By Anurag Kotoky and Mayank Bhardwaj
NEW DELHI (Reuters) - India will start buying gold again after a two-month gap as the government and banks have agreed how new rules on imports should work, easing prices in the world's biggest bullion buyer and helping supplies just as seasonal demand kicks in.
But monthly shipments by the world's top importer are unlikely to be even a quarter of May's record 162 tonnes to start with and annual imports will be sharply down, helping to cut a bulging current account deficit and support the rupee.
India's gold shipments came to a virtual halt after the Reserve Bank of India (RBI) told importers on July 22 that a fifth of their purchases would have to be turned around for export and that 80 percent would be available for domestic use.
"The confusion was mainly about the 80:20 norm. Many people misread this. This means at least 20 percent of imported gold must be exported," a trade ministry source told reporters, clarifying the rule, that had been interpreted as limiting supplies for exports to just a fifth of total shipments.
"The issue stands resolved now and as a result imports will start immediately," said the source, who did not want to be named.
Banks and other importers had halted purchases as there was no clarity despite attempts by the RBI and customs authorities to ease confusion. The resulting impasse crimped supply and pushed up domestic prices.
While the government has taken urgent steps to curb imports, hiking duty three times since January 1 to a record 10 percent, it wants to boost exports, which had fallen 70 percent in July to $441 million, as the flip side of efforts to rein in a current account deficit which hit a record in 2012/13.
About a tonne of gold that was stuck at airports pending customs approval will be released immediately, said Pankaj Kumar Parekh, vice-chairman of the Gems and Jewellery Export Promotion Council (GJEPC), who was in the meeting.
Exports usually total only about 60-70 tonnes per year and compete for markets from the Middle East to the United States with jewellery from Thailand and Turkey.
"This will definitely boost morale of the (export) industry ahead of the peak (Christmas) season," said Praveen Gupta, general manager of bullion at Shree Ganesh Jewellery, which exports to Hong Kong, Dubai, Singapore and the United States.
60 TONNES A MONTH REASONABLE?
Domestic jewellers also breathed a sigh of relief as demand is expected to pick up in the next 10-15 days with the arrival of the wedding and festival season, traditional times to give gold. And this year's good monsoon will boost incomes of farmers, who often use gold as an investment.
"We've been struggling for stocks. Stocks are stuck in Kolkata and Mumbai. The move will definitely improve supplies in the market," said Harshad Ajmera, proprietor of Kolkata-based wholesaler JJ Gold House.
But imports will be checked by the link to exports and even with Friday's clarification, are likely to take a while to really get going, people in the industry said.
"I would hazard a guess that you might see 150 tonnes or something (shipped) in the fourth quarter ... a decent strong upturn from what we've seen, but lower than normal," said Daniel Smith, an analyst at Standard Chartered Bank in London.
"We think the government is prepared to accept a reasonable level of imports of around 60 tonnes a month," he added.
India imported 47.5 tonnes in July, worth $2.9 billion, but the figure slipped to only $0.65 billion in August. Volumes for August are not yet available. Last fiscal year, imports averaged 70 tonnes a month.
India's total gold imports could now be below 750 tonnes in the year to March 2014, Arvind Mayaram, economic affairs secretary at the finance ministry said on Wednesday, about 11 percent lower than a year ago.
(Additional reporting by Siddesh Mayenkar in Mumbai, Malini Menon in New Delhi and Jan Harvey in London, Writing by Jo Winterbottom; editing by Himani Sarkar and Keiron Henderson)