Import duty hike kills gold lovers’ Dubai dreams.

KOLKATA: Indians who were planning to shop in Dubai's gold souk for jewellery or aspiring to wear Italian jewellery this festival season may have to look back home to find their match. With imported jewellery becoming costlier as against Indian jewellery, gold trade in the country is upbeat that the festival season will roll out some good business for them. Factors like a good harvest and a decline in prices due to the rupee getting stronger are expected to drive the demand beginning next month.

"We are expecting that demand might go up to 120 tonne in the next three months largely driven by the festival season demand. Gold rate has also climbed down below Rs 30,000 per 10 gram which will attract buyers. There is a pent-up demand in the market as there was hardly any buying between June and August," said Mr Haresh Soni, chairman, All India Gem and Jewellery Trade Federation.

While there is no dearth of demand in the market, the availability of gold still remains an issue for jewellers. Harmesh Arora, director, Bombay Bullion Association, said, "There are some issues with customs department that need to be sorted out before imports can happen. We are expecting that those issues will be settled this week following which imports are likely to start. If everything goes well, we are expecting imports to be around 75 tonne of gold between October and December."

Gold imports into India have virtually come to a halt since July 22 when the Reserve Bank of India (RBI) introduced the so-called 80/20 rule that says 20% of all imports had to be re-exported. A lack of operational guidance on how the rules work continues to deter importing agencies from bringing in supplies because they fear their shipments could get stuck at airports.

The rules say imports will now have to be brought into a customs-bonded warehouse before being sent to the buyers.

Both Arora and Soni feel that the confusion should come to an end as it is affecting the organized jewellery trade. Some gold consignments are lying with the customs authority which need to be cleared first, added Soni.

"Once that is done, imports will gradually gather momentum. This year, the festive demand will be met through a mix of imported gold and recycled gold. In August, we saw lot of scrap gold entering the market as gold prices touched Rs 33,000 per 10 gm," explained Soni.

Soni lauded the government's decision to increase the duty on imported jewellery from 10% to 15% to protect the domestic industry. At present, gold, the raw material for jewellery, attracts a 10% duty. The gold trade had raised its voice for increasing the duty on imported jewellery to stop the entry of finished products from places like Thailand, Malaysia, Italy and Dubai into India. "This will help us to get some NRI business back," he added.

Samir Sagar, director of Mumbai-based Manubhai Jewellers, said even though there is news of good harvest this year, he is keeping a neutral view on gold offtake this festive season.

"You never know what will happen to economy in the next two months. Therefore, I would keep a neutral view on gold demand," Sagar added.

Source : economictimes.indiatimes.com