India is planning to ban imports of 24-carat gold jewellery in an attempt to curb the misuse of free trade agreements (FTAs) with Asian countries, the DNA newspaper reported on Friday.
The world's second biggest gold consumer raised the import duty on the metal to 10 percent in 2013 to curb demand but that has boosted smuggling and prompted some importers to use India's FTAs with the Association of Southeast Asian Nations to import 24-carat gold jewellery at just two percent import duty.
The imported jewellery is then melted to make coins and bars and sold in the local market, industry officials said.
The government is now planning to change existing rules to allow imports of only lower-quality 18 and 22-carat jewellery, the newspaper said, citing unnamed government officials.
Finance ministry officials were not immediately available for comment on the report.
Finance Minister Arun Jaitley told parliament on Friday that authorities at Indian airports seized 8.32 billion rupees ($124 million) of smuggled gold in the year that ended in March. Seizures came to 4.3 billion rupees from April 1 to the middle of November.
India's gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for the country's millions of farmers.
Mining.com reports that 2015 has been an especially bad year for gold in India. December quarter demand could fall to 150 to 175 tonnes, Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation. That would be the lowest in eights year and compares to a 5-year average for the quarter of 231 tonnes, according to the World Gold Council.
This year 302 of the 640 districts in India experienced at least a 20% shortfall compared to normal rainfall. The lack of demand is being blamed on a severe drought now in its second year that has hurt incomes for the country's more than 50 million small scale farmers and depressed buying in rural areas which account for the bulk of India's gold demand.