No silver lining for buyers in this India-UAE treaty

livemint.com:

MUMBAI : A duty differential in silver imported under an India-UAE treaty is being exploited by unscrupulous jewellers to short-change unsuspecting buyers, according to an official from nodal trade body India Bullion and Jewellers Association. The differential can also queer the pitch for silver exchange traded funds in India, he said.

Surendra Mehta, national secretary of IBJA, told Mint it was imperative for stock exchange MCX and the Securities and Exchange Board of India to consider allowing contracts and ETF units backed by Dubai silver to be traded on the exchanges. This is because quota-free silver imports from the UAE have ballooned thanks to the India-UAE Comprehensive Economic Partnership Agreement (CEPA) of April 2022, he said.

“Currently, MCX allows delivery of only LBMA silver, while mutual fund ETF units are also backed by LBMA silver, which trade at a premium to the spot market price because silver from the UAE is imported at 9% duty under the CEPA against LBMA silver imported at 15% duty," said Mehta. The London Bullion Market Association (LBMA) oversees the wholesale gold and silver markets in London.

“While both importers and customers should benefit from access to cheaper imports, there is a tendency among certain jewellers to display the MCX silver price in their shops and pass off Dubai silver as LBMA silver to unsuspecting customers, making a neat 6% gain in the bargain," Mehta said. He contended that even mutual funds that have launched silver ETFs will have a problem at redemption as they will “perforce" have to sell the silver backing the units at a discount in the spot market.