Even at the earlier duty difference, Nepal witnessed a huge surge in the imports of gold, which ultimately made its way to the Indian market primarily through illegal channels. Gold imports to Nepal surged by a whooping 300 percent to Rs 25.54 billion in the first five months of the current fiscal year compared to the same period last year. Essentially, what is happening is that Nepal is spending its hard-earned foreign currency to purchase gold for the Indian consumers, which makes it to their hands through our open and porous borders. This is also evident from the fact that real consumption of gold in local market has only increased marginally.
Such a high import of gold is also one of the reasons for Nepal’s current trade deficit as well as the historic negative Balance of Payment (BoP), which touched Rs 20 billion in the first quarter of the current fiscal year. Earlier, despite our trade deficit, we managed to keep the BoP situation in our favor because of the healthy flow of remittance, which has also unfortunately registered a slow growth due to the global financial crisis.
The step taken by Nepal Rastra Bank, the central bank of the country, to halt issuance of LC for gold imports and allow imports on condition of 100 percent cash guarantee has curbed the import of gold to some extent but the difference in the import duty margin between the two countries following Friday’s announcement by India is too tempting and is certain to once again make businessmen go all guns blazing to import the yellow metal. Hence, we urge the government to immediately raise the gold import duty to make it at par or at least close to India’s revised tariff.
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