India has started to make physical checks of gold stocks held by wholesalers to ensure inventories match the amount imported by banks and state-run traders, an industry association said, as the country steps up efforts to halt gold smuggling.
The move could aggravate shortages in the physical market as authorities seize gold without a valid provenance, boosting premiums, which rallied to a record of $160 an ounce on London prices late last year.
“Government agencies are raiding and seizing gold at various places and asking to reconcile the (gold bar) number with the imported gold,” said India Bullion and Jewellers Association (IBJA) general secretary Surendra Mehta.
Gold was being seized if numbers do not match up, said Mehta, whose 1,200 bullion dealers and jewellery retailers plan plan to close their shops on March 10 in protest at the spot checks and import curbs.
Officials from India’s Customs department were not immediately available to comment.
To tackle a widening trade deficit, India – the world’s second-biggest gold consumer behind China – has put in place measures to dissuade gold buying, including a 10 percent import tax.
Imports have fallen sharply, leading to shortages and triggering smuggling. India imported about 750 tonnes of gold in 2013, while up to another 200 tonnes was believed to have been smuggled into the country, according to the World Gold Council.
The bulk of official gold imports are channelled through either state-owned or private foreign banks and government-backed trading companies, which in turn sell the metal to local jewellery makers.
Mehta said legally imported gold bought by retailers from middlemen was being caught up in the checks.
“My 125 kilograms (4,400 ounces) of gold has been stuck at Ahmedabad airport unnecessarily for a month now,” Prithviraj Kothari, owner of Riddhisiddhi Bullions Ltd, a leading jeweller, told Reuters.
Customs officials have said only a fraction of illegal shipments have come to light.
The finance ministry and the Reserve Bank of India have acknowledged that smuggling has increased considerably but have said they would not ease the import restrictions until they have a better grip on the trade deficit.
Gold premiums are currently sitting at $80 an ounce.