Zero-duty unrefined gold imports

Source: This post is based on the article “Zero-duty unrefined gold imports take the shine off local players” published in “Business Standard” on 22^nd January 2024.

Why in the news?

The government has asked bullion refineries to not import gold under zero duty from LDC (Least Developing Countries).

What is unrefined gold and what are the associated issues?

Meaning: Unrefined gold or gold dore is any gold alloy in its natural state. Unrefined gold is a natural substance (found in nature), it is not pure gold, but rather a high gold content precious metal alloy.

Issues: It is imported into India from Least Developed Countries (LDCs) under a zero-duty policy. This policy allows these imports without imposing any import duty. Example-Tanzania and Guinea.

Several items are being imported under the DFTP (duty- free tariff preference) scheme from LDCs. However, the government noticed that even gold dore was being imported at zero duty against the normal duty of 14.35 per cent.

India must abide by international treaty of WTO (world trade organization) and U.N. (United Nations) to allow zero duty import from LDCs. Hence the government cannot impose strict restrictions.

Duty-Free Tariff Preference (DFTP) Scheme

Definition: The DFTP scheme is a trade policy initiative that allows certain items to be imported from Least Developed Countries (LDCs) into a country without imposing the standard import duties.

Purpose: This scheme is designed to promote trade with LDCs by making it more economically viable for them to export specific goods to larger markets.

The scheme was officially introduced on 13 August 2008. India was the first developing country to introduce a preferential tariff program for the LDCs

What are its consequences?

1. It distorts the level playing field as not all refiners benefit from zero duty import.
2. The illegal import hurts the domestic market.
3. At lower duty,300-500 Kg of gold is imported daily.

UPSC SYALLABUS: -Economy.