An effort has been made to tap the huge quantities of gold lying idle in the country, while efforts have also been taken to cut down imports. The Budget proposes a new gold monetisation scheme, developing sovereign gold bond and minting India’s own embossed with the Ashok Chakra – something like the US Eagle gold coins.

The monetisation proposal has been hanging fire since the middle of 2013 after the then UPA Government introduced the 80:20 gold scheme wherein 20 per cent of each imported consignment had to be re-exported in value-added form before further shipments could be allowed.

Last year, MMTC-Pamp refinery entered the scene to shoulder the responsibility of being the nodal agency to collect the gold and recycle it. The jewellery sector has been keen on this since it has been facing supply problems. On the other hand, the Centre has been concerned over the fact that huge foreign exchange outgo was being incurred on an idling asset such as gold.

The monetisation scheme looks to address this by trying to ensure supply for the jewellers while ensuring that gold lying idle in the country is put to better use. According to the World Gold Council, some 22,000 tonnes of gold is lying idle in the country.

Explaining the rationale behind the scheme, Finance Minister Arun Jaitley said: “India is one of the largest consumers of gold in the world and imports as much as 800-1,000 tonnes of gold each year. Though stocks of gold in India are estimated to be over 20,000 tonnes, mostly this gold is neither traded, nor monetised.

The gold monetisation schemewill replace both the present ‘gold deposit’ and ‘gold metal loan schemes’. It will allow the depositors to earn interest in their metal accounts and jewellers to obtain loans in their metal account.

Banks and other dealers will also be able to monetise the bullion.

Increasing the supply of gold through the monetisation scheme could also help the government keep imports low without putting in place curbs besides checking the current account deficit.

The Budget has also proposed development of a Sovereign Gold Bond, as an alternative to purchasing metal gold.

The Bonds will carry a fixed rate of interest and also be redeemable in cash in terms of the face value of the gold at the time of redemption by the holder of the Bond.

Jaitley proposed starting work on developing an Indian gold coin, which will carry the Ashok Chakra on its face.

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