Pure gold gods, goddesses can go abroad freely as govt eases export norms

Gods and goddess made of pure gold are free to go out of the country. The government has relaxed export norms especially for them. 

The Directorate General of Foreign Trade (DGFT) on Friday evening issued a public notice allowing export of only religious idols made of 8 to 24 carat gold. In August last year, the export of items made of gold above 22 carat was banned in a bid to stop round-tripping of gold.

Round-tripping in bullion, also called round-trip transactions, involves a company selling gold jewellery/articles  to another company (mostly of the same group) who borrow cheap in international market and pay for import which exporter uses as cheap finance. to reverse the transaction, importing company melts the gold articles and exports gold to Indian original exporter and so on.            

Getting cheap finance is one of the major attraction apart from some exports benefits.

Currently, China is the bigger exporter of gold idols. It is also a major supplier of Indian gods and goddess, exporting to non-resident Indians. According to industry estimates, China exports 500 kg of religious idols made of pure gold.

Domestic manufacturers, however, claim they are better at designing religious idols than their Chinese peers.

“We know our gods and goddesses well and will stick to tradition. We should be allowed to export them,” said Srinivasan Krishnan, convenor, Gem & Jewellery Export Promotion Council (GJEPC). Government decision follows a representation by GJEPC and intense debating on ensuring it is not misused

Since Friday’s notification, wastage norms — making charges — for gold articles has been increased to 2.5 per cent of its value for plain idols, and 5 per cent of value for studded idols.

This is good for handcrafted idols. But, it also means that even if idols do not have intricate designs, full wastage can be claimed as duty-free imports. At present, most idols are made by machines, with low wastage.

Sources in the industry said the value-addition norms were also reasonably high to check round-tripping, but adding that the definition of value-addition was vague, and it could be misused.

For plain gold idols, value-addition has been fixed at 10 per cent. It is 14 per cent of idols studded with coloured gems and 15 per cent for those studded with diamonds. The usual value addition for gold articles (under which idols were included earlier) is 3.5 per cent.

GJEPC officials said stiff conditions for process of idol making, payment, etc made round-tripping almost unviable.

The DGFT notice on Friday amended the Handbook of Procedures, adding a new entry for the relaxed norms.

Srinivasan said, “Now, exporters will start marketing India-made idols. We see an immediate 100-kg annual export market opening up. This can be eventually expanded to 500 kg a year.” 

Exporters are confident of charging 12-13 per cent premium over gold prices. The DGFT has prescribed a minimum of 10 per cent.

Industry observers, however, feel there is possibility of round-tripping through gold idols.

One observer who has tracked round-tripping cases said unlike many other commodities, gold can be broken or melted without losing its value. Hence, machine-made idols can be broken and brought back. Higher value-addition and wastage norms help route such gold using cheaper financing. GJEPC, however, denies such possibilities.

Gold Rush

• Very high wastage and value addition norms fixed for idols made on machines
• Export of 24-carat gold articles was banned last year
• China is a market leader in pure gold religious idols
• India will try to regain the market it lost to China
• Experts have raised doubts that the facilities could be misused
• GJEPC says round tripping is unlikely with stiff conditions in place