Govt raises import duty on gold jewellery to 15%

India’s jewellery industry numbers about 400,000 retail jewellers

Agencies/New Delhi

India doubled its import duty on gold jewellery to 15%, the finance ministry said yesterday, setting it higher than the duty on raw gold in a move to protect the domestic jewellery industry.

“To protect the interests of small artisans, the customs duty on articles of jewellery ... is being increased,” the ministry said.

The government has also curbed raw gold imports through measures including three duty hikes this year to a record 10%. The Reserve Bank of India has put tight restrictions on importers that have sharply curtailed supplies.

India imported gold jewellery worth $137.57mn between April and July - a fraction of overall bullion imports, which were valued at $2.9bn in July alone.

The world’s biggest buyer of bullion, India imported a record 162 tonnes in May, creating a headache for the government which is trying to rein in a wide current account deficit and support a weak rupee.

Gold is the biggest non-essential item in India’s import bill although jewellery is a tiny fraction of the purchases.

The hike in the duty on jewellery was demanded by the domestic industry on concerns over imports of cheaper jewellery from Thailand, Malaysia and elsewhere.

“This is a good move for the local industry and it will support the manufacturing sector,” said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation (AIGJTF).

India’s jewellery industry numbers about 400,000 retail jewellers and is largely made up of tiny market shops owned by the same families for generations.

Meanwhile, the gold industry is hoping for divine intervention - but of a different kind - to break out from the negative phase.

Industry stakeholders feel if India’s gold-rich temples part with at least half of their treasure, it will save the government from importing the yellow metal for at least four to five months.

“I feel if the temples sell part of their gold, the country will not need to import gold for five to six months. The consumption of gold in India will remain static, no matter how much the government asks citizens not to buy gold. The market is going through a slump,” Harshad Ajmera, AIGJTF director said.

A similar sentiment was echoed by Pankaj Parekh, vice chairman, Gems and Jewellery Export Promotion Council, who said a partial release of temple gold can not only save the country from foreign exchange outflows but can even help in export earnings.

“If the temples release some of their gold, the country need not import this for another four-five months. It will be a win-win situation for both the government and the temples. The government will save a lot of foreign exchange,” he added.

All this is predicated on building consensus between the temples on parting with some of their gold.

There were reports that the RBI had sent a circular to some of India’s prominent temples seeking details of their gold stocks. Three of the richest temples have, however, denied receiving such a circular.

“We have not received any request from the RBI as of now. The gold is with the treasury department and we cannot give any estimation. We get around Rs2 crore (Rs20mn) as hundis (offerings) everyday,” a spokesman of Tirupati Temple in Andhra Pradesh said.

Kerala’s Sree Padmanabha Swamy temple, which dates back almost 5,000 years, is also believed to have enormous amount of gold, precious stones, rare coins and idols.

The current price of gold is around Rs30,375 per 10g.