MUMBAI : India’s gold trade is facing a potential loss of ₹6,000 crore this festival season as authorities clamp down on transportation of the precious metal in poll-bound states, an industry official said.
Law enforcement agencies have seized gold consignments in Madhya Pradesh, Telangana, Rajasthan and Chhattisgarh, major gold consuming centres where the model code of conduct is in force. According to Surendra Mehta, national secretary of the trade body India Bullion And Jewellers Association (IBJA), whose gold rates are used by the Reserve Bank of India (RBI) to price government gold bonds issued on behalf of the government, police and other agencies have been seizing intrastate and interstate consignments even though they are backed by proper documentation.
Mehta has written to the state election commissioners to lift the ban on the goods with proper documentation. Mint has seen a copy of IBJA’s letter to Madhukar Gupta, state election commissioner, Rajasthan.
“…it has come to our notice that gold bullion and jewellery moving in the state, whether within or outside the state, are being seized by the police and other agencies citing the election code of conduct for movement of jewellery. Such gold bullion and gold jewellery are being seized despite the fact that the movement of these goods is being done with all relevant documents as per the applicable GST (goods and services tax) laws (sic),” the letter signed by Mehta said.
“With the ongoing festival and wedding season, the performance of our sector will be severely affected, including loss of work for goldsmiths, who are the backbone of our industry and also recognised as a major contributor to our GDP (Gross Domestic Product).”
Mehta said Indians consume 100-120 tonnes of gold between Navratri and Diwali as part of festive shopping and for weddings thereafter. The four states account for about 10% of the total consumption, resulting in a potential loss of ₹5,560-6,000 crore if the goods can’t move, he said.
“In view of the seizure of goods on the basis of the model code of conduct, despite being GST compliant, we are advising our members to hold consignments to and from these states till their movement is cleared by the authorities concerned,” Mehta added.
The IBJA has requested the state election commissioners to allow the movement of the goods if they are accompanied by relevant documents under the GST law.
An official of a listed jewellery chain said on condition of anonymity that the movement of valuables like gold “typically faces hurdles” during elections.
“We have our documentation and our goods are insured by a third party who transports them from the manufacturer to the jeweller or from one outlet to another. But we face problems in moving the same for purposes like promotions at exhibitions etc,” the official said.
India is the world’s second largest consumer of gold after China. According to the World Gold Council (WGC), it consumed 158.1 tonnes of gold in the second quarter of 2012, behind China, which consumed 181.5 tonnes.
