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'Govt should invest 500 to 1000 cr in R&D'

Monday, January 30, 2017

Prithviraj Kothari, MD, RSBL

A commerce graduate from the Mumbai University, Prithviraj Kothari MD, Riddi Siddhi Bullions Ltd (RSBL) has been in the family business of gold trading since over 30 years and counting. As one of the promoters, he has almost single handedly steered RiddiSiddhi Bullions Ltd. (RSBL) to the top 10 unlisted public companies in India. Gold, which has swayed enormously with the downturn of events during the calendar year 2016 and with the Indian Budget 2017 being on the roll, Kothari spoke to AD&C and gave an overview to what impact it could lead on the Bullion sector.

How significant has been the impact of demonetisation on bullion industry?
Industries of diverse fields have been affected by demonetisation. The banned on 500 and 1000 denomination notes had initially caused a huge chaos and since the circulation of new notes took over 2 months, the market had hardly seen any functioning during that time. Moreover, majority of the people had no clue of how to deal in a cashless economy as 86% of the Indians believe in cash transactions. Nevertheless, the alternatives are now being made to use such as debit cards, credit cards, mobile wallets or cheques. Circulation of new notes is gradually taking over the economy and within a span of one or two months, the scenario shall change for good.

How significant is goods and services tax (GST) for bullion industry?
Every state has a different set of rules and regulations to follow and to set up a new branch, one has to go through different stages of the procedural requirement to fulfill the necessities along with the taxation percent. With the implementation of GST, a centralised taxation system will reinvent. If a factory exists in one city, it can be operated from anywhere within the country with no extra taxes to be beared. The two main advantages that this would lead to is getting access to have complete control over operations in the most cost-effective way.

The government is focused on reducing import of gold. Has the time come to focus on gold mining in India?
Despite huge resources, total production from domestic mines constitutes between 1-3 tonnes out of India’s estimated consumption of 1000 tonnes. With custom duty being 10%, Gold import from unauthorised sectors leads to a huge difference between international and domestic markets. We have been trying hard to convince the government to bring down the custom duty to 5% or 6% which shall lead to a restriction of import from unauthorised sectors and in turn provide a support to the local industry.

With such issues, mining will remain just a dream for India...
Since the economy been opened from 1997, we have been dependent very much on the International market as India itself has no production of its own. Even the Indian Government is looking forward to pump up crore of rupees in Research and Development to make this dream a reality. Due to environmental issues, things are taking a long time to execute, but that shall eventually happen in the future.

The government has not yet reduced import duty on gold. Do you expect the same in the upcoming budget?
With the hike in customs duty to 10%, the current account deficit had raised drastically. But the hike was decided so as to lower the import of Gold within the country. For now, there is no issue of account deficit and there is also enough surplus and imports have reduced too. Therefore the government should consider lowering the customs duty with a view to increase the domestic market sales and export of gold too.

Are Commodity exchanges the best tools for hedging price risk? Is the current system of trade sufficient or the government should do something else?
See, any commodity exchange tool is used to cover a risk price so that overnight if there is a certain policy change or a rise or fall in the prices, you can be protected and face no loss during that phase. There are people who do speculative trading and and occur small amount of losses with hedging and I suggest them not to do so. Along with hedging, SEBI has put forth a suggestion of introducing option trading under commodity exchanges and probably within a span of 2 months, option trading shall also be allowed so as to reduce the risk to a great extent for small scale as well as large scale firms. Thus, to great extent, there would be support to the economy and in a way, the economy will boom.

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