India's Gold Refineries Have Capacity but Not Enough Gold
SRF Capital Studio Research DeskFunding Intelligence, SRF Capital StudioIndia built about 1,800 tonnes of formal gold refining capacity and then struggled to fill it. GIFT City's bullion exchange was meant to help, but its gold volumes stalled in FY26. What that means for refiners, jewellers and investors.
Summary
- Formal gold refining capacity in India grew from about 300 tonnes in 2013 to roughly 1,800 tonnes by 2021, across 33 refineries, according to the World Gold Council.
- Imported doré and domestic scrap together fed less than a fifth of that capacity, so the constraint is supply of gold to refine, not plant.
- The India International Bullion Exchange at GIFT City grew fast to FY25 and then stalled in FY26 over an import quota dispute; the re-export hub story is an ambition, not yet a fact.
How India built too much refining
A decade ago India refined very little of its own gold. The WGC counts fewer than five formal refineries in 2013. By 2021 there were 33, and organised capacity had risen from about 300 tonnes a year to an estimated 1,800. Another 300 to 500 tonnes sits in the informal sector.
Policy did this. Import duty on doré, the semi-refined bars that come from mines, was set slightly below the duty on finished bullion, a gap the WGC puts at around 0.65%. That small margin was enough to make refining in India worthwhile. Doré imports rose from about 50 tonnes in 2013 to a peak of 276 tonnes in 2018 and were around 220 tonnes in 2021.
The feedstock gap
Add doré to domestic scrap and the total still falls well short of capacity. On 2021 figures, the two together fed less than a fifth of what the formal refineries could process. Recycled gold was 114 tonnes in 2024, and most scrap still passes through unorganised hands before it reaches a refiner, if it does at all.
Most refineries are small, too: the WGC notes the majority have capacity below 50 tonnes a year. An industry of many under-used plants has high fixed cost per gram, and it competes on price for the same limited scrap.
India's refining problem was never capacity; it is feedstock.
What GIFT City's bullion exchange does, and does not do
The India International Bullion Exchange opened at GIFT City on 29 July 2022, regulated by the IFSCA. It gives qualified buyers a transparent, exchange-traded way to import gold, with the metal held in vaults in the IFSC until it is brought into India on payment of duty.
It grew quickly. Gold contracts went from 411 kg in FY23 to about 93 tonnes in FY25, and in November 2025 the exchange was aiming for more than $12 billion of foreign exchange flow in FY26. Access was widened too: in October 2025 the IFSCA cut the net worth needed to trade as a Qualified Jeweller from ₹25 crore to ₹15 crore.
Then it stalled. Much of the FY25 volume came from importers using the concessional duty quota under the India-UAE trade agreement. When the DGFT moved that quota to an auction, the Rajasthan High Court stayed the process, and IIBX gold volumes for FY26 were reported at about 600 kg by mid-March 2026.
IIBX is often described as a re-export engine feeding foreign doré to Indian refineries. We found no evidence that this pipeline operates at scale. Today IIBX is an import channel, and a useful one; a hub for refining and re-exporting gold is a policy goal still to be built.
What this means for the gold chain
- Refiners need secure feed more than new capacity. Contracts with organised buyback chains and mines, and India Good Delivery Standard bars that exchanges accept, count for more than extra furnaces.
- Jewellers of qualifying size should keep IIBX access ready, because the price and purity transparency is real once the quota question is settled. Smaller firms will reach it through trading members.
- Buyback businesses gain bargaining power: a refinery with spare capacity will pay for steady, documented scrap. That is the opening we describe in our MSME guide to the gold trade.
- Tax is fact-specific. The GST margin scheme for second-hand goods can apply to some resales of used gold, but not once it is melted or reworked. Take advice before building a price on it.
What an investor should test
Refining looks like a scale business, but in India it is a supply business. Before backing a refiner, ask for tonnage by source (doré, domestic scrap, other) for three years, by month, and the share of feed under contract. A plant that runs at a fifth of capacity is priced very differently from one that runs at two-thirds.
Then stress the policy variables. The duty went from 6% to 15% in May 2026 and a cut is under discussion, as we explain in why Modi asked Indians to stop buying gold. The doré-to-bar duty gap can change in any budget. Any model that depends on one setting should be tested against the others during due diligence.
For the upstream side of domestic supply, including gold from e-waste, see urban mining in India, and for the sector as a whole, gems and jewellery.
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SRF Capital Studio Research Desk
Funding Intelligence, SRF Capital Studio
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