In a move that could see India emerge as a price setter in bullion, the Bombay Stock Exchange (BSE) has introduced and adopted a first-of-its-kind India standard gold and silver good delivery mechanism for futures and options contracts currently being traded on its platform.

All exchanges offering futures and options trading in bullion are currently offering London Bullion Markets Association (LBMA)-approved gold and silver for delivery on their platforms. Only one Indian refinery is qualified to supplying LBMA-quality gold. The rest of the gold delivered on other exchanges in India is imported.

So, despite being the largest consumer, India is essentially a price taker. The country's annual gold and silver consumption stands at 800-1,000 tonnes and 6,500-7,000 tonnes, respectively.

But once the India standard delivery of gold and silver is accepted by market participant, India would turn out to be a price setter. This will qualify gold refined by Indian bullion refineries.

"With this step, BSE wishes to highlight its commitment and priority towards development of the Indian bullion market. By conforming to its own good delivery standard, India could emerge as the as the price-setter instead of a price-taker in bullion trade," said Sameer Patil, Chief Business Officer, BSE.

A number of other organisations had earlier tried to launch India standard good delivery gold and silver. But, traders felt there was a trust deficit in the system. To bridge the gap, BSE has obtained an undertaking from a number or Indian refineries that process scrap jewellery originating from domestic sources or dore (unrefined gold) imported from overseas.

"We are confident that by adopting India good delivery standard, we will ensure trust and reassure purchasers of the purity, form and provenance of precious metals. We can start delivery of India good standard gold and silver even from the current contract expiry also with no premium or discount to the LBMA approved bullion," said Patil.

Meanwhile, to facilitate India standard delivery, the Bureau of Indian standard (BIS) had in January this year notified standards setting the standard of purity of gold and silver.

By promoting and adopting Indian standards as defined by Bureau of Indian Standards (BIS), BSE aims to create linkages between bullion financial and physical markets, with an aim to reduce dependency on imports and lower disparity in quality amongst the exchange traded markets, physical spot markets and the consumer markets.

Taking yet another lead, the BSE is all set to launch almond futures on its platform later this month.