higher capital outflow and weakens the rupee.
Though the officials refused to give details, there is a strong possibility of the scheme being tightened, considering the sudden jump in the import of the precious metal. In September, gold imports surged over 400 per cent, taking the trade deficit to an 18-month high.
Since the Government does not want to see the CAD to spin out of control, it wants to take all possible measures in tandem with the RBI. As part of the curbs, the Finance Ministry can revise the import duty on the yellow metal, while as a central banker, the RBI can bring about changes in import or export procedures. Last year the Ministry raised the import duty on gold to 10 per cent.
It is believed that relaxation of the ‘80:20’ scheme in May this year was one reason for the import surge. In May, the RBI allowed star trading houses and premier trading houses (registered as nominated agencies with the Directorate General of Foreign Trade) apart from nominated banks/agencies/entities to import gold under the scheme. It also allowed banks and nominated agencies to provide gold loans for domestic use to jewellers and bullion traders.
RBI had said that the norms had been relaxed to remove hurdles being faced by gems & jewellery exporters and bullion traders.
Exports riseThe September trade data show that export of gems & jewellery turned positive after three successive months of decline. The official said this fact would be kept in mind while reviewing the scheme.