Unveiling the new budget, Indian Finance Minister Pranab Mukherjee announced a rise in import duty on gold to Rs 480 (IRs 300) per 10 grams from Rs 320 (IRs 200). Duty in Nepal, on the other hand, stands at Rs 130 per 10 grams. [break]
Even at the duty difference of Rs 190 per 10 grams across the border, Nepal in recent past had witnessed a whopping rise in smuggling of the yellow metal to India. “With this gap widening to Rs 350 per 10 grams, we fear it will open the floodgates,” said a central bank source.
Although real consumption of gold in the country increased only marginally, gold imports had jumped to Rs 25.54 billion in the first five months of the fiscal year 2009/10 -- a huge rise over Rs 8.76 billion of the same period last year.
It had served as one of the factors behind the sharp depletion of foreign currency reserve and an unprecedented balance of payment deficit of over Rs 20 billion.
Even the dealers, who were denying that any gold smuggling took place, said that the rise in tariff by India will now spur smuggling from Nepal to India.
- India raises gold tariff to Rs 480 per 10 grams
- Tariff gap of Rs 350 huge to spur smuggling
- Dealers suggests govt to hike duty to Rs 400
“No one will be able to control it,” Tej Ratna Shakya, president of Nepal Gold and Silver Dealers´ Association (Negosida) told myrepublica.com, and strongly urged the government to hike the duty soon.
He noted that the difference will instantly push up gold imports burning up the country´s hard earned foreign currency, adding a new cycle of woes to an already tottering economy.
“The government must react immediately and increase duty in Nepal as well to Rs 400 per 10 grams,” he said. Given the transaction costs and other factors, he viewed tariff hike by anything below Rs 400 will not help.
Recently, Negosida had suggested to the government to hike gold imports duty to Rs 350 per 10 grams. The Ministry of Commerce and Supplies has already forwarded a proposal to this effect to the Ministry of Finance.
Apart from gold, India on Friday also imposed an excise levy of Rs 1.60 (IRs 1) per liter of petrol and diesel. The decision again is expected to make prices of two key petroleum products more expensive in India than in Nepal, thereby encouraging smuggling.
milan@myrepublica.com
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