Old fear of gold contraband back

NEW DELHI: Bullion dealers and those in the gem and jewelry sector fear an increase in gold smuggling due to the rise of basic customs duties on the yellow metal from 10% to 12.5%.

With gold prices expected to shoot up, the gems and jewellery industry also expects consumer demand for diamond-studded jewellery to dwindle. At present, the diamond-studded jewellery market, which includes gold , silver and platinum, is pegged at Rs 50,000 crore in India.

Haresh Acharya, director, Indian Bullion and Jewellers’ Association (IBJA) said, “Smuggling will increase because the official procurement price of gold will go up now. Consequently, the gems and jewellery sector will suffer because increased procurement of gold through unofficial channels will foment unhealthy competition in the market and affect genuine traders and jewellers.”

Echoing his views, Anantha Padmanabhan, chairman, All India Gems and Jewellery Domestic Council, told TOI: “The hike in customs duty will not only encourage gold smuggling, but also discourage the middle-class from purchasing gold jewellery.” On Friday, gold prices stood at Rs 35,155 per 10 gram in Mumbai.

The 2.5% increase is completely contrary to the pre-budget demand of gems and jewellery sector that had sought reduction in import duty on gold to 4% to curb eradicate the gray market . Vipul Shah, MD of a leading diamond company said, “The increase in gold duty will have a trickling impact on sale of diamond studded jewellery in domestic market. The industry is passing through a rough patch and the hike in customs duty will further undermine recovery prospects.”