Silver Import Drops 24% On Higher Prices.

Imports of silver into the country could be lower this financial year with figures from Gujarat, the silver hub of India, showing a 24% reduction in imports in the eleven months of FY11due to skyrocketing prices.

Silver imports from April 2010 to February 2011 dropped to 343 tonne from 451.5 tonne in the corresponding period of FY10 as prices surged beyond Rs 50,000 a kg over the past two months.

While the state imported the highest quantity of 161.77 tonne in January, imports plunged over 70% to 47 tonne last month and the figure up to March 18 was an abysmal 6 kg, data from Gujarat State Export Corporation (GSECL), show. "We have seen a drop in imports since January and expect the trend to continue this month too with prices having breached Rs 50,000," said an official from MMTC , one of the largest suppliers of gold and silver in the country. "Kandla port in Guajarat is a favourite destination for silver shipments into the country since transport by containers is the cheapest route. If figures from Gujarat show imports have dipped, it's possible overall imports could be lower this year," he added, requesting anonymity.

"There has been a significant decline in silver imports this year," said Samir Mankad, director of GSECL, which facilitates import of precious metals to Gujarat via its air cargo complex at Ahmedabad. During the same period in 2008-09, silver imports into the state were ruling at 1418.23 tonne. GSECL is a government-recognised exim house extending services to exporters, importers, trading agents or indenters.

The fall, according to market experts, comes as no surprise as silver has risen 24% from Rs 44,175 a kg (excluding 1% VAT) since the beginning of February to Rs 54,715 on March 22.

The price in the financial year to March 22 has doubled from the previous financial year as overseas funds pumped money available at close to 0% interest rates into commodities, particularly precious metals like gold and silver. Experts like Ketan Shroff, a leading bullion dealer with an office in Ahmedabad, explained that the spike in the international market led to a disparity between local and bank rates.

Silver for March delivery on local commodity bourse MCX traded at a discount of Rs 1,000 a kg to the bank rate towards expiry of the contract, resulting in people taking delivery on the bourse instead of opting to buy from banks whose rates were higher.

A disparity in bullion rates occurs when there is a sudden spike in international rates. This results in local market prices lagging the overseas rate. Over time, this disparity shrinks and local rates arrive at parity with international price. India is a major importer of both gold and silver.

Unlike gold, there is no organised compilation of silver imports and consumption trends in India, but imports were pegged by some industry sources at around 3,000 tonne in FY10 and 4,000 tonne in the previous fiscal.

Source : economictimes.indiatimes.com