Friday, September 27, 2013

INDIAN GOLD IMPORTS CAN BE SIMPLIFIED

TEJINDER NARANG

SIMPLIFIED PROCEDURE FOR GOLD IMPORT AND  20%  MANDATORY EXPORT



Around 4th September 2013, in a more than 40-clause document, Indian customs department laid out details for authorised importers for ensuring 20% gold (jewellery exports), bonds to be given by importers over duty payments and "surprise audit or checks" by custom officers to ensure compliance
Considering that—Gold is asset of its own class with countercyclical safety and has many ceremonial priorities in Indian context, administered tariff and advance export of jewellery requirements will be cumbersome and counterproductive.
Indian Gold import can be harmonised by disengaging nominated agencies and simplifying the procedures, wherein “20% advance FX earning of any commodity” shipped out by any exporter can be bought by a bullion importer by purchasing the Bank Realization Certificate (BRC) at a market determined premium. Private trade may be allowed to open letter of credits on LBMA (London Bullion Metal Association) approved members/associates/sellers for bullion import. For greater clarity--
1        Banks can be asked to issue Bank Realization Certificate (BRC) in two parts—say 20% and 80% to all Indian exporters of “any” commodity in twin copies—one for exchange control and others for custom controls.(BRC-is a documentary receipt issued to an Indian exporter by an authorized bank after realization of invoiced exports proceeds from LC opening bank.) 
2        Any Indian exporter has the discretion to trade (sell) 20% BRC to a bullion importer at a market determined premium by endorsement. (20% foreign exchange earnings will be indirectly “taxed premium” as per supply/demand intensity for bullion importers.)
3        Import LC for bullion import can be established by the bank upon surrender of the 20% BRC by bullion importer. Custom copy of BRC can be submitted at the time of clearance from airport.

ADVANTAGES
Market premium will bring equilibrium in direct and indirect imports. Additional exports of other commodities will be incentivised by premium earned on BRC. Bullion import will be undertaken after prior realization of 20% foreign exchange. Custom formalities, bonds/bank guarantees, special audits on delayed or deferred payments, ensuring advance exports etc. will be dispensed. Parallel and grey market will be minimal.

PLEASE ALSO SEE MY ARTICLE IN BUSINESS LINE 27.9.2013


SEE CHARTS---1)TOP 20 REPORTED OFFICIAL GOLD HOLDINGS (JUNE 2013) (IMF, WORLD GOLD COUNCIL).
2) ANNUALIZED RETURNS FOR ALTERNATIVE RESERVE ASSETS






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