Gold imports are likely to fall steeply next year to around 500 tonne due to rising prices following higher taxes and falling stocks that have put off retail demand, traders said.
"We are expecting gold imports to decline by 20-30 per cent to around 500 tonne in 2014, from around 650-700 tonne estimated this year," All India Gems and Jewellery Trade Federation (GJF) director Bachhraj Bamalwa told PTI.
One of the main reasons for this decline is the huge price differential between international and domestic market, which is about 22 per cent higher here, he said.
"While global bullion prices are trading way below at USD 1,250 an ounce, from their 2012 highs of USD 1,908 per ounce in August 22, 2011, back here it is still ruling nearly steady at Rs 31,000 per 10 grams. The differences are mainly due to the Customs duty, local taxes and premiums," he said.
This year, he said, gold imports are likely to be at around 650-700 tonne.
"There was absolutely no import from July end till September. It began from October and was robust in November, however, this month it is moderate. The bulk of imports took place in during April-May, when the demand was very high and prices were low," he explained.
The government has raised the import duty to 10 per cent and tied imports for domestic consumption to exports to curb Current Account Deficit (CAD) - the difference between outflows and inflows of foreign exchange.
The import for domestic consumption was tied to exports, like out of the imported gold, 80 per cent was given to domestic users of the designated kind and 20 per cent must go to exporter. This led to scarce supply of the precious metal and boosting premiums to USD 150 an ounce.
GJF chairman Haresh Soni said procedural hurdles in gold consignments are stuck at Custom bonded warehouses creating a disparity and giving a boost to the grey market.
Tying-up the exports, which are being affected due to global economic slowdown in the UK, US and the Middle East, has created hurdles for the domestic manufacturers and retailers, he said.
"The exports are not in our hands and are dependent on the economic conditions of the importing countries. Till exports improve the raw material will not be available for domestic market," Soni said.
If the government policy is not relaxed in the next 2-3 months and the current situation prevails, the jewellery industry will suffer