Joy Alukkas, leading jeweller, said the grey business had swelled largely because of the restrictions and the attractive margins offered to the smugglers.

In times of extreme scarcity, sources of the yellow metal in the State have a colour code of their own, these supplies being described in the market as white and grey.

Facing acute shortage of gold, big and small jewellers depend largely on recycled gold, which may be used by some unscrupulous business houses to mask gold gotten from the grey market, which has continued to thrive as a parallel economy even during more benign times for gold business.

These, however, are not benign times for the white market. Restrictions like 100 per cent cash margin on imports and duty of 10 per cent plus 0.3 per cent cess have created a situation in which “the tap has gone dry overnight”, said Ram Mohan Kamath, Secretary of Calicut Bullion Dealers’ Association on Tuesday describing how there is a crippling shortage of gold in the market for jewellers, big and small.

Though the heavy duty and restrictions were brought in to curb import of gold in the face of mounting current account deficit, there is a swelling market involving gold legally brought in by non-resident Indians. The NRIs bring in small quantities because they have a limit of up to one kilogramme, said Mr. Kamath.

However, once these small quantities of gold are sold to businesses in the local market they may vanish from the open system or the white market, which is fully accounted for. An industry insider called this the grey area.

Joy Alukkas, leading jeweller, said the grey business had swelled largely because of the restrictions and the attractive margins offered to the smugglers. He, however, said that exporters were able to source sufficient gold because of the current stipulations on the exim trade.

He pointed out that gold business, meaning retailing, had come down substantially during these months. Some big houses might have experienced up to 50 per cent drop in sales, said Mr. Alukkas.

Gold trade was down between 40 and 50 per cent now, he said comparing the current financial year with the last one because there was only a trickle of legal gold supply, said Mr. Kamath.

This has resulted in Indian market offering premiums ranging between $120 and 150 on an ounce of gold, said a commodity analyst in the city explaining why there was an unending train of gold carriers coming into India from countries in the Gulf, Malaysia and Sri Lanka.

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