Dual Policy Measures to Rescue Domestic Gems & Jewellery Trade

The All India Gems and Jewellery Trade Federation (GJF), the national trade federation for the promotion and growth of trade in Gems and Jewelry Industry across India, has written to the Union Finance Minister Mr. P. Chidambaram and has strongly advocated immediate reforms as following:
1) Bring back SBLC and other credit buying of gold. Advance payment or COD restrictions may be lifted;
2) Reduce import duty to 5%.

In a letter to the Finance Minister, Mr. Haresh Soni, Chairman, GJF, said, “When the gold import is restricted under 80:20 scheme, there is no way the import of gold is going to mount until and unless there is a growth in overall exports. As such, we request you to allow SBLC (Gold Loan) scheme for the jewelry manufacturers, wholesalers and retailers. This practice was followed in the recent past. However, this practice is prevalent in many countries due to the volatile gold prices and also supports the jewelry manufacturers, wholesalers and retailers in the way of working capital facility and as price hedging mechanism.”

“Secondly, due to high premium being levied on import of gold, there is a spurt of gold smuggling across the country which the media has been reporting for quite some time now. We assume that time is not very far that this sector will be governed by unscrupulous people and anti-social elements. This parallel economy will damage and ruin the basic fabric of this industry. Many entrepreneurs have spent money in creating infrastructure for producing world class jewelry. Handling of this jewelry sector in this manner will result in huge economic loss and unemployment. In view of the above points, and as a responsible trade body, we earnestly advocate above in the interest of trade and government,”

Due to shortage of raw material supply high premium is being levied on gold import, moreover there is unavailability of custom bonded warehouses at prominent locations within the country making it further more difficult to procure raw material. Also due to shortage, unavailability and high premium on raw material, artisans have become jobless and are unemployed despite festive and wedding season which is the point of earning livelihood for Lakhs of families associated with the trade. In the recent times it has also been noticed that due to the higher duty gap in international and domestic market, NRI business has been shifted to other potentially viable avenues. Several prominent jewelers from across India has also conveyed about the sharp decline in gold jewellery sales including sales of coins and bars as witnessed during festive season in 2013.

West Bengal
Mr. Bacchraj Bamalwa, immediate past Chairman, GJF Regional Chairman (also proprietor of Nemichand Bamalwa & Sons, Kolkata), said, “Dhanteras 2013 was very bad and sales reported was 15-20% down in most areas and 40-50% down in other areas. There was a wild fluctuation witnessed as gold prices came down very sharply from Rs. 32,000 to ` 27,000 and then went up to ` 33,000. People preponed wedding purchases to April and May during Akshaya Trithiya. During festival season 2013, consumers restricted purchases to pure symbolic ones. They preferred lightweight jewellery this festive season. Last year, jewellers sold more gold coins but this year investment buying didn’t really happen. Consumers were confused due to the negative publicity by the Government urging people not to buy gold.”

“The global trend reversed and the US economy improved leading us to believe that gold prices wouldn’t increase. We have seen one of the longest bull runs over last 10-12 years and correction bound to happen. International prices are in the range of USD 1,900 to USD 1,300 and correction of 35% is expected. This is not reflected in domestic prices. There is a supply crunch and premium zoomed to USD 100-120 from USD 2. Since there is less amount of gold imported. 10% import duties and 10% premium results in 20% price differential. Jewellers are not complaining about the shortage of gold because the demand is not much. The premium is equal in grey market and the imported channels. I am also not optimistic about sales increasing during this long wedding season as many have bought gold jewellery during April. If smuggling increases, it will destabilises economy,” Mr. Bamalwa added.

Mr. Zaverilal V. Mandalia, GJF Regional Chairman –Gujarat, (proprietor of Zaveri & Co.), said, “In Gujarat, we witnessed very few customers during this festive season. In 2013, Akshaya Trithiya was the best period and we doubled sales as gold prices were ` 26,000 as against ` 33,000. During Dhanteras, sales dropped 50-75% in some areas whereas they were 40% down in Gujarat State. During Diwali, consumers purchased mix and match jewellery with a lot of plain and light weight gold jewellery. Gold supply is available at a premium.

Tamil Nadu
Mr. N. Anantha Padmanabhan, GJF Regional Chairman – Chennai (proprietor of NAC Jewellers Pvt. Ltd.), said, “This time, festive season was very very poor. Consumers didn’t buy much jewellery except for light weight jewellery and the fall in sales was around 40%. The reasons included high gold prices, bad economy and inflation. People were spending more on onions. There was a premium on gold and this is killing indigenous trade. Gold is being smuggled into India and the organized sector jewelers are suffering. Casual purchase or impulse buying is simply not happening.”

Mr. K. Srinivasan, GJF Regional Chairman – Rest of Tamil Nadu/ Kerala/ Pondicherry (proprietor of Emerald Jewel Industry India Ltd.) said, “Festive season 2013 was a total flop as sales were 40-50% down as compared to last year. There is no money and no business. Gold scarcity is a major problem resulting in no raw material supply and price fluctuations are compounding the problem. Diamond sales were regular and didn’t increase at all. Gold is available at a premium.”

Karnataka and Andhra Pradesh
Mr. GV Sreedhar, GJF Regional Chairman – Karnataka & Andhra Pradesh (proprietor of Shree Rama Jewels), said, “Earlier, we used to see customers flocking from 15-20 days prior to Dhanteras but this year we witnessed very poor business. We sold only small ticket sized items and light weight jewellery. Diamond jewellery sales were fairly good and so was silver jewellery. There was no proper supply of gold and we didn’t publicise gold coins. Metal supply is down and there is a premium USD 60-70 USD in gold. Gold smuggling is rampant and it’s back to the Licence Raj.

Mr. Vijay Khanna, GJF Regional Director – New Delhi (proprietor of Khanna Jewellers), said, “Business was 30-40% down during this Dhanteras. Gold jewellery did sell but only light weight jewellery was preferred. There is a change now after Diwali and the market is improving but there is a shortage of supply. We expect more diamond jewellery sales during the forthcoming wedding season. Premium on gold is around ` 700-800 but it was at a high at ` 1,500 during Dhanteras.”

Mr. Ashok Minawala, past Chairman and GJF Regional Director, (proprietor of Danabhai Jewellers & Sons) said, “Things started improving after Navratri but sales were generally down in different parts of the country as compared to last year. Certain regional pockets did well inspite of the slowdown. Sales for diamond jewellery were stronger and gave hope for the wedding season. Price of gold played a very important role and it was slightly on the lower side. With 10% hike in duties and overall 13-14% impact, we are afraid of what will happen to the supply side during the forthcoming long wedding season.”