GTRI Raises Concerns Over Precious Metal Imports Under India-UAE Trade Pact

Introduction

The Global Trade Research Initiative (GTRI) has voiced serious concerns about the surge in precious metal imports from the UAE under the India-UAE Comprehensive Economic Partnership Agreement (CEPA). This influx is impacting the domestic jewelry industry and potentially causing significant revenue losses.

Seeking an urgent review of the agreement, it said the India-UAE comprehensive economic partnership agreement (CEPA) allows unlimited imports of gold, silver, platinum, and diamonds from the UAE into India with zero tariffs in the coming years. 

Key Issues and Calls for Action

GTRI has called for an urgent investigation into the effects of CEPA, which allows unlimited imports of gold, silver, platinum, and diamonds from the UAE with zero tariffs in the coming years. This policy is expected to shift import business from banks to private traders and replace top suppliers with Dubai-based firms.

Revenue and Industry Impact

The think tank's report highlights that the zero-tariff policy could lead to an annual revenue loss of Rs 63,375 crore due to duty-free imports of gold and silver based on FY2024 import levels. Additionally, it could disrupt the domestic diamond and jewelry industry, particularly with major imports coming through GIFT City, which faces transparency issues.

Current and Future Tariff Changes

Presently, gold can be imported from Dubai at a 5% duty, but this will drop to zero in three years if the alloy contains 2% platinum. Similarly, silver imports from the UAE have surged due to an 8% duty under CEPA, compared to the general 15% duty, creating a significant tariff arbitrage.

Concerns Over Compliance and Money Laundering

GTRI also raised concerns about many imports not meeting Rules of Origin conditions, suggesting potential money laundering. The value addition process for silver imports is particularly questionable, prompting a call for a CAG audit to investigate pre-arranged deals and invoice manipulation.

Impact on the Jewelry Industry

The tariff concessions under CEPA are hurting India’s jewelry industry, with gold jewelry imports from the UAE increasing due to lower tariffs. The zero tariff on cut and polished diamonds under CEPA threatens India’s domestic diamond industry, which benefits from zero duty on rough diamonds and a 5% duty on cut and polished diamonds.

Specific Cases and Recommendations

GTRI founder Ajay Srivastava emphasized the problematic nature of the current situation, where silver bars are imported from Russia and other countries to Dubai, converted into granules, and then exported to India with minimal value addition. This process is raising concerns about meeting the rules of origin requirements.

Conclusion

GTRI's concerns highlight the need for a thorough review and investigation of the India-UAE trade pact to ensure fair import practices, safeguard domestic industries, and prevent significant revenue losses. The government must address these issues promptly to maintain the integrity of the country's trade policies.