Gold duty hike will raise domestic prices: Shree Ganesh

The finance ministry’s decision to increase the import duty on gold to 8 percent from 6 percent has not been welcomed by jewellers.

Nilesh Parikh of Shree Ganesh Jewellery told CNBC-TV18 that the move to restrict domestic supply of gold will inflate the prices in the country. He added that there will be a lot of disparity between international and domestic prices of the metal which will be stressful for manufacturers and retailers.
Speaking on the quantum of impact on their company, he said that it won’t have a direct impact on their firm as they get the gold without duty; 80 percent of their topline is from exports. However, from an industry perspective, he said that there will be agitations from jewellery manufacturers who are dependent on gold imports. Also read: Import duty on gold hiked to 8%, jewellery stocks in focus Below is the edited transcript of his interview to CNBC-TV18. Q: What you see as the impact of gold import duty changes?
A: The impact will be fairly large and won’t be welcomed by domestic players. Couple of years ago, we had 1 percent duty and 1 percent value-added tax (VAT).
With the Reserve Bank of India (RBI) almost banning import of gold; the supply to India will be restricted and prices may rise domestically. The rupee will depreciate furthermore.
There will be a lot of disparity in international and domestic prices in gold. Jewellery manufacturing and retailing can come under stress. Q: Could you quantify the potential impact for your company with the series of changes on gold import duties?
A: We are an export and trading house with main focus on exports. We are getting the gold without any duty. Therefore, 80 percent of our topline is from exports. We are generally talking about an industry which is fairly large in India. We are the largest importers, consumers of gold and jewellery in the world.
Domestically, there will be a lot of agitation. Gold jewellery industry employs approximately 2.3 million workers. Overall, the gems and jewellery industry employs approximately 3.4 million workers.
We don’t want any stress on manufacturing which has started after liberalisation of gold as a raw material. We are thinking how to mitigate this on domestic front. On exports, everything is fine. When rupee depreciates against dollar, exporters are always in positive mode.
Therefore, for our company, the impact would be negligible. But we have to fund large number of bonds in terms of bank guarantee. Earlier, we funded approximately 2 percent; now it is 10 percent. So, lot of capital is blocked.