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A recent decision by India now allows bullion traders to participate in the bidding process for gold imports from the United Arab Emirates (UAE). This move marks a significant shift in India's gold import policies and enables traders to bid for UAE gold, thereby increasing competition in the market.
The India-UAE Comprehensive Economic Partnership Agreement (CEPA) is an agreement between India and the UAE that covers 11 service sectors and over 100 sub-sectors. It came into force on May 1, 2022, and includes provisions for tariff reductions, market access, and cooperation in trade, investment, and intellectual property rights. As per the agreement, India can import up to 140 MT of gold at a one per cent duty concession on the applied Most Favoured Nation (MFN) rate, which is 15 per cent.
The Directorate General of Foreign Trade (DGFT) invited applications for Tariff Rate Quota (TRQ) for 2023-24, the last date being February 28, 2023. However, as part of the latest decision, authorities have cancelled the allotments made on the previous bids and a fresh window for inviting new applications for Gold TRQ has been notified, which will be open to all who have Importer Exporter Code (IEC).
Under the CEPA agreement, India's gold market can import bullion from the UAE under the 1 per cent duty cut for the first 5 years. Each year, the quota will be increased by a certain percentage. In the first year, the allowed imports from the UAE were 120 tonnes of gold, and now it has become 140 tonnes.
What is the India-UAE Comprehensive Economic Partnership Agreement (CEPA)?
The India-UAE Comprehensive Economic Partnership Agreement (CEPA) is a trade and investment agreement between the two countries. It came into effect on May 1, 2022, and covers 11 service sectors and over 100 sub-sectors. The CEPA allows India to import 140 MT of gold from the UAE at a one per cent duty concession on the applied Most Favoured Nation (MFN) rate, which is 15 per cent.
What is the significance of the latest decision by India?
The latest decision by India allows bullion traders in India to import gold from the UAE at a lower cost, thereby widening the scope for gold imports. The move is significant because it creates a level playing field for all players in India's gold industry, as they can all benefit from the duty cut on UAE imports. This decision is also timely, coming just ahead of the first anniversary of the CEPA coming into effect.
What are the benefits of this decision?
The decision to widen the scope of gold imports from the UAE is expected to lead to higher demand for gold from the UAE. It also ensures that all of the 140 tonne quota for this year could be taken up. By involving bullion traders in the process, it would create a significant secondary market demand for UAE bullion in India. This decision also effectively places curbs on parallel imports of gold, which is being reflected in the market. It will also see the need for official imports, and the UAE bullion suppliers will gain from this.
What is the quota for gold imports from the UAE?
Under the CEPA agreement, India's gold market can import bullion from the UAE under the 1% duty cut for the first 5 years. Each year, the quota will be increased by a certain percentage. In the first year, the allowed imports from the UAE was 120 tonnes of gold, and now it becomes 140 tonnes. Of the 120 tonnes last year, only 20% was actually utilised.
What is the process for TRQ allocation?
The Directorate General of Foreign Trade (DGFT) invited applications for Tariff Rate Quota (TRQ) for 2023-24, the last date being February 28, 2023. As many as 78 applications were received, and a preliminary Exim Facilitation Committee (EFC) meeting was held on March 23, 2023, allocating TRQ provisionally subject to the fulfilment of extant guidelines or conditions. As per the revision in the eligibility criteria for Gold TRQ under India-UAE CEPA issued vide public notice dated April 17, 2023, a fresh window for inviting new applications for Gold TRQ would be notified. The Gold TRQ would be allocated to all applicants both 78 old and new applicants as per the revised guidelines. The decision by India to widen the scope of gold imports from the UAE is significant as it creates a level playing field for all players in India's gold industry. By involving bullion traders in the process, it is expected to lead to higher demand for gold from the UAE.