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Lower Customs Duty To Check Gold Smuggling

Author: The Finapolis Network/Thursday, February 11, 2021/Categories: Exclusive

Lower Customs Duty To Check Gold Smuggling

The NDA government has slashed customs duty in the Union Budget 2020-21 on gold and silver and the measure is expected to curb the increasing smuggling of the precious metals in India. 
The Union Finance Minister Nirmala Sitharaman has proposed in the Budget-2021 to reduce the customs duty on gold and silver to 7.5 per cent from 12.5 per cent.
“The move will also improve the government's overall revenue from the sector. The duty reduction will support sectoral demand in the long term, as jewellery costs will come down and customers' purchasing power will improve,” said India Ratings and Research (Ind-Ra).
According to a latest report from Ind-Ra, the erstwhile duty structure gave incentives for gold smuggling into India.
In July 2019, with an objective of increasing revenues, the customs duty on import of gold was increased to 12.5 per cent from 10 per cent. As per Ind-Ra's data, unofficial imports of gold range between 150-180 tonnes when compared to the official gold import numbers of 600-700 tonnes for FY20.
Experts stated that the reduction in import duty on gold and silver is a favourable measure for the domestic organised jewellery players.
“The move will also improve the government's overall revenue from the sector. The duty reduction will support sectoral demand in the long term, as jewellery costs will come down and customers' purchasing power will improve. The majority of the gold jewellery demand in India is price sensitive. Overall demand stalls for any sharp rise in gold prices. Consequently, amid a sharp rise in gold prices, revenue for the top organised players declined by average 32 per cent YoY in 1HFY21, said Ind-Ra.
The festive demand will support recovery in during the second half of 2021-22 financial year. The bullion market witnessed a strong demand recovery in 3QFY21 due to the festive season, pent-up demand, over 10 per cent decline in gold prices from its peak in August 2020 and improved customer sentiments as multiple Covid-19 vaccines received approvals from the US Food and Drug Administration.
Furthermore, the report cited that weddings contribute 60 per cent to the overall retail jewellery demand in India.
“The wedding season extends from November to February and April-May. Ind-Ra believes that the reduction in customs duty will improve business volume as it makes gold jewellery more affordable and further unlock pent-up demand from price sensitive buyers for the remaining wedding season.”

Sugar production rises by 25% 
The domestic sugar production in India increased by over 25 per cent to 176.83 lakh tonnes in the four months of the current cane crushing season 2020-21 (October-September), when compared with 141.04 lakh tonnes during the corresponding period in 2019-20 season, according to a latest data from Indian Sugar Mills Association (ISMA).
In Telangana, Andhra Pradesh and Tamil Nadu, 37 sugar mills in operation produced 3.56 lakh tonnes as of January 31, 2021, compared with 4.39 lakh tonnes produced by 39 sugar mills as of the corresponding date in 2019-20 season.
As many as 491 sugar mills were in operation as of January 31, 2021, and produced 176.83 lakh tonnes of sugar from October 2020 till January 2021, as against 141.04 lakh tonnes produced by 447 mills as of January 31, 2020.
In Maharashtra, sugar production was 63.80 lakh tonnes till January 31, 2021, compared with 34.64 lakh tonnes produced in the same period in the last season. In the current season, 182 sugar mills are in operation compared with 140 mills in the 2019-20 season, said the apex industry body.
In Uttar Pradesh, 120 mills produced 54.43 lakh tonnes of sugar till January 31, 2021, compared with 54.96 lakh tonnes produced by 119 mills as of corresponding date of 2019-20 season.
In Karnataka, till January 31, 2021, 66 mills produced 34.38 lakh tonnes of sugar, compared with 27.94 lakh tonnes produced by 63 mills during the same period in 2019-20.
Gujarat produced 5.55 lakh tonnes of sugar till January 31, 2021 at 15 mills. Last year, 15 sugar mills in operation produced 4.87 lakh tonnes of sugar till January 31, 2020.
The remaining states of Bihar, Uttarakhand, Punjab, Haryana, Madhya Pradesh, Chhattisgarh, Rajasthan, and Odisha collectively produced 15.11 lakh tonnes of sugar till January 31, 2021.
Sugar sales in the first three months of the current season, i.e., up to December 31, 2020, is reported to be more or less similar to last season's around 67.5 lakh tonnes, said ISMA.
As economic activities pick up and vaccination drive gathers pace the business confidence in the country improved, showed a survey by National Council of Applied Economic Research (NCAER).
The NCAER Business Confidence index (BCI) rose 29.6 per cent on a q-o-q basis during the third quarter of FY 2020-21.
"The BCI rose further by 29.6 per cent on a q-o-q basis, rising from 65.5 in 2020-21:Q2 to 84.8 in 2020-21:Q3," and NCAER statement said.
However, business sentiments remained worse than they were during the corresponding period in the previous year, it added.
The proportion of respondents expecting that 'overall economic conditions will improve in the next six months' increased by 4.8 percentage points, from 29.8 per cent in 2020-21, Q2 to 34.6 per cent in 2020-21, Q3.
Further the proportion of respondents expecting that the 'financial position of firms will improve in the next six months' increased by 3.1 percentage points, from 27.7 per cent in 2020-21, Q2 to 30.8 per cent in 2020-21, Q3, it said.
The BCI increased for the consumer durables sector by 26.1 per cent on a q-o-q basis in 2020- 21, Q3, for consumer non-durables by 32 per cent, for intermediate goods by 37 per cent, for capital goods by 27 per cent, and for the services sector by 32.5 per cent.

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