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Biren Vakil
Ahmedabad: Import and trading of gold through the official channels has almost come to a standstill, if bullion traders in Ahmedabad and Mumbai are to be believed. A section of these traders say there is likelihood of some changes in the gold import policy in the ensuing 1999-2000 budget to be announced later this month.
Last month, the government announced a 60-per cent hike in the import duty to Rs 400 per 10 gramms. This has lured those engaged in the illegal channels to become active again.
The canalizing agencies, including the RBI designated banks and few public sector undertakings, allowed to import gold, have also adopted the cautious approach anticipating possibility of change in the import duty structure. As a result banks prefer to keep their inventory lower than earlier. "A number of traders, including large importers, are pressing the government to withdraw the duty hike," said a leading bullion trader in Ahmadabad requesting annonymity. "Higher duty encourages gold smuggling as a result ofwhich the government loses revenue." It is because of this, that traders expect government to make make some changes, if not completely withdraw the recent import duty hike.
What is more, the recent hike in import duty has made gold import through the NRI route lucrative once again. The NRI route, though official, is just short of clendestine operation using seasoned carriers to bring gold in the country. Currently, the landed price of one imported TT bar is around Rs 46,000. If imported through official the NRI route it is Rs 51,000, thereby leaving a hefty margin of Rs 5,000 per TT bar. In the NRI route, the carriers who assist import of the gold without paying duty, can earn hefty margins after passing on some profits to ``clear'' his consignments.
For example if a carrier brings 1,000 TT bar, earn Rs 3,000 per biscuit, or Rs 3 lakh per single trip. This is a profitable proposition, albeit risky. No bullion traders would go on record as regards the quantum of change in the official bullion trade. Also,the import of gold through the illegal channels, which surely has gone up, is not easily revealed. However, traders say, various bullion trade bodies have demanded that hike in the import duty should be withdrawn.
A section of bullion traders even feel that special import license (SIL) scheme may be reintroduced for the import of precious metals. This however, will force a section of genuine bullion traders to refrain from the business as the SIL attracts premium of over 20 per cent. The falling global prices and reduced off take of gold have already hampered the gold trade forcing some importers to diversify in other areas, leaving others to adopt speculative activity known as Comex trade. Currently, traders are waiting for the budget. Till than they will refrain from the business, feel an analyst.
Unconfirmed reports say there is also activity noticed in illegal imports via the sea route. Some parties have started trading in the smuggled gold, pushing down the gold prices in Mumbai, which otherwiserules higher than other centers due to tax deferential. At Ahmedabad in Gujarat, which normally sells around 1,000 TT bars to Mumbai, is said to be now selling around 500 TT bars. Gold trading volume has dropped almost fifty percent.
Meanwhile, traders became cautious in the dealing of gold. As illegal route has become active, fears of raid and investigation by custom officials has created feeling of harassment among traders. Recently, there were some incidents forcing small time traders to remain cautious.
Lastly, some of the banks engaged in gold imports did have problems with their clients. These problems had risen on account of the the duty hike announced last month and are yet to be resolved.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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