| Date: |
06-01-2015 |
| Subject: |
Government working on plan to import gold without hurting trade balance |
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KOLKATA: The Centre is planning to formulate a longterm strategy for import of gold to meet the requirement of jewellery exporters while keeping the current account and trade deficits in check. In a surprise move at the end of November, the government had eased import curbs on the precious metal.
Union commerce secretary Rajeev Kher has called a meeting on January 7 to discuss the issue with representatives of the finance ministry, Gem & Jewellery Export Promotion Council (GJEPC) and the Reserve Bank of India.
"The government is trying to find a way out so that exporters can get gold smoothly and also the trade deficit can be kept under control. This is a step towards this. The government is also working on a `Make in India' plan, which may also come up for discussion," said a senior industry executive, who did not wish to be identified.
In November, gold imports had surged to 151.58 tonnes, valued at $5.61 billion, pushing the country's trade deficit to an 18-month high. The deficit swelled to $16.86 billion, compared with $9.57 billion a year earlier and $13.35 billion in October.
According to a section of traders, the government might give an indication of controlling random increment in domestic supply while ensuring steady flow of gold to exporters at this meeting. "Following the scrapping of the 80:20 rule that tied import of gold to exports, the supply side bottlenecks have disappeared.If traders start importing gold in huge amounts now, it will again have an impact on trade deficit. Therefore, we are expecting some sort of quota system on gold imports may come in," said a leading exporter, requesting anonymity .
Exporters may ask for a reduction in import duty on gold, which is 10% at present. The increase in import duty on gold and silver has resulted in increase of transaction cost due to increase in the quantum of bank guarantee that exporters need to get the supply of gold.
A massive chunk of capital of exporters is getting blocked as the money required for obtaining bank guarantee has shot up by around 10 times in the past two years due to the increase in import duty on gold from Rs 250 per 10 gm of gold to 10% on price of gold. "We have urged the government to allow exporters to produce legal undertaking instead of bank guarantee to customs for getting duty-free gold and silver for fabrication and exports," said GJEPC chairman Vipul Shah. He added that "the dut drawback system needs to be rationalised and made tangible" to decrease the dependence on imports of gold and silver and to encourage exporters to use gold and silver that is available in the country. Duty drawback is the reimbursement of customs duty paid by jewellers. Exporters complain that the duty drawback rates are way below the actual import duty on gold.
Source : economictimes.indiatimes.com
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