HIMALAYAN NEWS SERVICE
KATHMANDU: The central bank will increase the gold import quota for the festive season provided the Finance Ministry raises the customs duty at par with the Indian import duty, according to Nepal Rastra Bank (NRB) governor.
“To meet the increased demand for gold during Teej and Dashain, NRB is ready to increase the quota to 20 kilos per day from the current 15 kilos,” informed NRB governor Dr Yubaraj Khatiwada, during the annual general meeting of the Federation of Nepal Gold and Silver Dealers’ Association. “However, it will happen only if the Finance Ministry hikes the import duty to curb any illegal outflow to India,” he added.
Two weeks back, India hiked the customs duty on gold to 10 per cent. According to traders, if Nepal raises the customs duty on gold to a minimum of Rs 4,400 per 10 gram, then only can instances of gold being smuggled to India be prevented.
Moreover, as the Indian government is working on curbing gold imports to manage its current account deficit, chances of gold being smuggled to India from Nepal has further deepened. Along with hiking the import duty, India has banned the import of gold coins and medallions to bring down its gold import to below 855 tonnes.
At present, NRB allows gold import of 15 kilos per day through commercial banks. Gold dealers then can buy the yellow metal from the banks based on the recommendation of their respective associations. Gold traders say that on normal days, the demand for gold is as high as 30 kilos per day but during the festive and wedding seasons, demand goes up to as high as 45 kilos per day.
“Even traders are not sure of exactly how much gold is required, so NRB will itself conduct an independent study to assess the actual demand and then only decide on a long-term quota,” the governor pointed out, hinting that Nepal Rastra Bank will not allow open general licensing for gold import any time soon.
“It is not the central bank’s job to regulate the import of precious metals in the country but these metal imports highly affect the country’s balance of payments situation so we have to be concerned about it,” said Dr Khatiwada.
In the last fiscal year, Nepal imported gold worth Rs 26.13 billion through legal channels, according to NRB data.
The fiscal year 2009-10 showed a huge deficit in its balance of payments accounts due to a large quantity of gold and silver imports that was suspected of being smuggled to India due to the difference in customs duty. Back then, Nepal imported gold worth Rs 41.6 billion. The government even had to suspend imports for a few months and since then NRB has imposed the import quota.