Illicit gold imports on rise as supply falls short of demand
KATHMANDU, Feb 14: Smuggling of gold through major points along Nepal-India border has increased in recent weeks after gold dealers, reeling under shortage of yellow metal, started accepting gold from unauthorized suppliers.
The shortage hit the market mainly after the commercial banks - the authorized importers -- failed to maintain supplies.
Apart from that, dealers say daily supply quota of 15 kg set by Nepal Ratsra Bank (NRB) is simply inadequate to fulfill the demand that has swelled due to long-running wedding season.
“Daily demand for gold has touched 40 kg,” said Tej Ratna Shakya, president of Nepal Gold and Silver Dealers Association (Negosida), adding that the dealers have not been regularly receiving the quota in full as banks have been showing laxity in importing gold. “This has spurred gold smuggling. Dealers have no option but to accept the illegal supply if they are to stay in business.”
Shakya, however, did not quantify the volume of such illicit supply.
According to dealers, mainly the dealers based along the bordering points are sourcing the yellow metal from India through informal channel and supplying them in the market.
“It is because of this very reason that dealers across the country have currently priced gold higher by Rs 500 per tola than the international rates. They need to pay more to entice people in the informal channel for the supply,” Shakya disclosed.
Officials of Negosida like Shakya admit the domestic gold prices have remained higher than international rates since about a month ago.
On Tuesday, dealers traded gold at Rs 54,000 per tola (11.664 grams). Though this rate is down by Rs 100 per tola compared to Monday, Shakya said it is Rs 500 per tola more than the international rates.
Moreover, bullion dealers said even the informal supply coming from India has not managed to fulfill the market demand. As a result, many dealers have stopped selling raw gold to the buyers.
"Owing to the shortage, we have decided to sell only jewelries,” Shakya stated.
Demand for gold has increased in the market mainly because this happens to be the wedding season when gold supplies hit peak. Given the situation, dealers have been urging the NRB to either open the import, allowing them to engage in import business, or increase the quota of supply.
"Apart from that, we have also been urging the central bank to instruct banks to issue us the supply in an uninterrupted manner. Sadly, our requests have been falling on deaf ears," said Shakya.