India Jewelers End Strike Over Gold

April 7, 2012 at 00:27

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India’s gold-jewelry trade associations agreed Friday to call off a 20-day strike, after Finance Minister Pranab Mukherjee promised to look into rollbacks on newly implemented gold taxes.

Indian retailers have been protesting measures, effective March 16, that doubled the import tax on gold to 4% and imposed excise taxes on most gold jewelry. Earlier, the excise tax was applicable only on gold jewelry sold by large, private companies.

Imports by India, the world’s top consumer of gold, have nearly stopped due to the strike, impacting global prices.

“We are more than satisfied after meeting the finance minister,” said Bachhraj Bamalwa, chairman of the All-India Gems and Jewellery Trade Federation. “We and all our associated members have decided to call off the strike until May 11 and expect some favorable announcement by the finance minister in Parliament by then.”

Mr. Mukherjee may not be able announce any changes immediately, as he would need to follow parliamentary procedures to make changes in the budget.

Indian gold prices have been quoting at a discount of around $20 a troy ounce, due to a lack of demand from wholesalers and retailers. Gold for June delivery ended at $1,630.10 a troy ounce Thursday on Comex.

The jewelers’ main demand is a rollback of the excise tax, which they fear will lead to compliance issues, as most also run manufacturing units.

Mr. Bamalwa said the trade has suffered a loss of 200 billion rupees ($3.91 billion) due to the strike.

The government has said the tax changes are aimed at discouraging purchases of the precious metal to contain the country’s current-account deficit, as gold is the second-largest import item by value after crude oil.

India’s central bank recently directed local banks to submit monthly statements on the quantity of gold held, over and above previous declarations of the value of their imports, in a bid to tighten monitoring of the metal’s inflow.

Until this week, only designated banks and state-run trading agencies were permitted to import gold, which mostly ended up in the retail jewelry market.

The government has now allowed Titan Industries to import gold directly, in an attempt to eliminate procedural hassles.