After scrapping an earlier controversial decision, the Director General of Foreign Trade (DGFT) has reallocated the special gold import quota of 140 tonnes, roughly worth more than $10 billion, to 341 applicants under the India-UAE comprehensive economic partnership agreement. The majority of the approved applicants have been allocated an import quota of 465 kg of gold, which will attract one per cent lesser import duty than usual. The import quota is for the current financial year.

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In March, the DGFT had allocated the same quote to just 78 applications, which was termed as a ‘pre-arranged’ deal by the large bullion players. Zee Business has seen the minutes of the latest DGFT meeting on May 18 chaired by Santosh Kumar Sarangi, Additional DG, where the quota was reallocated and also the bullion players confirmed about the revision.

The special gold import quota is part of India's bilateral deal with the UAE, which will allow approved bullion traders to import 140 tonnes of gold with one per cent lesser import duty than the usual under the scheme known as Tariff Rate Quota (TRQ), a mechanism for import of a set quantity of specific products. The India-UAE free trade pact came into effect on May 1, 2022 and allowed for the concessional tariffs on gold.

In April, the Indian Bullion and Jewellers Association (IBJA) had written to DGFT highlighting the lack of transparency in the gold import quota deal. The letter with Zee Business shows that IBJA had objected to the allocation due to non-transparent means of DGFT. After news reports on April 26, the DGFT called for a press conference and said it will initiate fresh quotas.

Estimated loss to government on earlier faulty allocations
 
IBJA had alleged that the benefit of the government's discount on duty was being passed on to 78 applicants, who got quotas on the back of incorrect allotment of TRQ. 

Tariff quotas were provided to a wide range of products, so far were mainly restricted to the agriculture sector. But this year, the scheme was also extended for gold imports. The DGFT had decided the players to be considered for the quota in March since the government had favoured gold imports from the UAE under the free trade agreement signed by charging an import duty of one percentage point less than the usual 12.5 per cent levied on imports from other destinations.

DGFT's Faux Pas

IBJA's letter, dated April 21, narrated a baffling incident to indicate the ‘pre-arranged’ quota deal. The letter, addressed to Sarangi said that the quota for import of 140 tonnes of gold was allotted to the 78 applicants in a meeting of the DGFT held on March 23 based on reference of a government public notice dated April 17.

“We fail to understand as to how in the meeting held on 23rd March was given based on reference to public notice no. 06/2023 dated 17/04/2023 issued by DGFT in sync with Ministry of finance (Department of Revenue) Notification No. 20/2023- Custom dated 31/03/2023,” said IBJA’s letter to DGFT.

“As per the minutes of the meeting dated March 23 of DGFT, the TRQ quota for import of 140 tonnes of gold at one per cent lesser duty was allotted to 78 applicants. We request you cancel the so far allotted quota and give fresh opportunity to all eligible applicants. Approving such a proposal in the meeting in March based on future DGFT public notice issued in April itself is void,” the letter added. As evidence, the IBJA has attached the minutes of the meeting of DGFT held in March, where the quota was allotted based on the April circular.

Last year in July, the government had hiked the basic customs duty on gold to 12.5 per cent. Along with the agriculture infrastructure development cess of 2.5 per cent, the effective gold customs duty works out to 15 per cent. Gold imports in India were down 27 per cent last year to 673 tonnes, against 925 tonnes in 2021, due to high import duty even while the smuggling of gold is on the steady rise.

Allocations in March were provisional, says DGFT

In a response to Zee Business, the DGFT said, "The allocations made in March were provisional and in view of the change in policy decision to allow non-manufacturer jewellers to participate in TRQ process, fresh applications were invited. Depending on the number of applicants and quantity applied for, a rational allocation has been made in favour of eligible applicants."

Further, the DGFT said that the allocation of quota is often based on either processing capacity (wherever actual user condition exists) or quantity applied, or a combination of both. "There is no question of non-transparency as the trade is fully aware of each others’ capacity. In the instant case, there was a change in policy decision to allow even non-manufacturer jewellers to apply following which the application process was initiated afresh and quota has been allocated. If there is any iota of doubt regarding this allocation, then specific cases may be furnished," DGFT said responding to Zee Business.

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