NEW DELHI: The finance ministry is pitching for removal of gold jewellery from the list of items allowed to be imported from Thailand at concessional duty under the bilateral treaty it has with India. The provision has undermined the government’s attempt to make the yellow metal expensive.
Finance minister P Chidambaram recently hinted at initiating measures to make gold imports expensive after rising consumption of the yellow metal lifted India’s current account deficit to an all time high 5.4% of GDP in July-September quarter.
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North Block has urged the commerce and industry ministry to discuss the issue at the next review of the India-Thailand FTA, which is expected shortly. “We have taken up the issue…Gold jewellery should be removed from the list of trading items” said a customs official privy to the development.
The early harvest scheme under India-Thai FTA, which was implemented on September 1, 2004, allows for import of gold jewellery from Thailand at 1% customs duty.
This concessional duty has become a bonanza after India raised import duty on gold twice last year to a maximum of 10% to contain gold imports.
Indians are the world’s biggest buyers of gold, but the demand is met almost entirely from imports, forcing the country to spend billions of dollars of foreign exchange on acquiring this unproductive asset. In the first half of the current financial year, India has imported nearly $20 billion worth of gold, nearly half the current account deficit of $38.7 billion.
“Demand for gold must be moderated… We may be left with no choice but to make it a little more expensive to import gold. The matter is under government consideration,” Chidambaram had said last week after the current account deteriorated alarmingly.
Indications are that the finance ministry may raise the import duty on gold further from the current maximum of 10%, but it wants to plug the loopholes before doing so.
The directorate of revenue intelligence (DRI) had last month raided many jewellers across the country for allegedly importing jewellery from third countries via Thailand taking advantage of lower customs duty on gold ornaments under the agreement. DRI action came after it noticed a sudden surge in gold jewellery imports in its routine watch over gold smuggling .
