State-run Minerals and Metals Trading Corporation (MMTC), India’s leading bullion importer, has asked the commerce ministry to bring the import duty on “dore bar” (raw gold) below that on refined gold to make the company’s planned refinery viable.
“We met commerce ministry officials two days ago. They supported the view that the import duty on raw gold cannot be higher than that on pure gold. Therefore, some favourable decision is expected soon,” MMTC Chairman Sanjiv Batra said on the sideline of an event in Mumbai yesterday.
The import duty on raw gold was recently cut from over Rs 400 per 10 gram to Rs 280 per 10 gram. But, an excise duty of Rs 140 per 10 gram was also levied. In effect, the overall duty was raised to Rs 420 per 10 gram, as against Rs 300 per 10 gram on pure gold.
“Why will anyone import raw gold for processing in domestic refineries and incur extra cost to produce pure gold when the same can be imported by paying lesser duty ?” asked Batra. “In the current duty structure, processing will not be viable.”
MMTC is planning to start medallion production in August this year. The refinery will start commercial production three months after that. “We will not process scrap gold for others,” said Batra. At present, raw gold mined in any part of the world goes to Switzerland for processing, which adds to the cost. Any London Bullion Markets Association-grade gold produced in India will be cheaper.
Similar proposals by private players such as the Association of Gold Refineries and Mint, a trade body representing gold refineries, have been turned down in the past.
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MMTC has completed over 90 per cent work on the project, which it is setting up in Haryana with Pamp S.A. Switzerland, one of the largest refiners of gold and silver and the world’s largest medallion manufacturer.
The project will have an initial refining capacity of 360 tonnes and gold medallion manufacturing capacity of 16 tonnes. The initial investment is estimated at $50 million. MMTC would have at least 26 per cent marketing rights for medallions and precious metals produced from the unit, sources said, adding that in the second phase, the refinery would also produce silverware and jewellery.
India’s largest bullion trader has 24 distribution centres and is planning to add a few more by the end of this year. MMTC will also facilitate delivery of gold for the recently-launched commodity futures trading platform, the Indian Commodity Exchange (ICEX), in which it has 26 per cent stake.
ICEX has announced a strategic tie-up with the Bombay Bullion Association (BBA), the largest bullion dealers’ trade body, to provide membership to the latter’s members and encourage wider participation by setting up multiple delivery centers.
Total gold imports into the country were estimated at 343 tonnes in 2009, a 18 per cent decline from 2008. The country processed 200 tonnes scrap gold of domestic origin in 2009.