Gold licences: Joy for some, agony for others
View(s):A special committee appointed by the Central Bank (CB) will be tasked with considering applications and granting licences to 50 gold importers amidst growing concern that the move would result in a monopoly in the business. The proposal in the 2016 budget provides for a limited number (50) licences to be issued to businessmen allowing tax-free import of gold. At present importers pay a tax of 10 per cent.
The Commercial Bank and Bank of Ceylon are the highest gold importers among banks at present but under the budget proposals, banks have been told to stick to their core business and are unlikely to be given licences. A gold merchant, who wished to remain anonymous, told the Business Times that most jewellers fear these licences would be given to a handful of businessmen with links to powerful politicians in the government while a large number of small importers and domestic jewelers will have to wade through choppy waters.
He said around 1000 importers including large scale importers would be thrown out of business following the implementation of the licensing scheme, he added. A senior CB official said a special committee will be appointed to select eligible gold importers while a new scheme will be put in place which is unlikely to create an artificial market or monopoly.
In his budget speech, Finance Minister Ravi Karunanayake said these licencees will sell the imported gold to jewellery manufacturers. “No person will be permitted to trade gold without the said licence,” he said. JVP leader, MP Anura Kumara Dissanayake told the Business Times that the government’s action will create a monopoly in gold trading and affect small businessmen and jewellery manufacturers as the 50 licenced traders will get the authority to dictate terms including the fixing of selling price without any controls.
He said that this move will also create a blackmarket and an increase in gold smuggling which is also prospering at the moment. Mr. Dissanayake noted that the government is moving towards crony capitalism despite the eviction of the Rajapaksa regime.
He pointed out that only 50 players can decide the gold price while these licences are likely to be given to top UNP election campaign contributors. Local gold craftsmen would be driven out of business due to the restricted gold market handled by 50 businessmen, he pointed out.
A member of the Sri Lanka Jewellers Association said the business of small gold traders became lucrative in the recent past due to a drop in gold prices and as a result of affluence through a salary hike of government sector employees. But this situation would change by creating a monopoly.
These licenced gold importers can create a shortage of gold at any time in the market pushing gold jewellery manufacturers and gold craftsmen into difficulties, he said. The island nation’s current gold needs are totally met by gold imports and are used for domestic consumption as well as in export manufacture. Meanwhile ministry sources said that Pure Gold Group, a reputed and award winning multinational jeweller based in Dubai, has made a $50 million investment proposal to enter Sri Lanka’s gold retail sector first, followed by wholesale and manufacturing and manufacturing for exports thereafter by setting up 30 sales outlets including duty free shops and shopping mall-based outlets in 2016.