India’s plan to recycle thousands of tons of gold left idle in temples and households looks too have fallen through on worries over high costs to process with only small returns, shattering the hopes of the government of India to cut metal imports.
A government official and two industry sources said that after 16 months, temples and households have turned over seven tons of gold out of the 24,000 tons held in private lands with most of the gold coming from temples.
President of the Indian Association of Hallmarking Centers, Harshad Ajmera said families that have around 80 percent of the idle gold have mostly snubbed the scheme with around four dozen government-approved centers that opened to test purity yet to process any of the household gold.
"You hardly earn anything but you have to do so many things to deposit gold under the scheme. Why should I take all this pain?" said Ganpat Shelke, who considered depositing 50 grams of gold.
The scheme was launched in 2015 by Prime Minister Narendra Modi with India looking for ways to reduce the spending of billions of dollars on a non-essential commodity that consisted for 27 percent of its trade deficit in the year to March 2016.
After Chin, India is the second-largest importer of gold buying about 800 tons per year for wedding gifts, religious donations and as an investment.
The scheme involves holders of the gold to deposit it with banks in return for interest and cash at redemption. In order to cut the need for imports, the government will melt the gold and auction or rent it to jewelers.
But the scheme logistics mean the owners of the gold must handle the cost of testing its purity and melting it down, while the interest rate on offer of just 2.5 percent compares with 7-8 percent that banks offer for cash deposit rates.
Shekhar Bhandari, executive vice-president of Kotak Mahindra Bank said "If a consumer wants to have 25 grams jewelry converted the cost of converting and purity testing takes 3-4 percent of total value away.”