Ted Butler: You do the math

Section:

By G. Chandrashekhar
The Hindu, Chennai, India
Monday, July 11, 2005

http://www.thehindubusinessline.com/2005/07/12/stories/20050712029101
00.htm

MUMBAI -- The government has finally made up its mind on further
liberalising gold imports by authorising more entities to import in
addition to the current list of some 17 agencies that include
government parastatals, star trading houses, and banks.

The Ministry of Finance has decided to expand the number of
authorised importers of gold beyond the current designated agencies.
For this purpose it is seeking to develop a set of criteria for
those persons, agencies and entities who would be authorised to
import gold.

The decision is sought to be justified on the ground that it would
ensure adequate supply in the market for the benefit of consumers.
Early last year, ahead of the general elections, the then Finance
Minister, Mr. Jaswant Singh, announced the government's decision to
make gold imports free, subject to guidelines to be issued by the
Reserve Bank of India.

Mr. Singh had asserted that unrestricted imports would help
jewellery makers and others to access the yellow metal freely
without having to go through intermediaries.

Over the last year and a half, the RBI has issued no guidelines and
imports continue to be routed through the designated agencies.

Less than a handful of active players are currently engaged in gold
imports.

Some of the active importers are said to be busy trying to postpone
the inevitable.

To facilitate issuance of draft circular by the RBI for import of
primary gold and silver, the Foreign Trade Division in the
Department of Economic Affairs under the Finance Ministry has
written to bullion associations seeking their inputs on the set of
criteria for authorisation.

Players in the bullion market have welcomed the development, but are
not exactly excited.

Speaking to Business Line, Mr. Bhargav Vaidya, a bullion analyst,
said that all players should be allowed to import.

He added that such imports should be from members of London Bullion
Merchants Association (LBMA), but not its associates.

As the capital adequacy norms of LBMA are somewhat tough and such
members are regulated, allowing import from full members (and not
from associates) would increase the comfort level of importers here,
he said.

It is unclear whether the import authorisation would depend on the
structure of the entity.

For instance, would corporates alone be permitted, to the exclusion
of proprietary and partnership firms?

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