New Delhi/Davos: With the clamour for a duty cut on gold imports growing and UPA chairperson Sonia Gandhi seeking action on such demands, the government on Thursday said there is no immediate plan to relax the curbs as they are working well.
Gandhi, without spelling out her own opinion, has asked the Commerce Ministry to look into demands made by gems and jewellery exporters for a cut in customs duty on gold and relaxation of a rule linking imports of the metal with exports.
"You are requested to kindly look into the matter (demands of the gems and jewellery industry) for appropriate action," said a letter written by the office of Gandhi to the Ministry of Commerce and Industry headed by Anand Sharma.
Finance Minister P. Chidambaram, who is in Davos, said restrictions on gold imports can be rolled back only after the government obtains a firm grip on the current account deficit (CAD).
"Until we have a firm grip on the CAD, I don't contemplate any rollback of any measure," he said, adding that the government will get a full idea of the CAD only when the interim Budget is presented in Parliament.
Parliament is scheduled to meet from February 5 to 21. Sharma, who too is in Davos, said the mechanism linking gold imports with exports has been working well.
"I've not seen that communication as yet as I am here at Davos. I can't comment on something that I have not seen, but what I know is that this 80:20 formula has been working well," he told PTI.
He, however, said the government was open to discussing all issues with the gems and jewellery federation.
The All India Gems and Jewellery Trade Federation wrote to Gandhi demanding reduction in customs duty on gold to 2 per cent from 10 per cent and relaxation of an 80:20 rule imposed by the RBI disallowing inward shipments of gold unless 20 per cent of the previous imports is exported.
The federation said the 80:20 rule has reduced imports and "broken the backbone" of the industry with short and erratic supply of gold.
"Smuggled gold has now become available freely, which is corrupting the industry. There is a major crisis and chaos in the industry today. Current policies and regulations are not at all conducive to ethical practices...which is plaguing the entire industry," it added.
Removal of restrictions on gold imports, the industry said, would provide relief to trade and industry, besides protecting the interests of millions of skilled artisans.
The government and the RBI had imposed restrictions on gold imports to contain the current account deficit, which soared to an all-time high of USD 88.2 billion, or 4.8 per cent of GDP, in 2012-13. The curbs, government sources said, have helped to lower the CAD.
The CAD in the first half (April-September) of this financial year narrowed to USD 26.9 billion (3.1 per cent of GDP) from USD 37.9 billion (4.5 per cent of GDP) in the first half of the previous fiscal. Gold imports have come down to 19.3 tonnes in November as against 162 tonnes in May.
