Chidambaram,Rajan may face music for easing gold import norms

New Delhi: Confirming Financial Chronicle’s campaign on the illicit and malafide use of the dubious 20:80 gold scheme which benefited a handful of start and premier trading houses even as there was a vacuum in government formation — May 21, 2014 — the Centre on Monday through a commerce ministry statement announced that none involved would be spared.
The Centre said it will take action against the people, hinting at former RBI governor Raghuram Rajan and ex-finance minister P Chidambaram at the time who relaxed gold import norms for private trading houses during the dying days of the UPA regime which resulted in a windfall of Rs 4,500 crore to 13 such entities in just six months.
India Bullion and Jewellers Association president and trader Mohit Kamboj, who spoke to FC, had played whistle blower by writing innumerable letters to people in authority both in UPA and then NDA to finally secure the cancellation of the scheme in late November 2014.
With Parliament paralysed over the PNB/Modi/Choksi swindle and the treasury benches in the line of an opposition fusillade, the government counter punched. The ruling party has accused Chidambaram of aiding jewellers Mehul Choksi and Nirav Modi – centrifuge in the country’s biggest bank fiddle – through an 80:20 gold import scheme.
Without naming any of the jewellers who may have benefited from the scheme, the government said in a statement that it had taken the “bold” step to scrap the scheme within months of coming to power to end all discrimination in the favour of private gold importers. It said the scheme had increased the shipments of gold into the country and put pressure on current account deficit in 2012-13.
This resulted in placing of restrictions on imports including by way of higher customs duty. As FC has consistently been pointing out through its exposes, “the 13 premier trading houses (PTH) and star trading houses (STH) were also allowed to import gold under 20:80 scheme,” the statement said, referring to Chidambaram’s decision to allow even private traders to import under the scheme.
These were in July/August 2013 modified into 20:30 scheme wherein only banks and PSUs like MMTC and STC were allowed to import gold if only a fifth of it is exported. “The then finance minister approved the modified scheme on May 13, 2014, even though the model code of conduct was in place since March 5, 2014 with the announcement of the Lok Sabha polls, and the counting was due on May 16, 2014,” said a statement by the commerce ministry.
It said there was a shortage of gold for domestic use and a premium of between USD 100 and USD 150 per ounce (about Rs 2 lakh per kg) was being charged. Preferential access was given to cronies who made a fast buck by hoarding the gold and profiteering.
“Allowing private companies like PTHs and STHs to import gold provided these agencies an opportunity of windfall gain, as the benefit of the high premium on gold could now be availed of by these agencies,” the government statement added.
The statement referred to a CAG report (again highlighted by FC) that put gold imported by 13 trading houses during June 2014 to November 2014 at 282.77 tones, “which means a windfall gain of about Rs 4,500 crore to these agencies during this period, assuming a premium of Rs 2 lakh per kg and 80 per cent of imported gold supplied to domestic market earning the premium.”