Import duty on raw gold more than doubled

To curb demand for bullion imports and rein in a record current account deficit (CAD), the government today more-than-doubled the import duty on gold dore bars and ores. The move comes a day after the government had increased import duty on gold from four per cent to six per cent.

Import duty on gold dore bars was raised from two per cent to five per cent. Annual imports of dore, an alloy of gold and silver used by refineries to produce pure gold, stand at about 100 tonnes. Gold imports stand at about 800 tonnes a year.

“It was a duty arbitrage they have plugged,” said Shekhar Bhandari, executive vice-president of treasury at Kotak Mahindra Bank. “Otherwise, people wouldn’t import through normal channels, but import dore bars,” he added.

However, Harmesh Arora, director, Bombay Bullion Association, said, “There won’t be much impact. Dore imports would increase day by day. The difference of one per cent would attract refiners.” He added refiners had been trying to tap small miners in Ghana, Kenya and other African countries for dore bars.

Gold mines often process their gold-bearing ore on site and send dore bars to gold refineries to be processed into tradable bars (of 99.5 per cent gold content or more). “If there are 700 tonnes of imports for the Indian market, this can be totally converted into a dore market,” Arora said.

Rising gold imports have been a concern for the government, which is battling a record high CAD. This financial year, it is trying to curb gold imports to about $38 billion, against $58 billion in 2011-12.

Today, standard gold rose Rs 375 to close at Rs 30,790 per 10 gm in Mumbai’s Zaveri Bazaar, compared with Rs 30,415 per 10 gm yesterday.