Why in the News?

India’s majority of silver imports are now handled by few private players from Dubai through the India International Bullion Exchange (IIBX), Gift City.
- This trend, aimed at reducing import duties by the traders, poses potential long-term revenue losses for India.

India’s Silver Imports

India imported a record 4,172 metric tons of silver in the first four months of 2024, far exceeding the total of 3,625 tons imported in all of 2023.
- In February 2024 alone, India imported a record 2,295 metric tons of silver, up from 637 tons in January. This represents a 260% increase.
The surge in imports has been driven by increasing demand from the Solar panel industry as well as a rise in Speculative Investment, with investors betting on silver outperforming gold.
Nearly half of India’s silver imports in 2024 so far have come from the United Arab Emirates (UAE) due to a lower import duty under the India-UAE Comprehensive Economic Partnership Agreement (CEPA).
- India generally imposes a 15% import duty on silver.
- However, because of the CEPA signed between India and the UAE in 2022, allows private traders to import silver through the India International Bullion Exchange (IIBX) paying 9% duty, and an extra 3% in value-added tax.
The government is now concerned about the 647-fold spike in silver imports from the UAE and plans to discuss the issue with Abu Dhabi.
- The Gift City exchange, while clearing imports from Dubai since December 2023, is under scrutiny for potential violations of these rules compared to imports from other ports.

Bullion refers to physical gold and silver of high purity that is often kept in the form of bars, ingots, or coins.
The IIBX was announced during the 2020 budget speech by the Finance Minister.
It is set up at the International Financial Services Center (IFSC) located in GIFT City, Gandhinagar.
It is India’s first bullion exchange, launched on 29 July 2022 in Gujarat.
It is the 3rd exchange of its kind in the globe.

The International Financial Services Centres Authority (Bullion Exchange) Regulations, 2020, were notified in December 2020 specifically for the trading of precious metals, including gold and silver.
These regulations encompass the operations of the bullion exchange, Clearing Corporation, depository, and vaults associated with IIBX.

Previously, India had liberalized gold imports through nominated banks and agencies in the 1990s.
- With IIBX, eligible qualified jewellers in India can directly import gold.
Jewellers need to become trading partners or clients of an existing trading member to participate in the exchange.

Previously, bullion in India was imported under a consignment model by nominated banks and agencies approved by the RBI, which added handling fees and premiums.
The introduction of IIBX aims to streamline the supply chain by allowing direct imports through the exchange, potentially reducing costs for traders and consumers alike.

Renegotiation of CEPA Terms: The Global Trade Research Initiative (GTRI) advocates for revising CEPA terms to curb duty arbitrage and enforce stricter checks on value addition claims by Gift City exchange.
Enhanced Regulatory Oversight: GTRI proposes limiting silver imports to RBI/DGFT-nominated agencies to mitigate risks associated with mis-declared imports and ensure compliance with CEPA conditions.
Investigation and Oversight: There is a call for a thorough investigation into relationships between export and import firms to identify and mitigate conflicts of interest or familial ties that could influence import practices.

[2016] What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?

Select the correct answer using the code given below:

(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3