India gold & silver prices going up
By Siddesh Mayenkar
MUMBAI | Tue Jan 17, 2012 9:17pm IST
(Reuters) - India hiked its gold import duty by 90 percent and doubled the tax on silver on Tuesday as the world's biggest consumer of bullion seeks to increase revenues, sending futures prices higher and hitting shares of jewellers.
India changed the import duty on gold to 2 percent of value from the earlier flat 300 rupees per 10 grams and that of silver to 6 percent of value from 1,500 rupees per kilogram, the government said in a statement.
Gold has soared this year, with international dollar prices touching a record of $1,920.30 per ounce in early September and Indian domestic prices hitting a peak in early December.
The duty change would translate to about 570 rupees per 10 grams for gold, said Prithiviraj Kothari, president of the Bombay Bullion Association. The silver import duty could equate to 3,000 rupees per kg at current prices, he added.
The BBA is sticking to its forecast for imports to fall 50 percent in January to March after they slipped about 8 percent on a year ago to 878 tonnes.
Gold futures on the Multi Commodity Exchange (MCX) rose after the announcement, with the February contract, gaining 1 percent to 27,778 rupees.
Silver for March delivery rose nearly 3 percent to 53,874 rupees per kg.
"It is not likely to impact demand in any meaningful way; we did not see any meaningful decline in demand last time, and hence may not affect demand this time around as well," said Chirag Mehta, manager of the Quantum Gold Fund.
The government last hiked the import duty on precious metals in February 2010, which was seen as having minimal impact on buying.
"This increase in duty would be passed on to the retail consumers by the jewellers as the actual rate of gold itself would increase due to the increase in duty," said Rajesh Mehta, chairman of jeweller Rajesh Exports.
But he did call for a rollback of the duty hikes, saying abolition "would completely eradicate the major issues of smuggling and would control black money in a substantial manner".
Shares in Rajesh Exports (REXP.NS) lost nearly 3 percent after the announcement as other jewellers also fell.
India's coalition government has been struggling to meet its fiscal deficit target due to increasing outlays, which include subsidies for fuel and food.
Analysts GFMS have just said they expect gold prices to climb above $2,000 in late 2012 or early 2013.
Silver imports are also unlikely to be affected, traders said.
"As it is, silver is a volatile market, the 1,500 rupees difference in prices won't impact buying," said Haresh Kewalramani, proprietor of Vishindas Gianchand & Sons, a large silver trader in Mumbai.
India, the world's largest importer of silver, bought 3,029 tonnes in 2010, double the year earlier after a weak monsoon cut demand in 2009.
(Reporting by Siddesh Mayenkar; Editing by Jo Winterbottom and Jane Baird)