UPSC Exam Preparation: Topic of the Day – 80:20 Gold Import Scheme
In response to a stressed current account deficit in 2012-13 as a result of the surge in gold imports, an import scheme was introduced in 2013. The scheme made it mandatory to export 20% of all the gold imports. According to the provisions of the scheme, 80% of gold imports was allowed to be sold in India while it was mandatory to export at least 20% of the gold imports prior to importing new consignments. The scheme intended to restrict gold imports, impose export obligations for conserving foreign exchange and ensure that the premium from purchase and sale of gold resided in the hands of public agencies.
- At the time of its implementation, the 20:80 scheme was open only to banks and to public sector companies such as the Metals and Minerals Trading Corporation and the State Trading Corporation of India.
- Additionally, the bullion dealers, jewellers etc approached the Finance ministry for relaxation of the policy.
- The curbs were eased after crude oil prices dropped to a four-year low. The easing of rules allowed more agencies to import gold.
- Later in May 2014, Premium Trading Houses (PTH) and Star Trading Houses (STH), both private sector entities were allowed to import gold. The decision was taken by the RBI to widen the scheme post-consultation with the government.
How did the scheme fare?
- A review of the scheme by the Commerce Ministry found that since liberalisation in May 2014, there was a substantial increase in the gold imports averaging to about 140-150 tonnes a month.
- Within this, the government found that gold imported by STHs and PTHs increased 320% following the May 2014 decision compared with the earlier period.
- The share of these entities in the total gold imported into the country also increased from 20% before May to 60% after, according to the government.
- A CAG report published in 2016 found that the 80:20 schemes had resulted in a loss of Rs 1 lakh crore to the exchequer.
- Indian Bullion and Jewellers Association (IBJA) had forewarned the Reserve Bank of India of the consequences.
- A sub-committee of the Public Accounts Committee headed by BJP MP Nishikant Dubey has reportedly sought details from the Revenue Department and any alleged link with the PNB fraud.
- the Directorate of Revenue Intelligence (DRI) was not in favour of the 80:20 gold import scheme launched in 2013
- To support the earning of one US dollar (around Rs 60 then) for jewellers, the government had to bear the expenditure in the form of duty foregone of Rs 221.75. Through the process known as round-tripping, black money that goes out of the country returns as white money.
- The scheme was misused for round-tripping of black money and money laundering.