Traders of three different commodity groups representing gold, pulses and edible oils are currently lobbying the government for a reduction or abolition of import duty. New Delhi should not succumb to lobby pressure, as there is no merit in their demand. Let’s see how.

Gold: No Justification For Duty Cut

In May this year, the government raised customs duty on gold from 6% to 15%, comprising 10% of basic customs duty plus 5% of the cess for the agri-infrastructure fund. It was necessary because of the widening trade deficit and rapidly depreciating rupee. Generating revenue for the exchequer was another consideration.

Traders opposed this duty hike, saying it would encourage illicit imports (smuggling). Reports of smuggled gold imports have already started appearing in newspapers and electronic media. Large-scale smuggling appears to be more of a conjecture than an established fact. Unlike in the 1960s and 1970s, large-scale gold smuggling is currently not possible because of superior border control coupled with advanced surveillance technology, speedboats and so on.

In reality, gold jewellery sales are sharply down in our country. High international prices and a weak currency have resulted in demand destruction.........

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