Industry insiders feel that gold smuggling through Kolkata has gradually increased after the Centre increased import duty on gold from 2% to 10%. Since a large number of trained goldsmiths are based out of Bengal, the yellow metal is much in demand in the state. Also, prices in Kolkata are a tad lower than that in metros like Mumbai by almost Rs 300 for 10gm. More significantly, the 'grey market' price is lower by another Rs 150 per 10gm.
Jewellers feel that with the prices low in the grey market, a section of buyers has already started moving to the unorganized sector. With the new norms in place, the shift will be faster, putting livelihoods of almost a crore in jeopardy.
During his budget speech, Union finance minister Arun Jaitley proposed to make PAN card mandatory for gold purchases above Rs 1 lakh instead of the earlier Rs 2 lakh threshold. Jewellers, who feel that the proposed regulation would only help the grey market to thrive, feel middle-class buyers would suffer the most. With the current gold price levels hovering around Rs 26,100 for 10gm, Rs 1 lakh will buy around 30gm of gold. While normal buying amount varies between Rs 15,000 and 50,000, it is significantly higher during the wedding season.
"It is not a big sum for those who are buying a sizeable amount of jewellery. The budget is much higher when a person is planning a wedding," said Pramod Dugar, regional director of Gem and Jewellery Trade Federation (GJTF). While retail business will be hit hard with jewellers finding it difficult to convince buyers to visit showrooms, a lot of transaction will happen "out of the books".
"Most of the purchases are done by homemakers over the years. A bulk of them don't have PAN cards," pointed out Bablu Dey of Swarna Shilpo Banchao Committee. According to income tax department estimates, around 14 crore people in India have PAN card. The department estimates show that around 14 lakh new PAN cards are issued every year.
"The government's intention is to stop flow of black money. In case of jewellery, most jewellers buy gold through the legal route. We maintain that the buyer gets an invoice against the purchases," said Bachhraj Bamalwa, former president of GJTF.
With bankers likely to put in place the gold monetization scheme from April, the industry is likely to see more supply of the metal, pulling down prices further. According to Pankaj Parekh of Alankar Jewellers, around 60% of gold and silver in the state is bought by the rural populace. "Rural and semi-urban population is likely to be hit the most as many of them don't have PAN cards. Many farmers save up from the harvest sales and buy gold to meet contingency requirements. They will also find the unorganized sector an easier route in the absence of PAN cards," he said.
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