KATHMANDU: Growing gold import has become a headache for Nepali economic planners and they are applying control measures from time to time. Nepal Rastra Bank (NRB), the central bank, has issued three notices to financial institutions within two weeks starting from January 8.

Nepal imported 10 tonnes gold worth Rs 25.59 billion in the first five months of the current fiscal year — double than that the previous year. Gold import was around 4.5 tonnes in the same period last year. In 2007-08 during that same duration, Nepal imported just 1.5 tonnes of gold.

The recent trend shows the gold import will not decrease if strict measures not taken soon. Sixth months of this fiscal year have already witnessed a 3.5 tonnes rise in gold import worth Rs 8.95 billion. Investment in real estate, expansion of financial sector and gold import has pushed the economy toward liquidity crunch since last September. The financial sector has invested Rs 114 billion in real estate till date while banks and financial institutions added 194 branches last year.

NRB needs to take strict measures to control gold import, said BN Gharti, assistant general manager of Kist Bank. “Imposing heavy duty on import and reducing the limit of totable quantity are some of the ways out,” he suggested. As per NRB directives of March 25, 2007 people can tote up to 10kg gold by hand and another one kg gold for personal use.

Economist Dr Chiranjivi Nepal echoed Gharti and said the government must hike custom duty. “It will kill two birds with one stone,” he said, “The government will profit as revenue will be generated and people will be discouraged from importing gold.”

Goldsmiths are opposing the rising customs duty. “We don’t believe the gold is going to India through smuggling,” said Tej Ratna Shakya, president of Nepal Gold and Silver Dealers’ Association (NEGOSIDA). “Rising customs duty should be the last option,” he said.

According to Shakya, the Letter of Credit (LC) ban on importing gold has a negative effect on gold market. “Gold price increased Rs 500 after the last directive of NRB,” he said, “Complete control of import will be bad for the Nepali gold market.”

The government has Rs 110 customs duty on per 10g gold while India is generating Rs 320 per 10g revenue in gold import. So, NRB and Ministry of Finance (MoF) should step ahead and impose heavy duty on gold import. Gold is a non-productive element and it will not affect the economy further, advised Dr Nepal.

Bankers also approved the suggestion of increasing import duty. “Increasing customs duty can be a good way out of the problem,” said Sashin Joshi, Chief Executive Officer (CEO) of NIC Bank Ltd, the first bank that started importing gold through official channel. New tariff should be 20-30 per cent less than Indian tariff to avoid unofficial import, he added. Joshi is also the president of Nepal Bankers’ Association.

Moreover, financial regulating agencies should rethink of reducing totable gold import and the personal use angle. Around 20 per cent of gold is coming from those two channels.