Gold becomes payment instrument
KATHMANDU, DEC 5:
Gold has become a new form of currency for traders looking to pay for illegal imports from India.
Buying gold in Nepal and selling it in India is not profitable due to lesser customs difference and tight supply of gold in the Nepali market. Thus, traders have resorted to a more profitable option of illegally trafficking gold from China and then taking it to India, according to gold traders.
The incident, where the police this morning caught some people trying to smuggle nine kg of gold from Tatopani checkpoint to Kathmandu, is supposed to be one such courier run meant to be cashed in India, they added.
“Gold is being used as a mode of payment for under-invoiced goods which has even led to an acute shortage in the domestic market, else gold is cheaper in India than in Nepal due to the difference in customs duty,” said president of Nepal Gold and Silver Dealers’ Association Tej Ratna Shakya.
The domestic market had faced gold shortage a month back.
Nepal charges Rs 1,500 for 10 grams of gold import while in India, the customs is set at four per cent of total imports making it roughly near Rs 2,000 per 10 grams. However, 10 grams of gold is worth Rs 48,000 in China, which can be sold at Rs 50,500 in India with a profit margin of Rs 2,500, at the current rate.
A large number of goods imported to Nepal from India are under-invoiced. Importers do not reveal the actual amount of goods being imported to pay less customs duty. Banks provide Letter of Credit and drafts to pay for the imports based on customs documents. Thus, to pay for illegally imported goods, traders face a tough time channelling money from Nepal to India.
Moreover, payments for illegally imported goods to Indian exporters is already causing a shortage of Indian currency in the domestic market, providing ‘some traders’ the opportunity to exchange Indian currency at as high as Rs 175 for IRs 100.
“The Department of Customs has asked the different customs points between Nepal and China to be more vigilant based on ‘reports’ regarding gold being smuggled from China,” said director at Department of Customs Shyam Dahal, adding that the Chinese customs office at Lhasa has also ensured its support.
“Rarely had anyone been caught sneaking gold to Nepal from China earlier, but police and customs have caught quite a number of people smuggling gold to India,” added Dahal.
In fiscal year 2009-10, Nepal went through the largest ever balance of payments deficit in the country’s history due to high imports of gold and silver. The government suspected that the imported precious metals were being smuggled to India where customs difference made it comparatively expensive.
Since then, the government has allowed only commercial banks to import gold with a quota of 15 kg per day to prevent a repetition of such a situation. Bullion traders have complained that 15 kg per day is not enough to meet the market demand.
Nepal being wedged between China and India — two largest importers of gold in the world — has become a lucrative transit point for gold smugglers. India is the largest consumer of gold, while China is the second largest. India alone bought 800 tonnes of gold in 2012.
Source: THT
