KOLKATA (miningweekly.com) – The Indian government is mulling measures to curb gold imports without having to increase import duties to rein in its rising current account deficit and rapidly depreciating rupee.

Sources say that increasing import duty on gold to 12% or 13% from the current rate of 10% will be the last option to be considered if all other measures fail to rein in inward shipments of the precious metal.

The government has already held a high-level meeting led by the Prime Minister, which decided on cutting down of “non-essential imports” to stem a rising current account deficit, aimed at easing the import bill and pressures on the local currency.

The list of non-essential items likely facing regulations was laid down at the high-level meeting last week, and officials says that gold imports, one of the highest import bills faced by the government, will definitely face checks in inward shipments.

However, officials indicate that the government is keen to avoid hiking customs duty on gold imports, currently pegged at 10%, to check imports fearing a double whammy.

They point out that historically, it has been noticed that higher customs duties triggered a rise in gold smuggling. At the same time, the increased cost of imported gold will negatively impact on the cost of production of the gems and jewellery industry, which is a significant exporter.

Hence, the officials say that the government is looking to put in place a “calibrated and differentiated” slew of measures, which could include graded quantitative restrictions as per various user industries.

According to government data, gold imports during April to August increased by 63% at $3.3-billion in terms of value.

Indian gold imports impacting on the current account deficit – difference between inflow and outflow of foreign exchange – increased by 22% in 2017/18 to $33.65-billion.

During the first quarter of the current financial year, the deficit increased by 2.4% and is poised to rapidly keep increasing with rising international oil prices and the falling value of the rupee against the dollar breaching the Rs70 a dollar mark.

The previous Indian government had put into play a measure, the so-called “80:20” rule which allowed the gems and jewellery industry to import gold only after exporting 20% in value of gold imported earlier.  The scheme was scrapped by the current government.

The Finance Ministry is working on the list of non-essential goods that will be targeted for import reduction and proposing a mechanism to check gold imports; the paper will be forwarded to the Prime Minister’s Office for approval at the highest level, by this weekend, officials said.