E-Kantipur

KATHMANDU, JAN 24 - Hike in customs duty of gold looks inevitable as the government mulls stringent measures to curb skyrocketing gold import, which has exacerbated the current liquidity crunch. A top Finance Ministry official said on Saturday that hike in customs duty could be “round the corner” if current measures to arrest the surge in gold import fails.

Already, the central bank has in the past two weeks issued three directives to commercial banks to curb the import of the yellow metal. The Ministry of Finance and the central bank are of the view that soaring gold import is one of the major reasons for record deficit in Balance of Payment (BoP). In view of dire consequences on the national economy, all stakeholders have more or less agreed in the customs duty hike, officials say.

However, existing law bars the ministry from hiking customs duty once a fiscal year has started. It can only be done through a parliament intervention. Bankers say the central bank's verbal request on Thursday to them to stop import of gold for “the time being” is an interim measure until the government makes a decision. 

The first six months of the current fiscal year has seen a record surge in gold import. Nepal has imported 12.5 tonnes of gold worth Rs. 33 billion in that period, a 276.71 percent growth over the same period last year.

Bankers attribute the rise in the gold import to the duty difference in gold between Nepal and India. Before the Indian budget of 2009, customs duty on gold in Nepal and India was Rs. 130 per 10 grams and Rs. 160 per 10 grams, respectively.

In March, India hiked the customs duty on gold by 100 percent, making it Rs. 320 while that in Nepal remained the same. It's not rocket science to find out why the gold import has shot up and where does the gold imported by Nepalis end up: So every 10 gram of gold that travels to India from Nepal earns the importer Rs. 220.

“The huge difference in the customs duty between Nepal and India is the main reason for this import surge,” said Sashin Joshi, CEO of NIC Bank.

Reining in bullion import

Jan. 8 -  NRB instructs banks to issue LC only against 40 percent cash margin

Jan. 18 - Bars banks from issuing Standby LC and bank

guarantee

Jan. 20 - Asks banks to deposit 40 percent cash margin

Jan. 21 - Directs banks to stop gold import

 

Posted on: 2010-01-25 03:49

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