Gold smuggling zooms As govt tries hard to choke the metal import, entry through unofficial channels doubled to 60 tonnes in first 5 months of this financial year The government may be shouting from rooftops about the need to curb gold consumption, but Indians’ insatiable appetite for the yellow metal has opened up the most obvious route. Gold smuggling has doubled in the April-August period, courtesy the increase in the gold import duty and other restrictions. Consensus estimates by jewellery industry players and veteran bullion analysts show since April this year, nearly 60 tonnes of gold has entered the Indian market through smuggling compared to 30-32 tonnes in the corresponding period of the previous year. India has raised the import duty twice during April to August-- first in June when the duty was increased from 6 to 8% and then in August to 10%. This has increased the margins for bringing gold into India through unofficial channels. At the same time, India tightened the gold import norms. In June, the consignment route for gold import was banned which made official imports costlier. Then in end-July, the Reserve Bank of India (RBI) opened the consignment route but linked imports to exports. However due to several confusions, official imports are virtually on halt giving enough room to smugglers to have a field day. Interestingly in July, a huge quantity was smuggled into India from Pakistan – a country where exporters have been allowed to import gold by paying zero duty subject to re-exporting it with 4% value addition. After the country saw huge imports in June -July , the Economic Coordination Committee of the Cabinet in Pakistan banned imports for a month in August. From September, however the ban has been withdrawn, though the import norms under the duty-free scheme and the value additions norms for exports have been tightened. While that reduced smuggling from Pakistan, other routes, including Bangladesh and other places have opened up, said a big jeweller. He also said that the road route has been the most preferred one for bringing gold unofficially into the country. Smuggled gold has been selling at Rs 400 (per 10 gram) discount to official prices over the last few weeks which is putting pressure on prices. However, since prices have spurted in the domestic market due to the sharp fall in rupee value, a huge flow of old gold was coming from investors who brought it at lower levels and those who wanted to sell when prices were higher last year end but could not sell. “In the past few days, investors have brought in huge stock to take advantage of high prices which provided some relief to jewellers who were otherwise starved of gold as imports were virtually on halt in the last one month due to policy confusions,” said Suvankar Sen, ED, Senco Gold Jewellers. Though the huge inflows have resulted in gold quoting at 3% discount to market price in the Mumbai market making smuggling unattractive, traders say once the rupee stabilises, smuggling could resume again. In the last one week, the sharp fall in rupee has resulted in a sharp spike in prices in the futures exchanges where prices are determined based on the landed cost of gold. Umesh Paresh, MD, Shree Ganesh Jewellery House, said that, “even discounts in recycled gold which in market parlance is known as tejabi gold, has widened to 1.5% of pure gold prices.” This was also the reason why the spot market is trading at huge discounts. C>P
Posted on: Mon, 02 Sep 2013 00:38:38 +0000
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