In a fresh clampdown, India has officially banned the import of gold jewellery from Thailand. The government has announced that unless it is satisfied that gold jewellery imports from Thailand had received 20% value addition in that country, they would be banned.
The authorities suspect that Indian importers are misusing the duty free pact with Thailand to import bullion from the South East Asian nation.
The commerce ministry has recommended suspension of gold jewellery imports from Thailand in view of the increasing imports from the country. For some time now, the government has been looking to bring down imports of the precious metal into the country and has added several stages of import duties.
The authorities said they has tried to control gold imports which is adding to the import bill and are set to roll out further measures to curb the shipments of yellow metal into India, traders and analysts have warned.
Under a bilateral agreement, gold jewellery imports from Thailand attracted a concessional duty of 1%. Gold imports from other countries attract a 10% duty.
However, the concession is available only if the jewellery has value addition of at least 20% before it is brought into India. The government suspects the norm for value addition is not being adhered to.
A lot of gold jewellery is imported from Thailand due to the low customs duties. It has been allowed under the Early Harvest Scheme, that was signed in 2004 and covered 82 items. The scheme provides for a host of remedial measures, which include anti dumping duties, safeguard duties and even suspension of imports in extreme cases if there is a serious injury to domestic industry or in case of rampant misuse of the treaty terms.
Moreover, nefarious traders have also been bringing in gold jewellery from China and Malaysia, which incur 6% to 10% customs duty and then importing it through Thailand.
Ajay Sahai, director general of the Federation of Indian Export Organisations, has given a price comparison to understand the situation better. Gold prices in India and Thailand are around $550.99 (Rs 30,000) for 10 grams. If there was value addition of 20%, the price would rise to $661.23 (Rs 36,000). However, gold jewellery is being imported at $569.40 (Rs 31,000) for 10 grams.
The arbitrage increased further after the Indian government increased customs duty on standard gold bars and jewellery to 6% in December. This was aimed at reducing gold imports, but has got more traders using the Thailand route to bring in the precious metal.
Statistics show that during April-November 2012, imports of gold jewellery from Thailand stood at $92 million, against just $13 million in 2011-12. About $72 million of the $92 million was recorded in October-November, during the festival period which includes Diwali.
In 2011-12, gold and silver imports into India stood at $56.5 billion which widened India’s current account deficit to a record 4.2% of GDP.