The Indian bullion industry is aiming to resort to norms established by the Organisation for Economic Co-operation and Development (OECD) and filter out the ‘conflict gold’ from bullion trade in India.
The traders of the Indian bullion industry seem to be majorly altering their modus operandi by mending trade practices. Last month the traders formulated certain self-regulations and established committees for monitoring gold trade code, good delivery rules and spot exchange
Now, the Bureau of Indian Standards (BIS) is aiming at keeping a tab on business practices by making it mandatory for gold dore refiners to get BIS certification and adapt best business practices for sourcing dore or unrefined gold.
Monitoring the business methods would prevent the trade of conflict gold or illegally mined gold. A drill that is usually conducted in African countries, mining of conflict gold involves employing child labour or using illicit means of mining. Funds generated by such means are used to support war or illegal activities.
The Bullion Federation of India (BFI) is looking at following suit of the diamond processing industry, which adapted measures to refrain from blood diamonds or conflict diamonds two decades ago. For this purpose the BFI is hoping to work closely with the Organisation for Economic Co-operation and Development (OECD).
According to BFI, “There was lack of awareness among traders and regulators on the meaning of these guidelines. The OECD has stated its intention to work closely with the government and raise awareness. The market is also changing, with more than 35 pc of domestic supplies now coming through dore. However, small refiners are finding it difficult to source gold efficiently. Some are sourcing from alluvial operations, which domestic refiners now fear may have been illegally mined.”
OECD defines gold dore as “newly mined gold metal alloy, which after smelting to a high concentration normally yields to 85-90 pc purity.” This dore has to be finally sent to a refinery for conversion into commercial quality gold bars.
Conflict gold enters India due to the import duty differential. In 2015, conflict gold imports in India in dore form was estimated at 30-35 tonnes and valued at around INR 8,000 crore.
While certain measures regulate the import of gold, many a trade slips often rot the proceedings. To declare the mine of origin with the customs department is compulsory, however, such details are rarely declared. Only refiners listed with the London Bullion Market Association or those managed professionally draft and share such accounts. But even if such details are declared, it is difficult to confirm the origin of the gold because dore is bought from aggregators.
Rahul Gupta of the BFI, a body of India’s largest traders said to a leading Indian daily: “India should now take steps to follow OECD guidelines on sourcing of gold to ensure that conflict gold doesn’t enter India.” Gupta was at the OECD Forum in Paris, representing some of India’s largest bullion traders when he made the comment.
Several European refiners have already adopted OECD guidelines that specify norms to be followed such as vetting suppliers and mines to ensure conflict gold is not supplied.
The last two years have shown the dore imports to be around 150-200 tonnes. It is estimated that about 30 pc of this comes from small-scale miners. BFI seeks to ensure that the Indian government works with OECD and asks refiners to follow its norms and ensure conflict gold is not imported.
To monitor the same, the BFI has agreed to send Indian delegates and other officials from the regulatory body, to receive training and be at par with these guidelines so that the implementation process is smooth. Twenty of India’s gold refineries are members of the Federation.