The gold smuggler, for long the villain in Tamil films, may return if jewellers' fears come true. Jewellers in the city feel that the Union budget proposal to increase customs duty is likely encourage smuggling of the precious metal from other countries. The proposal is to increase duty from two to four per cent for gold coins, bars and platinum and to levy one per cent excise duty on unbranded jewellery.

Until last year, we paid one per cent of the value of gold purchased, as customs duty. It was increased to two per cent in January. In three months, there has been a three-fold increase. This would mean a significant difference between the international price of gold and that of the gold sold here. The government has opened doors to smugglers who would want to make a profit of the situation, said a member of the Tamil Nadu Jewellers Federation.

Jewellery showrooms opened on Tuesday after a three-day strike, perhaps the first one in many years. The strike was against the budget proposal. The annual gold consumption of Chennai is nearly 100 tonnes, according to jewellers in the city. Gold prices in the city are determined by several factors, including charges payable to banks, as well as freight and insurance charges, which would increase the price by seven to eight per cent , said L.K.S. Syed Ahmed, Chief Advisor of the Tamil Nadu Jewellers Federation.

Yellow metal being sold at Singapore or Dubai will become cheaper compared to that sold here. Now, many jewellers import gold from London or Dubai through official channels, he said.

Another emerging point of concern is that the move would lead to more harassment from government departments. We would have to maintain more separate accounts of the transactions and register with various departments. Tax collected at source from customers purchasing gold worth more than Rs.2 lakh, which will come into force from July 1, will discourage people as they would fear harassment from government departments. Apart from the usual record of name and address, we have to insist they produce a PAN card, said a jeweller in the city. Meanwhile, jewellers belonging to All India Gems and Jewellery Trade Federation propose to approach members of Parliament to insist on a rollback of the proposals made in the Union budget. A resolution to this effect was taken at a meeting held in New Delhi on Tuesday.

N. Anantha Padmanabhan, the federation's regional chairman who participated in the meeting, said, Merchants will now have to pay nearly Rs.1.20 lakh as duty fee to import one kg of gold. We are also planning to send telegrams to Union Finance Minister Pranab Mukherjee on this issue. Goldsmiths would also be harassed to furnish details about large customers. The loss of business in the city owing to the three-day bandh was close to Rs.150 crore, he added.