MMTC Venture finds refining at Swiss unit cheaper.

MMTCPAMP India, a precious metals processing joint venture between state-owned MMTCBSE 0.00 % and Swiss bullion major PAMP, has started diverting unrefined gold to PAMP's refinery in Switzerland because cheap gold imports from South Korea has made its refining activities unviable. 

The company has diverted four tonnes of dore gold since the last week of July to its Swiss refinery and may increase the volume if the government does not take step to put a check on imports from South Korea under the Free Trade Agreement (FTA), officials said. 

"We will review the situation next Monday and take a call whether to divert larger volumes to our Swiss refinery," said Rajesh Khosla, managing director at MMTC-PAMP. "It is not being possible for us to compete against discounted gold that is available in the market. Our margins are under pressure," The company, which operates the only London Bullion Market Association (LBMA)-accredited precious metals refinery in the country, refines 14 tonnes of dore gold every month. 

Khosla said the government should come up with some notification to protect the interest of the domestic refining industry. "The government can impose safe guard charges for gold that is entering the country under FTA (free trade agreement)," he said. 

There are about 30 precious metals refineries in the country.They all import gold dore for being refined into gold bullion.Refining margin of 0.65 per cent is derived from the customs duty differential between dore gold and pure gold -9.35 per cent import duty on the former and 10 per cent duty on the latter. 

The slim margin of 0.65 per cent enables the domestic refining in dustry to deal with the conventional market-related gold price movement. 

However, import of gold coins and medallion from South Korea has resulted in gold being available in the local market at a discount. 

"As a result, it is becoming increasingly difficult for the domestic refining industry to compete with discounted gold that is being imported into the country from South Korea at no duty under the Free Trade Agreement (FTA)," said Surendra Mehta, national secretary at India Bullion & Jewellers Association. 

He said gold dore imports by the refiners have come down drastically because of cheap imports of gold coins from South Korea."Bullion dealers and jewellers are getting gold at a cheaper price and therefore they are not keen to buy gold from refineries," Mehta said.