Gold import crosses 14 tons

Country´s gold import crossed over 14.03 tons, which is about two-fold higher than the annual total demand, in mere first seven-and-a-half months of 2009/10 - thanks to cross-border duty difference and rising smuggling to India.

Nepal Gold and Silver Dealers´ Association (Negosida), which argues that the country´s total gold demand increased substantially this year with more people taking gold as alternate investment avenue, too estimates that the monthly national demand of yellow metal remains just at around 450 kg.

But statistics shows that import in each of the month from mid-July 2009 to February end 2010 well exceeded this figure -- highest one being 2,875 kg for the month ending mid-January (sixth month of the fiscal year).


Even the lowest import quantity, recorded at 696.5 kg for the month of mid-February after the central bank intervened into the market, is well above the actual domestic demand, said a customs official. Import over the first 15 days of the eighth month too stands at 675 kg.

As a result, country´s gold import during the period swelled by more than 300 percent and touched Rs 37.39 billion. Nepal had imported yellow metal worth a total of Rs 8.93 billion in the first seven months of the last fiscal year. Even the total annual gold import had stood just at Rs 14.81 billion in 2008/09.

“The reason of this quantum jump is obvious: We continued to turn blind to duty-difference that persisted between Nepal and India and let gold find way to India in a big way,” said a central bank official.

Over the first seven-and-a-half months of 2009/10, duty in India was higher than in Nepal by Rs 190. And it was enough to ensure handsome return to the illicit traders.If what happened in the past was bad, then country is presently exposed to even worse situation. India has further increased its import duty, pushing duty difference between the two countries up to Rs 350.
“This will open a floodgate for smuggling to Nepal,” Tej Ratna Shakya, president of Negosida, has reacted as soon as the Indian decision came.

Finance Minister Surendra Pandey, left with no option, too has disclosed that he has initiated exercises to hike customs duty for gold and also few other products that have been fueling trade gap.

However, because his endeavor needs to be backed up by political parties in the government and opposition, concerned officials view he will probably need some time to garner the support. “We hope it will come sooner than later,” said the central bank official.

Source: Myrepublica Daily/Nepal