Indonesia is the new gold route to India

Less than three weeks after the government placed curbs on the import of gold under a free trade agreement with South Korea, some traders have found a loophole and are supplying the metal at a lower price through Indonesia, which has a similar accord with India. Almost 150 kg of gold from Indonesia landed in India last week and the industry has brought the matter to the notice of the government, traders said."We had a meeting with senior offi cials of the Directorate General of Foreign Trade recently on this issue," said a senior executive of the Gem & Jewellery Export Promotion Council, who did not want to be identified.

"Jewellers were importing gold jewellery from South Korea under the Indo-Korea Comprehensive Economic Partnership Agreement, which has now been restricted post-issuance of the DGFT notification. Hence, Indonesia is now the new source-market." As a gold-producing nation, Indonesia fulfills the local value-addition norm as required under the free trade agreement. Of 3,000 tonnes of gold produced globally every year, Indonesia supplies about 100 tonnes. The Indian Bullion & Jewellers Association (IBJA) and All India Gem & Jewellery Trade Federation (GJF) have made representations to the government. "We are hoping that the government will take appropriate action to stop entry of cheap gold from Indonesia," said Surendra Mehta, national secretary of IBJA. Cheap imports disrupt the organised gold trade. Nominated agencies had said earlier there should be a comprehensive policy on gold imports from ASEAN nations with which India has free trade agreements.

The entry of gold through FTA channel can stop if import duty is reduced, said Nitin Khandelwal, chairman of GJF. "The difference between duty-free gold and gold with import duty is Rs 725/10 gm. If this price differential continues, it will be difficult to restrict entry of gold via the grey route and keep a check on unscrupulous traders."