Mumbai: The All India Gems and Jewellery Trade Federation (GJF) today sought measures, which includes reducing import duty to five per cent and bringing back stand-by letter of credit (SBLC), to "rescue" the industry.
"The association has written to the Union Finance Minister P Chidambaram and has strongly advocated immediate reforms of bringing back SBLC and other credit buying of gold. We have also urged the government for advance payment or COD restrictions may be lifted and reduce import duty to five per cent," GJF said in a statement.
The government in September this year increased the import duty on gold and silver jewellery to 15 per cent from 10 per cent to protect the domestic industry. The government hiked the import duty on gold thrice in 2013 as part of its measures to contain the widening CAD.
In a letter to the Finance Minister, GJF Chairman Haresh Soni said: "When the gold import is restricted under 80:20 scheme, there is no way the import of gold is going to mount until and unless there is a growth in overall exports.
"As such, we request you to allow SBLC (gold loan) scheme for the jewellery manufacturers, wholesalers and retailers. This practice was followed in the recent past."
However, this practice is prevalent in many countries due to the volatile gold prices, and it also supports the jewellery manufacturers, wholesalers and retailers in the way of working capital facility and as a price hedging mechanism, he said.
Soni further said due to high premium being levied on import of gold, there is a spurt in gold smuggling across the country. "We assume that time is not very far when the sector will be governed by unscrupulous people and anti-social elements. This parallel economy will damage and ruin the basic fabric of this industry," he added.
Due to shortage of raw material supply, high premium is being levied on gold import. Moreover, there is unavailability of custom bonded warehouses at prominent locations within the country, making it even more difficult to procure raw material.
In recent times, it has also been noticed that due to the higher duty gap in international and domestic market, NRI business has been shifting to other potentially viable avenues. Several prominent jewellers have reported a sharp decline in gold jewellery sales during festive season in 2013, he added.