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Informist, Wednesday, Jul 24, 2024

--Bullion body: Gold jewellers face 180-bln-rupee loss on duty cut

--Bullion boy: Gold jewellers sitting on inventory of 300 tn

By Sandeep Sinha

MUMBAI – The gold jewellery industry is staring at a loss of 180 bln rupees due to the reduction in basic customs duty on the precious metal in the Union Budget for 2024-25 (Apr-Mar), according to Surendra Mehta, national secretary of the India Bullion and Jewellers Association. Presenting the Budget on Tuesday, Finance Minister Nirmala Sitharaman said that the import duty on gold and silver will now be 6% against 15% earlier.

The reduction in customs duty led to a sharp fall of 5.8% in the August contract of gold to 68,510 rupees per 10 gm on the Multi Commodity Exchange of India. The precious metal had hit a fresh record high of 74,538 rupees per 10 gm on Jul 18.

The average loss per kg for dealers, wholesalers, big and smaller jewellers, who had bought the precious metal at a higher customs duty of 15%, comes to about 590,000 rupees, Mehta said. Given that the industry is sitting on an inventory of 300 tn, the cumulative loss works out to about 180 bln rupees, he said. The loss per 10 gm is 5,900 rupees. The industry will find it difficult to pass on the cost of higher imports to customers.

"They (bullion industry) will have to absorb the inventory loss initially but slowly, their working capital will improve as less funds will be required (to buy gold)," Mehta said.

"Those who have not hedged (their gold purchases), will have to suffer (more), so this makes a very strong case that people should do hedging," Kunal Shah, head of commodity research at Nirmal Bang, said.

Trade data released by the commerce ministry on Jul 15 showed that the value of gold imports rose 17% on year to $19.10 bln in Jan-Jun, from $16.33 bln a year ago. The ministry gives the import data only in value terms.

According to industry sources, the country's gold imports in Jan-Jun rose 4% on year to around 302.5 tn from 291 tn in the same period a year ago.

In 2023, India imported 734.3 tn of gold, up 3% from 2022. The country is second-largest importer of gold after China.

In an interaction with Informist earlier, Sachin Jain, India region chief executive officer of the World Gold Council, had said that he expects the country's bullion imports to remain at 700-800 tn gold in 2024.  End

US$1 = 83.72 rupees

Edited by Ashish Shirke

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