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Govt raises Customs duty on gold by 2 percentage points

ETFs allowed to park gold with banks move aimed at curbing import of the metal

BS Reporter  |  New Delhi/ Mumbai 

The government on Monday increased the on and platinum by two percentage points to six per cent.

With this, the duty on has gone up five-fold since January last year, when it stood at one per cent.

The move is aimed at curtailing imports of the metals. has been one of the biggest contributors to the spiralling current account deficit, at 5.4 per cent of the gross domestic product in the July-September quarter.

The government also allowed exchange-traded funds (ETFs) to deposit part of the physical held by them with banks and proposed a relaxation in banks’ deposit schemes to encourage individual investors to put their idle in circulation.

India imported 969 tonnes of in 2011 (calendar year) and 604 tonnes in 2012 till September, according to the World Council.

Announcing the steps, Economic Affairs Secretary told reporters the steps would lead to moderation in imports, as the additional held by individuals and would come out in the market and the demand would be met from within the country. would get a marginal interest for depositing the with banks. The duties would be reviewed after some time if there was a moderation in imports, he added.(MANAGING CURRENT ACCOUNT DEFICIT)

Banks have been advised to notify the changes in deposit schemes in the next two-three weeks. RBI would modify its guidelines, while Sebi would issue a circular with the changes.

The moves are expected to free part of the Rs 11, 674-crore held in by mutual fund houses for productive use by the gems and jewellery trade.

deposit schemes are offered by six banks, including State Bank of India and Canara Bank. It is on-lent by banks to gems and jewellery traders. At the end of the deposit period, the depositor is entitled to physical or its equivalent in cash at market prices.

Bankers, however, say the schemes have not gained much traction as storage of is a hurdle. SBI officials say the bank has not yet on-lent the entire deposited with it.

To make deposit schemes attractive, the government proposes to reduce the minimum quantity and the tenure (to six months from three years at present).

On fears the import duty rise would stoke smuggling, Revenue Secretary said the government had options to deal with that.

After on Monday’s duty hike, has become Rs 350 per 10 g costlier. In Mumbai’s Zaveri Bazaar, rose after the announcement to Rs 30,415 per 10 g. Traders delayed invoicing of orders to make additional income. The metal rose Rs 315 in New Delhi to Rs 31,250 per 10 g.

futures spread shrinks
The spread (the difference between the near-month and far-month futures contracts on MCX) fell from Rs 730 to Rs 550, as prices in the current contract rose after the duty hike announcement, while profit booking in the April contract led to some moderation in prices.

First Published: Tue, January 22 2013. 00:59 IST