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India UAE CEPA drives silver imports to India

Lower landing costs and the expectation of a strong rally in silver prices had led to huge imports of the metal in the last 4-5 months. This had caused some supply overhang, resulting in lower price of silver in India compared to the international market. This has opened an arbitrage opportunity in silver between Indian and international prices, market players said.

The difference in returns in silver emerged as Indian importers are using the Comprehensive Economic Partnership Agreement route - a bilateral trade channel between India and the UAE that allows lower duties. Compared to the standard 15 per cent import duty on gold and silver, CEPA allows 6-8 per cent lower duty on silver, analysts said.

Taking advantage of the CEPA, "in the last four months, silver imports to India were in abundance... about 2,000 tones", said Navneet Damani, senior VP (commodity research), Motilal Oswal Financial Services. "The market was flooded with imported silver."

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