New Delhi - The government is considering a relook at the import duty on gold in order to curtail the arbitrage opportunities resulting from free trade agreements (FTAs) but without hurting the genuine requirement of business, Commerce Secretary Rita Teaotia said.
The top official's observation comes in the wake of a surge in gold imports earlier this year from South Korea, which signed an FTA with India in 2010. In August this year, the Indian government responded by restricting imports of gold and silver items from South Korea.
"I think the real issue on why free trade agreements tend to be leveraged is the issue that we have been raising again and again and that is the import duty on gold. This is a matter that the Government of India is seized of," Teaotia said at the Gold Summit here organised by the Gem and Jewellery Export Promotion Council.
"There are implications on both sides and I think we will have to work to come to some sort of balance on the duty issue. It certainly needs to be addressed because as long as there is arbitrage, there will be people who will try to game the system," she said.
Gold imports from South Korea more than quintupled to $339 million between July-August this year over the same period last year.
On the issue of FTAs, Teaotia said that the government engages in consultations with stakeholders before entering into such agreements.
"I do want to make it very, very clear that there is a full fledged consultation with industry sectors before any single line is conceded in a trade agreement," she said.
"The availability of gold has certainly been provided for through the nominated agencies, which, I believe, should address the requirements of the medium and small scale industries, who would need that because that is allowed to come in without the payment of 10 per cent duty."
India is the world's biggest consumer of gold, while the country's annual exports of the yellow metal and gold jewellery is only to the tune of around $7 billion.