Author: Paul Ploumis
12 Feb 2015 Last updated at 07:33:37 GMT
MUMBAI (Scrap Monster): Gold had become the most smuggled item in India during 2014. According to estimates, nearly 175 tonnes of gold were smuggled into the country during the year. However, with the government lifting certain curbs on gold imports during November last year, the supplies from official channels have increased significantly. Consequently, illegal gold trade has declined sharply.
The government had imposed severe restrictions on gold imports starting 2013 onwards. The tax levied on gold imports was raised multi-fold from 2% to as high as 10%, in an attempt to reverse the ever-widening trade deficit. The scarcity of gold availability through official channel drove premiums higher and led to rampant gold smuggling acts. Gold smuggling in India surged significantly higher during 2014. The seizure of smuggled gold increased nine-fold when compared with the previous year.
However, late last year, the government announced several relaxations on gold imports, by allowing more agencies to import gold. Additionally, the controversial 80:20 rule that required importers to sell 20% of their purchases to jewellers for re-export. As a result, the premiums paid by jewelers for possession of gold from registered banks and agencies tumbled to $1 from the peak of $160 per Oz during 2014. In black market, the gold premiums are currently ruling at discounts of nearly $6 per ounce, according to sources.
Currently, gold supplies from official channel are easily available. As a result, gold has lost its allure among smugglers. The quantity of seized gold at the Mumbai International Airport saw sharp plunge from August ’14 peak of 130 kilograms to just over 40 kilograms during January this year. The illegal trade of gold is likely to drop further if the government announces cut in gold import tax during the fiscal budget due to be presented on Feb 28th.