Red flags raised over silver imports from UAE through GIFT City
- Almost all of India’s silver imports are now being handled by a few private players bringing the white metal from Dubai through the GIFT City exchange
- which could cause significant revenue losses for the exchequer over time.
KEY HIGHLIGHTS
- A trade research body has sought a probe into the relationships between export and import firms to identify and address any potential conflicts of interest
- while warning that this silver market trend could extend to gold, platinum, and diamonds, further disrupting traditional import practices and market dynamics.
- India’s imports of gold and silver from the UAE had jumped 210% in 2023-24 to $10.7 billion.
- Total silver imports stood at $5.4 billion.
- In May, 87% of India’s global silver imports came from Dubai at a reduced 8% duty and were cleared through the GIFT City exchange in Gandhinagar
- which has been clearing all silver imports from UAE since December 2023. Imports from other countries and ports are virtually abandoned.
- Earlier attempts by some banks to import silver from the UAE through other ports were questioned for not meeting rules of origin of the India-UAE free trade deal, think tank Global Trade Research Initiative (GTRI) flagged in a report.
- “The key concern is how the imports cleared through GIFT City meet the rules of origin requirements specified in the India-UAE CEPA [Comprehensive Economic Partnership Agreement]
- when importers from other ports fail to meet these
- India levies a 15% import duty on silver and only allows institutions nominated by the Reserve Bank of India (RBI) and the Directorate General of Foreign Trade (DGFT) to import the precious metal.
- However, the GIFT City exchange does not limit imports to RBI/DGFT-nominated agencies, registers private traders, and has found no rules of origin issues as flagged by customs elsewhere.
Zero tariff
- Under the CEPA signed in 2022, India has agreed to reduce the duty on silver imports to 0% over 10 years, subject to Dubai exporters meeting the rules of origin conditions.
- “As the tariff becomes zero over the next eight years, all silver imports will likely come from the UAE, resulting in a revenue loss of ₹6,700 crore.
- It had also suggested restricting silver imports to nominated agencies authorised by the RBI and DGFT to minimise the risk of misdeclared imports.
Prelims Takeaway:
- GIFT City
- GTRI