The government has suspended import of gold by special economic zones (SEZs) for trading purposes. This is likely to curb circular trading in the gems and jewellery industry.
While the import of gold has added to India’s current account deficit, increasing gold imports by SEZs for trading purposes without much value addition has been an area of concern.
SEZs meant for manufacturing goods and trading neither help value addition nor creation of employment. As part of trading, bullion, coins and medallions are imported, packed and exported.
Colin Shah, convenor of the gold jewellery panel in the Gems and Jewellery Export Promotion Council said, “It (circular trading by Sezs) could have been happening; some elements would have been misusing the system, but to what extent is not known. Units that have licenses to manufacture also have licenses to trade.”
According to Vipul Shah, Chairman of GJEPC, the council supports healthy trading and healthy manufacturing but not circular trading.
Last year when Financial Chronicle asked about possible circular trading in the industry, AnupPujari, director- general of foreign trade, said, “My job is to promote exports and if I receive information about somebody misusing the scheme, I will take action.”
Gold jewellery exports were up 33 per cent in 2012-13, despite a 9 per cent drop in overall gems and jewellery exports. In 2011-12 gold jewellery exports grew by 38 per cent in 2010-11 by 28 per cent. Gold jewellery exports account for up to 45 per cent of overall total gems and jewellery shipments.
According to industry sources, gold jewellery exports through SEZs are also one of the ways of laundering unaccounted money. “These export houses import duty-free gold, which is then taken out of SEZs on the pretext of some craft work. Unaccounted old gold purchased from the market at a cheaper price is re-crafted and exported. Thus, the domestic retail stores get duty free gold and unaccounted cash from the old gold purchases gets laundered,” an industry analyst said on condition of anonymity.