Even as UPA chairperson Sonia Gandhi sought action on demands of duty cut on gold imports, the government today said the curbs on the yellow metal will stay till it has a firm grip on the current account deficit.
In a letter written to the commerce ministry, Gandhi has asked it to look into demands made by gems and jewellery exporters for a cut in customs duty on gold and relaxation the 80:20 rule of the Reserve Bank which links imports of the metal with exports. “You are requested to kindly look into the matter for appropriate action,” the letter said.
However, finance minister P Chidambaram, who is in Davos to attend the World Economic Forum annual meet, said that restrictions on gold imports can be rolled back only after the government obtains “a firm grip on the current account deficit (CAD)”. He added that the government will get a full idea of the CAD only when the interim Budget is presented in Parliament, which is scheduled to meet from February 5 to 21.
When asked, commerce minister Anand Sharma, who too is in Davos, said that though he hasn’t seen the letter yet, “this 80:20 formula has been working well”.
Earlier, the All India Gems and Jewellery Trade Federation (AIGJF) wrote to Gandhi, Chidambaram, Sharma and Prime Minister Manmohan Singh, demanding reduction in customs duty on gold to 2 per cent from 10 per cent and relaxation of the 80:20 rule imposed by the RBI. The rule bars the import of the metal unless 20 per cent of the previous imports is exported.
Harish Soni, chairman, AIGJF, told The Indian Express that the curbs have led to an increase in smuggling and reduction in the availability of official gold to jewellers.
“The import of jewellery has increased and the gap between finished goods and raw material has narrowed. Due to lack of raw material the local premium has gone up, and customers are being forced to pay unnecessarily high price,” he said. The Centre and RBI had imposed restrictions to rein in the CAD, which soared to an all-time high of $88.2 billion, or 4.8 per cent of GDP, in 2012-13. The curbs helped in lowering the CAD, which narrowed to $26.9 billion in the first half of FY14 compared to $37.9 billion during the same period a year ago.