Chidambaram rules out further hike in gold import duty

TOKYO: Ruling out any further increase in import duty on gold, Finance Minister P Chidambaram today said any further hike in duty would encourage smuggling of the precious metal.

"We have raised the tariff in January but if you raise the tariff to a prohibited level it will increase smuggling. We are along coast line," he told a news channel here.

In January, the government raised import duty on gold from 4 per cent to 6 per cent to curb import of the metal in a bid to contain Current Account Deficit (CAD).

"I have tried and I am still trying (to check demand for gold). I appeal to the people to give up this craving for gold. But you know gold is also a safe investment for poor. It is a hedge against inflation," he said.

Meanwhile, the government today hiked the tariff value, the base price on which the customs duty is determined, to USD 521 per ten gms from USD 516 per ten gms of gold.

At present gold prices are ruling at USD 1,597.90 per ounce in Singapore. Gold was quoted at Rs 30,100 per ten gms in Delhi.

CAD at the end of December quarter of 2012-13 touch a record high of 6.7 per cent on account of high oil and gold import and slowdown in exports.

"CAD is very large...imports should financed through exports...there will be CAD for quite some time," he said.

Depreciating the currency is not the first option, he said when asked whether the country is contemplating depreciating the rupee.

Chidambaram said some people have suggested that if you depreciate the Rupee, imports will slow down. This may not work in a country that is dependent on oil imports, he said.

"We import some coal, we import capital goods, we import edible oil, pulses. These are very essential imports and I think that the fact that the rupee depreciates may not slow down imports," he said.

"Infact, it may lead to exact opposite result. Our import bill will go up in rupee terms. So, I am not sure whether depreciating the currency is the answer to the current account deficit," he said.