New Delhi, Jan. 23: Sonia Gandhi has written to the Union government asking it to look into a demand by jewellers to slash the 10 per cent import duty on gold.
The government has been considering the possibility of easing the restrictions on gold imports, imposed to curb Indians’ appetite for gold jewellery.
Senior finance ministry officials said the government could look at a “step-by-step reduction in gold duty”, which was raised from 4 per cent a year ago after a trade deficit of $17.19 billion in December 2012 and other factors helped drive the value of the rupee down.
However, finance minister P. Chidambaram sounded a caution at Davos today, saying: “Until we have a firm grip on the CAD (current account deficit), I don’t contemplate any rollback of any measure.”
The higher gold duty came after the country’s current account deficit — or the gap between India’s foreign currency income and spending — mounted to a record $88.2 billion, or 4.8 per cent of the GDP, in 2012-13.
Sonia’s letter to commerce minister Anand Sharma said: “You are requested to kindly look into the matter for appropriate action.”
PTI quoted Sharma, who too is in Davos, as saying: “I’ve not seen that communication as yet as I am here at Davos. I can’t comment on something that I have not seen.”
He, however, said the government was open to discussing all issues with the gems and jewellery federation.
Sonia’s letter to Sharma came after the influential jewellers’ body, the All India Gems and Jewellery Trade Federation, wrote to her seeking a cut in the gold duty to check the spate in gold smuggling.
Officials said a small cut in the import duty on gold was probable in the next budget.
Following the duty hike, gold and silver imports in December 2013 dipped to $1.77 billion from $5.6 billion in the same period last year — a fall of over 68 per cent. That helped narrow the trade deficit to $10.14 billion in December 2013 — the second lowest level during the ongoing fiscal.
However, reports suggest that while gold imports have fallen, gold smuggling has risen.
Revenue officials say the value of gold seized from smugglers between April and October last year was $33.6 million, almost double the $17.3 million worth of the metal seized in the 12-month period ending last March 31.
Some of this gold is being smuggled in through neighbouring countries. Pakistan earlier this week banned gold imports for 30 days, complaining it was becoming a conduit for gold smuggling into India.
“Credible reports have indicated that in the wake of steep increase in duty on import of gold in a neighbouring country, there has been a surge in its smuggling activity,” Pakistan’s finance ministry said in a statement on its website.
“Smuggled gold has now become available freely, which is corrupting the industry,” the gems and jewellery federation, which has about 40,000 members, had written to Sonia.
“There is a major crisis and chaos in the industry today. Current policies and regulations are not at all conducive to ethical practices.”