(Adds comment in fourth paragraph. For more on India budget-related stories, please click on {INEL }.) By Thomas Kutty Abraham and Madelene Pearson Feb. 26 (Bloomberg) -- India, the world’s biggest consumer of bullion, raised import duties on gold, silver and platinum to reflect higher global prices for the precious metals. Gold and platinum will each attract a tax of 300 rupees per 10 grams, from 200 rupees, and silver will be charged at 1,500 rupees per kilogram from 1,000 rupees, Finance Minister Pranab Mukherjee said in his budget speech. The levy on rhodium, used in polishing jewelry, has been cut to 2 percent from 10 percent. Gold climbed 24 percent last year, a ninth consecutive gain, as governments cut interest rates and spent trillions of dollars to bolster economies, and nations including India, China and Sri Lanka boosted bullion reserves. The increase in the import levy, which comes after the government doubled taxes in July, may curb jewelry demand, industry officials said. “The government has raised the tax on gold and silver for two years in a row and that’s not going to encourage consumption with prices at such high levels,” Suresh Hundia, president of the Bombay Bullion Association, said in an interview from Mumbai. The “decline in imports will be steeper this year because of the increase in duties.” Imports of gold this year may decline to 250 tons to 300 tons, from 343 tons in 2009, while that of silver may fall to 1,000 tons from 1,350 tons, Hundia said. Gold purchases this month are estimated at 28 to 32 tons, he said. Immediate-delivery bullion gained as much as 0.6 percent to $1,113.4 an ounce and traded at $1,112.50 at 2:55 p.m. in Mumbai. The price reached a record $1,226.56 on Dec. 3. April-delivery futures in India added 0.5 percent to 16,773 rupees per 10 grams at 3 p.m. local time. ‘Negative Impact’ The “surprise” increase in the tax may increase bullion prices, said Rajesh Mehta, Chairman of Rajesh Exports Ltd., the country’s largest producer and exporter of jewelry, in a phone interview from Bangalore. The duty will have a “negative impact on domestic demand,” he said. Gold demand in India fell 33 percent last year to 480 tons from 2008, according to the World Gold Council. Jewelry demand accounted for 405.8 tons, down 19 percent from a year earlier, the producer-funded group said Feb. 17. Silver for May delivery added 0.4 percent to $16.115 an ounce at 2:58 p.m. in Mumbai. The price has gained 24 percent in the last year. --Editor: Ravil Shirodkar To contact the reporters on this story: Thomas Abraham in Mumbai at tabraham4@bloomberg.net; Madelene Pearson in Mumbai on mpearson1@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net.

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