India slashes import tax on gold, silver to tackle smuggling (updated)

Tribhovandas Bhimji Zaveri

23/07/2024 08:21

(Adds trade official, premium update, share price, detail, from
paragraph 3)
    By Rajendra Jadhav
       MUMBAI, July 23 (Reuters) - India slashed import duties
on gold and silver on Tuesday in a move industry officials said
could lift retail demand and help cut smuggling in the world's
second-biggest bullion consumer.
    Higher demand for gold from India could boost global prices,
which hit a record high this year, although that could widen
India's trade deficit and put pressure on its ailing rupee.
    "It's a massive step in (the) right direction, as it will
reduce the incentives for smuggling of gold. It will create a
level playing field for honest industry stakeholders," said
Sachin Jain, CEO of World Gold Council's Indian operations.
    The government said it will charge 5% basic customs duty and
1% in Agriculture Infrastructure & Development Cess (AIDC) on
gold and silver imports, lowering import duties to 6% from 15%. 
    "To enhance domestic value addition in gold and precious
metal jewellery, I propose to reduce customs duties of gold and
silver to 6%," India's Finance Minister Nirmala Sitharaman said
in a budget speech.
    Local gold prices  MAUc1  fell 6% to 68,500 rupees per 10
grams, their to their lowest level in more than three months
after the announcement. Indian prices hit a record high of
74,777 rupees earlier this month, which squeezed demand.
    Overseas gold prices  XAU=  erased losses and rose 0.4%.
    Indian jewellery demand was hit by record-high gold prices,
but the duty cut will bring down prices and boost consumption,
said Saurabh Gadgil, chairman of PNG Jewellers. 
    Gold was trading at a premium in India for the first time in
eleven weeks on Tuesday, with dealers charging a premium of up
to $20 an ounce over official domestic prices, inclusive of 15%
import and 3% sales levies, versus last week's discount of $65.
    Shares of jewellery makers such as Titan Company  TITN.NS ,
Tribhovandas Bhimji Zaveri  TBZL.NS , Senco Gold  SENC.NS  and
Kalyan Jewellers jumped by up to 10%.
    Finance Minister Sitharaman also announced an import duty
exemption for 25 critical minerals, including lithium. India has
been exploring ways to secure supplies of lithium, a critical
raw material used to make electric vehicle batteries.  

 (Reporting by Rajendra Jadhav; Additional reporting by Neha
Arora; Editing by Himani Sarkar, Clarence Fernandez and
Alexander Smith)
 ((rajendra.jadhav@thomsonreuters.com; +91-22-68414378 ; Reuters
Messaging: rajendra.jadhav.thomsonreuters.com@reuters.net))