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Red flags over runaway silver imports from UAE through Gift City


A silver trader weighs his silver ornaments inside his shop in the western Indian city of Ahmedabad. Image used for representative purpose only.
| Photo Credit: REUTERS

In a major disruption for the bullion market, almost all of India’s silver imports are now being handled by a few private players bringing the white metal from Dubai through the Gift City exchange, which could cause significant revenue losses for the exchequer over time.

A trade research body has sought a probe into the relationships between export and import firms to identify and address any potential conflicts of interest, while warning that this silver market trend could extend to gold, platinum, and diamonds, further disrupting traditional import practices and market dynamics.

India’s imports of gold and silver from the UAE had jumped 210% in 2023-24 to $10.7 billion. Total silver imports stood at $5.4 billion.

In May, 87% of India’s global silver imports came from Dubai at a reduced 8% duty and were cleared through the Gift City exchange in Gandhinagar, which has been clearing all silver imports from UAE since December 2023. Imports from other countries and ports are virtually abandoned.

Earlier attempts by some banks to import silver from the UAE through other ports were questioned for not meeting rules of origin of the India-UAE free trade deal, think tank Global Trade Research Initiative (GTRI) flagged in a report.

“The key concern is how the imports cleared through Gift City meet the rules of origin requirements specified in the India-UAE CEPA [Comprehensive Economic Partnership Agreement] when importers from other ports fail to meet these,” it noted.

India levies a 15% import duty on silver and only allows institutions nominated by the Reserve Bank of India (RBI) and the Directorate General of Foreign Trade (DGFT) to import the precious metal. However, the GIFT City exchange does not limit imports to RBI/DGFT-nominated agencies, registers private traders, and has found no rules of origin issues as flagged by customs elsewhere.

Under the CEPA signed in 2022, India has agreed to reduce the duty on silver imports to 0% over 10 years, subject to Dubai exporters meeting the rules of origin conditions.

“As the tariff becomes zero over the next eight years, all silver imports will likely come from the UAE, resulting in a revenue loss of ₹6,700 crore. This trade is driven solely by the tariff arbitrage offered by India,” GTRI warned.

“The key concern is how imports cleared through Gift City meet the rules of origin requirements specified in the India-UAE FTA when importers from other ports fail to meet these. This is strange as the Dubai-based suppliers may be the same in both cases. There is apprehension that imports from Gift city might violate rules of origin conditions,” GTRI chief Ajay Srivastava said.

GTRI has mooted a renegotiation of the CEPA terms to nullify the duty arbitrage, more rigorous check on Dubai exporters’ value addition claims by the Gift City exchange, and a “thorough investigation into the relationships between export and import firms to identify and address any potential conflicts of interest or familial ties”.

It had also suggested restricting silver imports to nominated agencies authorised by the RBI and DGFT to minimise the risk of misdeclared imports.

“When banks like Yes Bank and RBL Bank attempted to import silver from the UAE at the concessional 8% duty through Chennai and Bengaluru ports, customs authorities demanded details on the rules of origin. The firms could not comply,” the GTRI report said, adding that officials rightly required proof that the imports met the CEPA conditions, including evidence of 3% value addition and details of the value-addition process in Dubai.



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