India Gold Curbs Tighten Even as Minister Says "Need to Ease"

Customs officials seizing wholesale gold stocks in face of smuggling surge...

 

INDIA'S GOLD import curbs must be eased to meet demand from the jewelry industry, the Congress government's commerce minister said Tuesday.

 

Separate reports, however, say that Customs officials are tightening supply by seizing wholesalers' stockpiles of gold as part of an attempt to clamp down on the very same smuggling the minister fears.

 

"We have to ensure adequate availability of gold for the gems and jewelry industry," Anand Sharma told reporters.

 

"Is a very important sector for our exports. We have to have a balance. Over-regulation leads to another problem...of smuggling."

 

However, Surendra Mehta, general secretary of the India Bullion & Jewellers Association, says that government agents "are raiding and seizing gold at various places" amid a drive to reconcile the number of gold bars held by wholesale stockists against what little imported gold has been allowed under the strict licensing regime.

 

Together with other organizations such as the Bombay Bullion Association, the 1,200 dealers and shops Mehta represents plan to hold a strike next Monday, March 10, demanding an end to these spot checks and seizures, as well as an easing of import rules.

 

Formerly the world's No.1 gold-consumer nation, India has no domestic mine output. Its yawning trade deficit led the government in July 2013 to ban gold imports in all but name, imposing an 80/20 rule under which 20% of new shipments must be re-exported before the 80% can be released from sea- or airport storage.

 

Smuggling has leapt, adding perhaps 20% to the government's official Current Account Deficit of $45 billion in the last 12 months. 

 

Gold imports into the wealthy north-west Indian state of Gujarat – currently governed by front-runner for prime minister at May's elections, Hindu nationalist Narendra Modi – have fallen to their lowest level since the global financial crisis of early 2009 sparked India's first outflow of metal since the Great Depression, data showed this week.

 

Gujarat State Export Cargo Ltd says that between April 2013 and Feb. 2014, only 87 tonnes of gold bullion entered through Ahmedabad, a major importing airport, down 40% from the same period last year.

 

Nationwide however, official data showing $1.4bn of gold imports in January 2014 equate to some 35 tonnes of bullion, analysts at Australia's Macquarie Bank note – "broadly in line with trade estimates...and the highest figure since July," when the 80/20 rule was imposed.

 

The ruling Congress Party looks set to lose power to Hindu nationalist Modi's BJP at May's elections. Modi backed India's gold industry last September, since when government ministers have repeatedly hinted at a review or impending easing of import rules and the 10% duty on gold bullion.