 "Uttarakhand emerges a gold refining hub")
Uttarakhand has emerged a hub for gold refining with half the country's bullion refineries being located in the state - most of them have come up in the past few years. The reason: the state government has waived excise duty for new investments, leaving higher margins for refineries compared to those situated in other parts of the country.
There are 32 gold refineries in India and 27 of them process dore or unrefined gold with a total refining capacity of 1,467 tonnes. Of these, 18 refineries are situated in Uttarakhand, where eight more refineries are coming up, according to industry officials. Most new refineries are with smaller capacities and are being set up by big bullion dealers.
Uttarakhand's refineries process a third of the gold refined in the country, and analysts expect this proportion to only increase as imports of unrefined gold rises. Most refineries are concentrated in an excise-free zone (EFZ) located in Rudrapur, Uttarakhand.
If unrefined gold is imported and refined in India, there is no Customs duty, but there's a countervailing duty of eight per cent. The duty on bullion or refined gold is 10 per cent. However, refiners in EFZ get a drawback due to which they get two per cent duty difference compared to imported refined gold. On the other hand, refineries in domestic tariff area (DTA) are liable to pay an excise duty of nine per cent, and their tax differential with imported gold reduces to only one per cent.
James Jose, secretary, Association of Gold Refineries and Mints, says: "Dore is not available easily in international market after recent production cuts by goldmines. To get higher supply, refineries in EFZ pass on part of extra duty benefit in favour of goldmines to get higher assured supply."
Due to lower unrefined gold supply, Indian refineries are on an average running only at 20 per cent capacity. Jose adds, "Some smaller refineries operate only when unrefined gold is available."
Says Sudheesh Nambiath, lead analyst (precious metals), Thomson Reuters GFMS, "Out of the total 1,467 tonnes refining capacity in the country, only about 650 tonnes is located in DTA, while the rest are concentrated in EFZ at Rudrapur, Uttarakhand. However, the average capacity utilisation of all the functional refineries as a whole is only 20 per cent. That said, the top four importers accounted for more than 90 per cent of total unrefined gold imports, and have on an average operated at 70-80 per cent of capacity this year."
According to the World Gold Council, the share of unrefined gold in total gold imports was a little over five per cent in 2014, which has increased to 30 per cent in the first three quarters of 2015. Interestingly, Rajesh Exports recently acquired Swiss refinery Valcambi and it plans to merge its Uttarakhand gold refinery with Valcambi. This will ensure higher supply of unrefined gold for India. Rajesh Mehta, chairman and managing director of Rajesh Exports, says, "The India-based refinery will be merged with Valcambi, which will take three to six months and we have already initiated efforts to get London Bullion Market Association (LBMA, a wholesale bullion trading market) accreditation for the India refinery. This development will help improve capacity utilisation of Indian refining."
The company's Uttarakhand refinery has 350 tonnes installed capacity, of which it is utilising 50 tonnes at present.
MMTC has a tie-up with Swiss-based refinery PAMP (Produits Artistiques Metaux Precieux) and it is the only LBMA-approved refinery in India. According to Nambiath, the share of this trade will expand in the coming years thanks to the obvious cost advantage. "Secondly, it is a less regulated industry in India and defining the quality standard is at the will of the refiner," he adds.
There are 32 gold refineries in India and 27 of them process dore or unrefined gold with a total refining capacity of 1,467 tonnes. Of these, 18 refineries are situated in Uttarakhand, where eight more refineries are coming up, according to industry officials. Most new refineries are with smaller capacities and are being set up by big bullion dealers.
Uttarakhand's refineries process a third of the gold refined in the country, and analysts expect this proportion to only increase as imports of unrefined gold rises. Most refineries are concentrated in an excise-free zone (EFZ) located in Rudrapur, Uttarakhand.
If unrefined gold is imported and refined in India, there is no Customs duty, but there's a countervailing duty of eight per cent. The duty on bullion or refined gold is 10 per cent. However, refiners in EFZ get a drawback due to which they get two per cent duty difference compared to imported refined gold. On the other hand, refineries in domestic tariff area (DTA) are liable to pay an excise duty of nine per cent, and their tax differential with imported gold reduces to only one per cent.
James Jose, secretary, Association of Gold Refineries and Mints, says: "Dore is not available easily in international market after recent production cuts by goldmines. To get higher supply, refineries in EFZ pass on part of extra duty benefit in favour of goldmines to get higher assured supply."
Due to lower unrefined gold supply, Indian refineries are on an average running only at 20 per cent capacity. Jose adds, "Some smaller refineries operate only when unrefined gold is available."
Says Sudheesh Nambiath, lead analyst (precious metals), Thomson Reuters GFMS, "Out of the total 1,467 tonnes refining capacity in the country, only about 650 tonnes is located in DTA, while the rest are concentrated in EFZ at Rudrapur, Uttarakhand. However, the average capacity utilisation of all the functional refineries as a whole is only 20 per cent. That said, the top four importers accounted for more than 90 per cent of total unrefined gold imports, and have on an average operated at 70-80 per cent of capacity this year."
According to the World Gold Council, the share of unrefined gold in total gold imports was a little over five per cent in 2014, which has increased to 30 per cent in the first three quarters of 2015. Interestingly, Rajesh Exports recently acquired Swiss refinery Valcambi and it plans to merge its Uttarakhand gold refinery with Valcambi. This will ensure higher supply of unrefined gold for India. Rajesh Mehta, chairman and managing director of Rajesh Exports, says, "The India-based refinery will be merged with Valcambi, which will take three to six months and we have already initiated efforts to get London Bullion Market Association (LBMA, a wholesale bullion trading market) accreditation for the India refinery. This development will help improve capacity utilisation of Indian refining."
The company's Uttarakhand refinery has 350 tonnes installed capacity, of which it is utilising 50 tonnes at present.
MMTC has a tie-up with Swiss-based refinery PAMP (Produits Artistiques Metaux Precieux) and it is the only LBMA-approved refinery in India. According to Nambiath, the share of this trade will expand in the coming years thanks to the obvious cost advantage. "Secondly, it is a less regulated industry in India and defining the quality standard is at the will of the refiner," he adds.