Concerns Mount as Silver Imports Experience Dramatic Decrease, Hinting at Illicit Practices
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The significant decrease in silver imports this year has taken the government by surprise. While over Rs. 13 Arba worth of silver was imported last year, the figure has plummeted to a mere Rs. 1.25 Arba this year.
The government, attributing the decrease to declining foreign exchange reserves, implemented several policy measures to curtail silver imports. However, due to complications leading to increased illegal transactions and reduced revenue, the government later eased some of the policies. Nonetheless, the lack of improvement in silver imports continues to worry the government.
An official from the customs department expressed concerns, who was quoted as stating, 'The declining trend in silver imports is a serious matter that requires investigation. We previously had to implement strict measures to address unnatural imports. However, the unexpected decrease in revenue has had a significant impact. Complaints of customs evasion and theft have also risen, and suspicious activities have been observed.'
While there is no shortage of silver in the market, government authorities suspect that the decrease in import volume, as indicated by customs data, may be due to fraudulent activities. Quantitatively, the import of silver is at its lowest level in the past decade.
According to data from the Customs Department, 12.92 crore grams of silver were imported in the fiscal year 2075/76. In 2076/77, the figure decreased to 9.20 crore grams, and further declined to 7.17 crore grams in 2077/78. However, in 2078/79, the import saw a significant increase with 13.90 crore grams of silver being imported. As the current fiscal year nears its end, only 1.26 crore grams of silver have been imported so far.
Businessmen note that the decrease in silver imports has also affected silver product exports. Although legal imports have declined, there is no shortage of silver in the market, which has an annual demand of 10 crore grams. Therefore, businessmen also suspect customs fraud.
When imports are unusually high, there are suspicions of Nepal being a hub for illegal trade with other countries. Conversely, when there is an abnormal decrease, it raises concerns that imports may be happening through open borders, evading customs.
Following the abnormal increase in silver imports until Bhadra of the previous fiscal year 2078/79, the Public Accounts Committee of the Parliament summoned the Ministry of Finance to inquire about the situation. The then Chairman of the Audit Committee, Bharat Shah, questioned, 'Have they imported silver worth Arabs and made a bed to sleep on? The state should take an interest in this matter!'
In response, the then Finance Secretary Madhukumar Marasini explained, 'We observed the trend in silver imports and felt sorry about it. During a general study to understand the reasons behind this, we found disparities in the duty charged on silver imports between Nepal and India.'
To address the issue, the government increased the customs duty on silver by 25% in Kartik 2078. Prior to Kartik, the customs duty was Rs. 85 per 10 grams, but it was raised to Rs. 107 afterward.
In Mangsir 2078, Nepal Rastra Bank introduced a limit of only $35,000 for silver imports at a time as a measure to reduce imports. Moreover, these facilities were exclusively provided to those involved in the production and sale of jewelry. Previously, there were no defined limits or purposes for such imports.
Businessmen state that prior to these regulations, silver was imported in quantities of 500 or 1000 kg at a time. However, with the new limit of $35,000, only 40 kg could be imported. While the shipping costs remained similar, the price of silver increased.
As a result of these policies implemented by Nepal Rastra Bank (NRB) and the government, silver worth Rs. 12.5 Arba was imported during the five months from Shrawan to Mangsir in the fiscal year 2078/79. However, in the following seven months, from Poush 2078 to Ashad 2079, only Rs. 58 crores were received.
After a significant decline in silver imports and complaints of theft from businessmen, Nepal Rastra Bank increased the facilities related to specified currency rates when importing silver. In Chaitra 2079, the government raised the limit to $60,000. However, the impact of these measures has not been observed.
Tejaratna Shakya, the former president of the Nepal Gold and Silver Traders Federation, was quoted as stating that the annual consumption of silver in the Nepali market is 10 crores 95 lakh grams (300 kg daily). However, this year, only 1 crore 26 lakh grams have been legally imported.
Additionally, the revenue has significantly decreased. In the first five months of the fiscal year 2078/79, customs revenue amounted to Rs. 1.24 Arba. However, this year, only Rs. 14 crores have been generated.
Gold and silver traders point out that there is no shortage of silver in the market, but legal transactions have shrunk. Tejaratna Shakya, a gold and silver businessman, was quoted as stating, 'The government has artificially increased the cost of legally imported silver. Despite attempts to rectify the situation, no improvements have been observed. This indicates an increase in illegal transactions.
(Disclaimer: The article is a translation from an original source. The consistency in statistical information has been maintained for accuracy.)
