When the American novelist Erin Bowman said "gold makes monsters of men", she probably did not have India's gold traders in mind.
But the yellow metal from Indonesia has certainly made monsters out of a few Indian traders who have taken highly profitable advantage of a legal loophole available under the India-Asean Free Trade Agreement (FTA).
In the last two months, these traders have imported a whopping 600 kilogrammes of gold from Indonesia, to the consternation of bullion, gems and jewellery traders and the government. In the first two weeks of September alone, they imported 250kg of gold.
The India Bullion and Jewellers Association (IBJA) and the All India Gems and Jewellery Trade Federation (GJF) have asked the government to either exclude gold from the Indo-Asean FTA or impose a 15% duty on all imports of gold articles. The two groups pressed for a quick solution in talks recently with the director-general of foreign trade at the Union Ministry of Commerce.
Under the FTA, traders importing bullion from Indonesia can import articles of gold with 99% purity at 3% countervailing duty under regulations governing the Goods and Services Tax (GST) regime that came into effect from July 1 this year.
Traders importing gold from countries such as Switzerland and United States must pay 10% import duty apart from the 3% countervailing duty. This puts them at a distinct disadvantage in dealing with bullion and jewellery customers in their home market.
"We suggest excluding gold in any form from the Indo-Asean FTA (until import duties are at par) or as an alternative, imposing import duty on articles of gold at 15%", said Nitin Khandelwal, chairman of the GJF.
Mr Khandelwal told Asia Focus that because of the imports of cheap gold from Indonesia, there was a "major price difference in the market" as importers had been taking advantage of the FTA between India and Asean.
The imports have also put public-sector banks and refiners, who source their gold largely from countries other than Indonesia, at a disadvantage.
The Metals and Minerals Trading Corporation of India (MMTC), the largest bullion trader in Asia, mainly imports gold bars on consignment from authorised dealers that are members of the London Bullion Market Association (LBMA). Indonesia is not in that list. The MMTC also sells gold coins and articles through banks.
Mr Khandelwal said he was hopeful that the government of Prime Minister Narendra Modi would find a solution to cheap gold imports from Indonesia very soon.
Surendra Mehta, national secretary of the IBJA, declined to comment on the matter because it involved foreign relations. "We submitted what was required for the gold traders. We have given our suggestions to the government. Since it's a matter between two nations it would not be correct for me to comment," he said.
Mr Khandelwal is basing his optimism on the outcome of a similar situation involving South Korea, which was a major source of cheap gold imports for about two months before Indian traders started turning toward Indonesia.
The value of gold imports from South Korea jumped to US$339 million between July 1 and Aug 3 of this year from just $70.5 million in the corresponding period in 2016. A worried Modi government removed gold and silver from the list of tariff-free items from Korea and imposed a 12.5% excise duty.
In the case of South Korea, New Delhi was able to justify an excise tax because South Korea does not mine gold and was only exporting the metal to India after doing value addition through processing.
But Indonesia is a gold-mining nation and thus fulfills the local value-addition norm as required under the free trade agreement. This makes it more difficult for the Modi government to fashion an appropriate response in terms of duty or tax.
Besides having introduced two rates in the Indian gold market, the gold imports from Indonesia threaten to widen the trade deficit between the two countries. The deficit stood at $10.31 billion in the 2015-16 fiscal year and $9.94 billion in 2016-17.
In view of the large deficit, a committee of Indian lawmakers recently asked the government to "review the trade policy framework" with Indonesia. To cut down the deficit, India earlier this year doubled import duties on crude palm oil, Indonesia's main export, from 7.5%.
Indian Commerce Minister Suresh Prabhu met Enggartiasto Lukita, Indonesia's minister of trade, in New Delhi on Sept 25. A joint statement mentioned that palm oil was among the subjects the two ministers discussed. However, it was silent on gold imports.
During the meeting Mr Prabhu also demanded more market access in Indonesia for Indian pharmaceuticals, health and dairy products, bovine meat and automobile components. The two ministers discussed increasing investment and joint ventures as well. Indonesia has still not ratified the Indo-Asean FTAs on services and investment.
Besides crude oil and gold, India also imports tea, coffee and other products from Indonesia. India exports cotton, electronic hardware, pharmaceuticals, leather, and jute products.
Gold is India's second biggest import after crude oil. New Delhi spends about $300 billion on 900 to 1,000 tonnes of gold imports every year. Local gold output stands at less than four tonnes. Authorities have been trying to revive some derelict gold mines in Karnataka state but with little success so far.
Indonesia exports about 100 tonnes of gold a year to different countries, representing a share of about 3% of all gold produced worldwide.
India is the world's second largest importer of gold after China. Indian families are avid investors in gold coins and related articles, and demand for gold soars during the wedding season and around religious festivals.