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MUMBAI - India's annual gold production could surge to 20 tonnes from a mere 1.6 tonnes if the government removes bureaucratic hurdles and encourages investment in the sector, the World Gold Council (WGC) said in a report published on Thursday.

The South Asian country is the world's second-biggest consumer of the metal and fulfils most of its demand through imports. Higher local output could help New Delhi in capping imports.

India splurged a record $55.7 billion on gold imports in 2021, buying 1,050 tonnes - the most in a decade, and far more than the 430 tonnes imported in 2020.

"It makes sense for India to develop mining capacity. But change is needed for this to happen, legacy hurdles must be reduced considerably, and investments encouraged," said Somasundaram PR, regional chief executive officer of WGC's Indian operations.

In India, securing mining licence is a lengthy process with approvals needed from multiple agencies, which dissuades investment, particularly from multi-national companies, the council said.

Most gold mining areas are in remote locations with poor road and rail linkage, which makes moving materials to and from sites difficult and expensive, it said in the report.

Currently, Hutti Gold Mines in the southern state of Karnataka employs more than 4,000 workers and contractors, and accounts for the bulk of production in India.

Gold mining could provide employment to another 3,000-4,000 people, but it needs to attract investment of more than $1 billion to convert resources into reserves and ultimately construct mines, the WGC said.