Tuesday, January 28, 2014

3,000kg of gold being smuggled in a month, admits Chidambaram
New Delhi, Jan 28, 2014: Finance minister P Chidambaram on Monday acknowledged a spurt in gold smuggling in the wake of higher duties and other curbs on the import of the yellow metal into the country. While estimating illegal shipments of up to 3,000kg in certain months — a record by all accounts — the minister justified the restrictions, citing high current account deficit (CAD) but indicated that some of the tightening may be eased in the next few months.

The government had increased customs duty on gold to 10% and later RBI imposed import restriction by linking it to exports in an attempt to lower the ballooning CAD which was $88 billion last fiscal. This year, the government hopes to contain CAD at around $50 billion by bringing down gold imports.

The finance minister, who was speaking at the international customs day function here, said a review on the decision to lower duties or remove other restrictions was possible only after March even as he said monthly smuggling of gold was 1-3 tonnes after imposition of the restrictions.

"I am confident that by the end of this year we will be able to revisit some of the restrictions on gold import but we will do so only when we are absolutely sure that we have a firm grip on the CAD," he said. Gold imports, which touched a high of 162 tonnes in May, fell to 19.3 tonnes in November in the wake of a series of curbs by both the government and the RBI.

"I know gold smuggling has increased ... But the restrictions on gold import were absolutely necessary because it is these restrictions which have brought down gold import which in April and May had crossed 300 tonnes," Chidambaram said.

"If we had not imposed restrictions, there was no way we could have managed balance of payments or the current account deficit," he said.

Chidambaram said after implementation of goods and services tax, the relative contribution of customs duty to revenue would decline, but it would continue to perform a critical function as sentinels of our borders and facilitators of legitimate trade.

Speaking to reporters outside North Block later, economic affairs secretary Arvind Mayaram said the CAD currently was below $50 billion and expressed confidence that deficit would be within the budget estimates.