NEW DELHI: The government on November 28 removed restrictions on gold imports, scrapping the controversial 80:20 scheme amid allegation of misuse by half a dozen companies. Bowing to pressure from jewellers, the previous UPA government had eased some of the curbs and private agencies were allowed to import gold under the scheme that mandated traders to export 20% of all gold imported while retaining 80% for domestic use. The move is expected to cut smuggling and raise legal shipments into the world’s second-biggest consumer of the metal after China.

“It has been decided by the Government of India to withdraw the 20:80 scheme and restrictions placed on import of gold. Accordingly, all instructions issued about the scheme from time to time… stand withdrawn with immediate effect,” the Reserve Bank of India said in a statement. Sources said the move to scrap the scheme was taken as the measure was intended tackle the widening current account deficit last year. “Now that CAD is under control why continue with an emergency measure,” a source said, adding that the measure had led to smuggling. Apart from opening the floodgates to import, the move had resulted in nearly half the imports being routed through six agencies, raising alarm bells in the government.

Sources also ruled out any other curbs on gold imports for now. The scrapping of the scheme comes against the backdrop of expectations that the government will impose fresh restrictions to curb a surge in imports of the yellow metal in recent months. Data showed import of the yellow metal spiralled nearly four times to $4.2 billion in October from $1.1 billion in the same month last year. Gold imports have shot up to 150 tonnes in October compared to 24 tonnes in the same year ago period.In the April-June quarter of the current fiscal, the CAD narrowed to 1.7%, from 4.8% of GDP a year ago.

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