KATHMANDU, Nov 11: Black marketeering of gold has increased as yellow metal becomes scarce in the market. Officials of the Nepal Gold and Silver Dealers Association (Negosida) disclosed to Republica that some of the dealers were currently charging customers as much as Rs 1,000 more on a tola (11.664 grams) of yellow metal over its official retail rate.
Though dealers close their outlets on public holidays, they ran their businesses on Saturday as well keeping in mind Dhan Teras, which falls on Sunday, and Laxmi Puja due on Tuesday.
And some of the retailers charged their customers as high as Rs 61,099 per tola of gold, which is Rs 1,000 more than Negosida set rate.
“Yes we received complaints of some of the dealers forcing customers to pay Rs 1,000 more per tola,” confirmed Tej Ratna Shakya, president of Negosida. “As their act was unfair, we instantly instructed them to refrain from such acts,” he told Republica.
Dealers said the black marketeering has surfaced mainly because gold has become scarce in the market. According to them, gold demand has presently soared to around 45 kgs a day due to festive consumption and upcoming marriage season whereas supply from the banking system - the only official supply channel - continues to remain at 15 kgs a day.
“The short supply has been there since the onset of Dashain. But what has troubled us of late is that the supply chain has gone wayward because banks these days are supplying gold to dealers they are familiar with, overstepping the basic sales guidelines issued by the central bank,” said Shakya.
Under the existing guidelines, Nepal Rastra Bank (NRB) has set commercial banks to supply 60 percent of fixed daily quota to dealers in Bagmati zone and remaining 40 percent to the dealers in 13 other zones.
In Kathmandu (that is in Bagmati), banks have been asked to make supply based on the recommendation of Negosida, Gems and Jewelers Association and Handicrafts Association, among others. Supplies to be made in other zones should be based on recommendation of local Negosida and other agencies.
“But, unfortunately, banks in Kathmandu of late are supplying gold to dealers of other zones based on recommendations issued by agencies located outside the Valley,” said a dealer. And some of the Kathmandu-based dealers too are exercising their connections with banks outside the Valley and are acquiring gold supposed to be supplied to local dealers.
Such personal connections-based sales by the commercial banks have eroded the predictability of the gold supply in the market and created more problems for Negosida officials in managing the market, said Shakya.
That is not all. Scarcity is there because Negosida officials also suspect that a chunk of gold issued for local sales could be finding its way to the Indian market, particularly as payment for settling unauthorized cross border trade.
Government officials ruled out such possibility saying that gold in India was cheaper than in Nepal by Rs 600 per ten grams, and that payment through gold would mean traders would be paying more for the goods than they are required to pay.
But dealers like Shakya, however, argue differently. “IC 100 in the informal currency market, from where illicit traders mainly source the IC, is presently traded at Rs 168 -- Rs 8 higher than official rate. Hence, unlike the government´s assessment, our calculations is payment through gold becomes more profitable for financing unauthorized trade than currency,” said Shakya.
Negosida officials, including Shakya, said that their association has already reported their speculations and problems to the NRB rules, requesting it to correct the operations in the market.
In its suggestions, Negosida has asked the NRB to ensure that commercial banks are strictly adhering to its rules. It has also requested the central bank to increase the daily supply quota of gold in the market, and also increase IC supply in the system in order to do away with currency anomalies.