EDITORIAL: Huge gap
The central bank should be able to come up with a definite and realistic reply to the gold dealers’ claim of what the demand for gold is. It needs to assess the demand for gold in the market
Things do not seem to be going all right in the Nepali bullion market, as jewelers have lately begun to raise the price of gold to buyers. Some jewellers are reported to be charging up to Rs.4,000 more per tola of gold ornaments. According to jewellers it is because the demand for gold in the market is much higher than its official supply. That is why they have been asking for an increase in the quota of the gold they can buy from the commercial banks which are the legal suppliers of gold to the goldsmiths around the country. But considering the quota of gold it allows to the goldsmiths, the central bank seems to have taken a very conservative estimate of the actual demand for gold in the market or the low supply is due to some other constraints. According to Mani Ratna Shakya, former president of Nepal Gold and Silver Dealers’ Association, the demand for gold is so high that the public are too ready to pay a higher price. Dealers are said now to be buying the yellow metal from unofficial channels at a higher price too.
This artificial situation should not be allowed to exist. Supply and demand should be allowed to play their full part, and the government should intervene if there are any distortions or if a group is taking unfair advantage of the situation. But the government’s survey of the demand, if any, does not seem to reflect the actual demand, as is clear from the huge gap between the jewellers’ estimate of the demand for gold, which stands at nearly 50 kg per day and the 15 kg (and 20 kg during peak time, such as marriage season) that the central bank allows them daily. This should be a major reason why gold is being smuggled into the country in huge quantities, as attested by the fact that within the past few days alone about 50 kg of smuggled gold was seized in the capital.
Government agencies have often proved to be too slow or indifferent in reacting to the market situations, and this applies to the bullion market as well. The government’s regulatory agency has not inspected the bullion market for the past three years, which is attributed to the lack of any monitoring guidelines. And bureaucrats are experts at coming up with evasive answers when confronted with questions on the issue. But the fluctuations in the bullion market are not a new thing. The central bank should be able to come up with a definite and realistic reply to the gold dealers’ claim of what the demand for gold is. For this, it needs to assess the demand for gold in the market and make more gold available to the goldsmiths through the official channels so that traders may not have to depend on smuggled gold as a source of supply. This would help minimize the distortions and illegal and unethical business activities in the bullion market. The nexus between the illegal hundi business and gold smuggling also needs to be studied and corrective action taken. But all this does not reduce the importance of strict market monitoring and law enforcement, things that are always sorely lacking here.
The rampant land plotting that is taking place at Chitwan has endangered banana farming. As of now banana worth at Rs. 1 billion is being produced in this district annually. However, because of the soaring price of land here many land owners have cancelled their contract with farmers and are selling their fertile land. It is estimated that more than 70 bigahas of land used for the purpose of cultivating bananas have been vacated for plotting purposes to make handsome profits. The One Village One Production programme that has been carried out for the past five years is now threatened. If the government does not take appropriate measures banana farming in Chitwan would face grave threats.
Banana is being cultivated in 1,525 hectares of fertile land in Chitwan with as many as 610 farmers involved in their cultivation of 21,600 metric tonnes of bananas every year, and 40 per cent of them are being exported to Kathmandu and Pokhara and other nearby districts. Moreover, as 80 per cent farmers rent the land in order to cultivate bananas at stake would be their livelihood. It is something to be very serious about as much of the land being plotted are fertile.