Jewellers oppose tighter gold import norms; moot self-restriction
21 November 2014
The All India Gems and Jewellery Trade Federation (GJF), the country's largest gems and jewellery association, has proposed that its members curb sales of gold coins and bars in an effort to prevent the government from imposing import restrictions on gold.
This follows an increase in inbound shipments of gold to the world's second-largest gold buyer after China; and the industry fears the government is likely to announce some new measures to rein in gold imports, which might include restrictions on a group of private trading firms.
Jewellers and the bullion trade alike are against any new restrictions on gold imports as they feel this would prove detrimental to the industry and further fuel smuggling of gold into India.
There are expectations that authorities may impose restrictions on gold import following data which showed that these had more than quadrupled in October 2014 to 106.3 tonnes from 26 tonnes in October 2013.
The (GJF), representing more than 6,00,000 jewellery and bullion traders, feels any further curbs could spell doom for the gems and jewellery sector.
"Since the base of gold imports in September-October 2013 was low, the increase may seem very high but this comparison cannot be used to impose further restrictions," said Harish Soni, chairman of GJF, adding that higher demand was a normal trend, "stimulated by advance buying prior to festival time and anticipation of additional curbs on gold imports as indicated by the government".
Prithviraj Kothari, executive director, India Bullion & Jewellers Association (IBJA), said, "There must be other options. Gold has become more of a currency than a commodity and increasing the duty will only encourage smuggling and new restrictions will further impact availability. Gold deposit schemes should be encouraged."
Vipul Shah, chairman, Gem & Jewellery Export Promotion Council (GJEPC), said his organisation was neutral "as long as exporters are not disturbed. The government is no doubt keen to curb domestic consumption".
GJF said importers had not yet distributed gold imported in September-October 2014 to jewellers as gold hoarders were "holding on to their stock in anticipation of higher profits resulting from further curbs and restrictions to be announced by the government".
While proposing to curb sale of gold coins and bars immediately by its members to restrict demand, GJF said these account for about 300 tonnes. GJF also proposed unlocking idle gold to the tune of 1,000-1,500 tonnes in three years through its proposed Rashtriya Swarn Nivesh, a gold deposit scheme.
Jewellery demand in India surged 60 per cent in the third quarter, but investment demand eased 10 per cent, according to the World Gold Council.
Struggling with a high trade deficit, India last year raised its gold import duty to a record 10 per cent and made it mandatory to export a fifth of all bullion imports.
The trade body has also urged the government to reduce the duty on gold to 2 per cent to make smuggling unprofitable.
The World Gold Council has estimated about 200 tonnes of gold will be smuggled into India in 2014, versus 150-200 tonnes last year.