India turns screw again on gold imports

In this photograph taken on October 14, 2011 an Indian employee at a jewellery stall picks up a piece of gold jewellery during an exhibition in Bangalore. -- PHOTO: AFP
In this photograph taken on October 14, 2011 an Indian employee at a jewellery stall picks up a piece of gold jewellery during an exhibition in Bangalore. -- PHOTO: AFP

NEW DELHI (REUTERS) - India turned the screw on gold buying again on Wednesday, banning imports of coins and medallions and making domestic buyers pay cash, a day after hiking bullion import duty to a record 10 per cent.

The government is trying to curb apparently insatiable demand from Indians for gold which sent its current account deficit to a record in 2012/13, but although buying slowed in June it revived in July, triggering the latest restraints.

All imports of gold will now need a licence from the foreign trade office and will have to be brought into a customs bonded warehouse, Economic Affairs Secretary Arvind Mayaram said.

He added that unrefined gold would be added to existing rules stipulating that 20 per cent of all imports must be used for export, which is usually in the form of jewellery.

The move to force cash payments revives an earlier central bank directive which was dropped last month.

Imports by the world's biggest bullion buyer hit a record 162 tonnes in May as global prices fell, prompting a duty increase to 8 percent. Imports dropped to about 31 tonnes in June but revived to 47.6 tonnes in July, according to the finance ministry.

With the rupee touching a record low last week, domestic prices are high and premiums paid for bullion over London prices are near US$45 an ounce, up from US$30 an ounce last week.

But even that has failed to deter buyers and industry players remain sceptical that these measures will have a serious impact on demand among Indians, who traditionally buy gold to give at festivals and weddings.

Gold coins and bars constituted about 36 per cent of total demand in 2012.

The government wants to contain imports to "well below" last year's 845 tonnes this year.

The curbs on gold come as India imposed restrictions on foreign exchange outflows in its latest attempt to prop up the rupee.