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Due to the new licensing system, the import of silver in India has reduced rapidly. This is why local premium has reached its highest level in many months. People with knowledge of this matter said in Bloomberg's report that most of the banks have not yet received the necessary permits to import this white metal and they are waiting for the government's approval. He said that only a few people have got licenses. India is one of the largest consumers of silver in the world, with demand driven by jewellery, silverware, industrial use and purchases during festivals and weddings. With little to no domestic production, it is almost entirely dependent on supplies sourced from abroad by banks and other authorized entities, making its purchases an important role in balancing global silver supply and demand.

How much did silver import decrease?

According to consultancy Metals Focus, the country imposed licensing requirements for silver imports in May to conserve foreign exchange reserves, causing shipments to fall to an estimated 29 tonnes in June from 747 tonnes in January. The total figure for June was estimated to be less than 1 percent of the country's annual silver demand. Harshal Barot, principal consultant at Metals Focus, said on Wednesday that the supply shortage has pushed the estimated 30-day average premium — the extra amount paid by buyers above benchmark prices — to its highest level since at least 2019. Renisha Chainani, head of research at Mumbai-based gold trading firm Augmont Enterprises Limited, said that the halt in imports has resulted in a shortage of physical silver, while the demand remains stable. He said home premiums are approaching “deficit conditions.”

confused businessman

According to a government official with knowledge of the matter, the committee that approves import licenses meets only once or twice a month, leading to delays. The official, speaking on condition of anonymity, told Bloomberg in a report that the new arrangement is aimed at curbing the surge in silver imports from countries like Thailand and the United Arab Emirates, with which India has free-trade agreements. The new licensing system has left some traders confused. He said there is little clarity about how quotas are allocated and what happens when they run out. The government is now also demanding 'Certificate of Origin', a requirement introduced only two months ago. According to a spokesperson of India's Commerce Ministry, import of silver now comes under the 'restricted import' category. Import requests are being processed as per rules.

When the government increased the import duty

This licensing system has been implemented after the decision of Prime Minister Narendra Modi's government, in which the import duty on gold and silver was more than doubled. This was done because the cost of energy had increased due to the ongoing conflict in West Asia, which was affecting the rupee and foreign exchange reserves. This problem may increase further before the busiest shopping season (peak season) in India. Jewelers generally start replenishing their stocks from July itself for the festivals that fall in October-November and the wedding season that runs from November to March. Chainani of Augmont Enterprises said that we expect that as shopping increases during the wedding season, the situation may become more difficult.

Saurabh Sharma

Covering stock market, economy and commodities for 15 years. Before joining TV9, he was also associated with many big organizations like DNA, A-Shiyanet, Jansatta and Rajasthan Patrika.

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