KATHMANDU, Nov 28: Gold traders have complained that they were unable to meet the demand of their customers following a rush of buyers in the local market after the price of gold dropped by Rs 18,500 per tola in the past two days, mainly due to the quota imposed by the government on gold imports.
After the government halved the customs duty on gold imports on Monday, the traders witnessed a surge in demand for the precious yellow metal. Aiming to check the growing smuggling of gold from India, the government reduced the customs duty to 10 percent from 20 percent.
Manik Ratna Shakya, past president of the Federation of Nepal Gold and Silver Dealers’ Associations (FENEGOSIDA), told Republica that the demand for gold surged by a notable amount in the past two days after the government reduced the import duty on gold. “However, we are unable to make adequate supplies mainly due to the government policy,” said Shakya.
After the gold imports surged massively draining out the foreign currencies from the country, Nepal Rastra Bank (NRB) introduced a work procedure in 2009 for proper management of gold imports. The quota system was launched in accordance with the work procedure allowing the banks to import 15 kg of gold a day, which is revised from time to time.
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According to the FENEGOSIDA, currently the central bank through Nepal Bankers’ Association has assigned 16 commercial banks to import 20 kg per day. The precious metal is then sold out to the businesspersons via associations related to gold traders including the FENEGOSIDA.
Shakya said at least 25 kg of gold is needed to meet the increased demand in the current situation after the government reduced the duty on gold imports.
The shortfall in gold supply in the domestic market has been attributed to the government-imposed quota on gold imports.
Gold traders blamed the banks' recent reluctance to import adequate quantities of gold amid the sharp decline in demand until two days ago when the price was skyrocketing amid speculation about insider information on the government reducing import duty.
Due to various reasons including the price hike, imports of gold had been in a declining trend in recent times. The records with the Department of Customs show that Nepal imported gold worth Rs 1.42 billion in the first four months of the current fiscal year. In the FY 2023/24, the imports figure stood at Rs 22.35 billion, down from Rs 35.61 billion in the previous year.
“The decades-old policy is not relevant at present as the country now has a cushion of foreign currency reserves to finance imports. Rather, the government should allow traders to directly purchase gold from banks in any quantity they wish to end the glitches seen in the bullion market,” Shakya added.
Traders have even suspected the possible manipulation by banks and a number of traders’ associations behind the shortage to take undue benefits from the market. “It has come to our notice that a few assigned banks and associations are deliberately making short supply, so that they could sell the raw gold at high prices in the market,” said a trader under condition of anonymity.
