Curbs on gold imports may be relaxed after Congress President and UPA Chairperson Sonia Gandhi, who is also the Chairperson of the National Advisory Council (NAC), asked the Government “to look into the matter for appropriate action”.
Gandhi’s office has written to the Commerce and Industry Ministry on the issue, enclosing a petition sent to the UPA Chairperson by the All India Gems and Jewellery Trade Federation. Gold gained two per cent at $1,262 on the news. In an effort to contain the current account deficit (CAD), the Government and the Reserve Bank of India had imposed a number of restrictions on gold imports, including raising the import duty to 10 per cent.
Merchants were also asked to re-export 20 per cent of each gold consignment (the 80:20 rule) before ordering fresh shipments. This has made import of bullion difficult, resulting in lower imports, and consequently, a lower current account deficit.
With the CAD declining, the Government is already giving indications that some relief, in the form of a lower import duty and relaxation of conditions for the 80:20 scheme, can be given. A review was supposed to take place early this month, but didn’t. The process could now be expedited, said Government sources.
In its letter to Gandhi, the gems and jewellery trade strongly advocated four policy measures: lift the 80:20 rule, reduce import duty to 2 per cent, revoke restrictions on gold, and mandate banks to restrict imports in 2013-14 to 80 per cent of their imports in 2012.
The federation claimed that due to disruption in supply through the official channel and a surge in smuggling, the industry is in the midst of a major crisis.
Indeed, Government data has shown that while gold imports are down smuggling has gone up. During the April-October period, gold worth ₹208 crore was seized from smugglers, against ₹107 crore during the corresponding period in 2012-13 and ₹42.38 crore in 2011-12.
When all else fails This is not the first time the jewellers have knocked on the Congress President’s doors. In April 2012, they met Gandhi and appealed for relief from the hike in excise duty on unbranded gold jewellery as well as the Tax Collected at Source rule on purchase of jewellery, as proposed in that year’s Budget.