UPA Chairperson Sonia Gandhi has asked the government to look into demands for a cut in customs duty on gold and relaxation of a rule linking imports of the metal with exports.

“You are requested to kindly look into the matter (demands of the gems and jewellery industry) for appropriate action,” said a letter written by the office of Ms. Gandhi to the Ministry of Commerce and Industry.

The All India Gems and Jewellery Trade Federation had written to Gandhi, demanding reduction in import duty on gold to 2 per cent from 10 per cent to encourage exports and curb smuggling.

The federation also demanded relaxation of the Reserve Bank of India rule disallowing inward shipments of gold unless 20 per cent of the previous imports are exported.

The rule has reduced imports and “broken the backbone” of the industry with short and erratic supply of gold, the federation’s letter said.

“Smuggled gold has now become available freely, which is corrupting the industry. There is a major crisis and chaos in the industry today. Current policies and regulations are not at all conducive to ethical practices... which is plaguing the entire industry,” it added.

Removal of restrictions on gold imports, the industry said, would provide relief to trade and industry, besides protecting the interests of millions of skilled artisans.

The government and the RBI had imposed restrictions on gold imports to contain the current account deficit, which soared to an all-time high of $88.2 billion, or 4.8 per cent of GDP, in 2012-13.