NEW DELHI (Commodity Online): Subsequent to the hike in customs duty on gold to 6% recently by India government, the country has told Thailand that it intends to impose a duty of 10% on jewellery imports from that nation under the proposed FTA to curb the same.

Currently Thailand enjoys the privilege of almost 0% duty under the Early Harvest Scheme as India imports gold jewellery from the South East Asian country. And with import duty on gold hiked by India, it fears that Thai jewellery exports would flood the domestic markets, taking advantage of duty disparity.

“Negotiations for the FTA are still going on. We have taken up the issue with Thailand. We believe duties on gold have to be consistent with our domestic policy. But, we are definitely not going to impose a ban on its import. The response from Thailand is awaited,” said a commerce ministry official to The Business Standard.

India has raised import duty on gold on account of widening Current Account Deficit. However, Thai jewellery imports account for a mere 0.02 per cent of overall gold imports into the country, the newspaper noted.

But the hike in customs duty of gold may accelerate the trend as EHS or Early Harvesting Scheme helps Thailand to have almost 0% import duty on gold jewellery. (It bears the condition that some 20% of value addition should have taken place in Thailand so as to prevent routing of exports through Thailand.)

“Now that the government has frozen the rate under EHS, it will not be able to re-impose the duty. To do that, they will have to restart the negotiations from the beginning under FTA talks, said Ajay Sahai, director-general, Federation of Indian Export Organisations ( FIEO) and was quoted by The Business Standard as saying.

For the period spanning April-November 2012, gold jewellery imports from Thailand were valued at $92 million against just $13 million for the entire financial year of 2011-12.

That is a miniscule figure compared to $56.5 billion in FY12 in total gold imports by India.