With import of refined gold costlier and partly refined products more economical, they expect a market rise in business.
Gold refineries are heaving a sigh of relief at the government’s decision for differential customs duty for raw and refined gold, as has been demanded by the industry for a long time. India is the largest importer of refined gold, with an estimated 1,000 tonnes of arrival during 2011.
With yesterday’s revision in the import duty structure, the government levy is one per cent ad valorem on gold concentrates (dore bar), while that on refined gold was raised to two per cent. The change is expected to make refining activity economical, with imported concentrate as raw material.
“The decision will help improve the efficiency of domestic refineries that were operating at 25-30 per cent (capacity) and running into losses despite building huge capacity over several years. Indian refineries will now find import of gold concentrate economical,” said Harmesh Arora, managing director of NIBR Bullion, a city-based refinery.
Earlier, concentrate with up to 80 per cent of gold content was exempt from import duty but as most mines globally mine concentrate with 90 per cent purity, duty-free import was not possible.
According to James Jose, secretary, Association of Gold Refineries and Mints, and managing director of Chemmanur Gold Refinery (P) Ltd, most domestic refineries turned sick due to the lack of raw material. The latest decision will not only help them restore production capacity but also make the pure gold price competitive in India.
Jose demanded the government completely waive import duty. Today, gold concentrate is primarily mined in Africa and refined in Europe. European gold refineries charge Rs 50,000 a kg. If duty-free concentrate imports are allowed, Indian refinery charges can fall as low as Rs 5,000 a kg.
There are 25 gold refineries in India. Most are engaged in melting of scrap jewellery and operating at 25–30 per cent of capacity as against 35–40 per cent around the same time last year, due to a scarcity of scrap.
The third quarter Gold Demand Trend report by the World Gold Council reported a 32 per cent decline in availability through domestic refineries during the quarter ended September 2011, at 15 tonnes as compared to 22 tonnes in the corresponding quarter of the previous year. During calendar year 2010, refineries melted 81 tonnes.
But in the first three quarters of 2011, total supplies were hardly 35 tonnes. With an estimated 25 tonnes of gold availability from domestic refineries as witnessed during the fourth quarter of 2011, total supply during the year works out to 50 tonnes, substantially lower than the availability last year.
Scrap availability was also hit due to mandatory hallmarking, as hallmarked jewellery was directly sold for resale after polishing. Without hallmarking, however, jewellery items are supplied to refineries for melting. With the new duty structure more gold refined in the country will be available.
