- Union Law Minister Ravi Shankar Prasad alleged the 80:20 (gold import) Scheme that was introduced by the UPA government in August 2013, was designed to help jewellers such as Nirav Modi and Mehul Choksi.
What was the 80:20 scheme?
- The scheme was introduced in August 2013 to curb the import of gold.
- During this period, the country’s macroeconomic indicators, especially the current account deficit (the excess of imports over exports), were weak.
- While 80% of gold imports under the scheme (India is one of the biggest importers of gold globally) could be sold in the country, at least 20% of imports had to be exported before importers could bring in new consignments.
- The permission to import the next lot was to be given upon the fulfillment of the export obligation.
- The policy aimed to discourage gold imports to rein in the widening current account deficit.
Why were the rules eased in May 2014?
- The 80:20 scheme was relaxed in May 2014 by the RBI at the behest of the Finance Ministry.
- Jewellers, bullion dealers, authorised dealer banks and trade bodies had approached the Ministry requesting a relaxation of the policy.
- The easing of rules allowed more agencies to import gold.
- Initially, only state-owned banks and firms were permitted to import gold.
- Later, six to seven private sector trading firms were also permitted to import gold under the scheme.
- These private firms accounted for 40% of the total gold imports in April-September that year.
When was the scheme scrapped?
- On November 28, 2014, the scheme was scrapped.
- It has been decided by the Government of India to withdraw the 20:80 scheme and restrictions placed on the import of gold.
- Over three years later, last week, a sub-committee of the PAC (Public Account committee) reportedly asked the Revenue Department to share details of the scheme and its alleged link with the Punjab National Bank fraud case.