Gems & jewellery industry’s apex body GJF demands immediate end to ‘Gold Control Raj’ imposed by the Government
GJF seeks immediate abolition of 80:20 formula for gold import; & reduction of gold import duties to 2%
- GJF expresses disappointment at Government’s complete ignorance of the G&J industry, which had a size of Rs. 400,000 crore (in 2013) & employs over 2 crore people
- GJF demands that gold should not be single handedly held responsible for CAD
- GJF urges Government to discourage smuggling of gold by bringing in right policies
New Delhi, February 26, 2014: The All India Gems and Jewellery Trade Federation (GJF), the national trade federation for the promotion and growth of trade in Gems and Jewellery (G&J) Industry across India, and all major G&J Trade Associations, has demanded an immediate end to the Gold Control Raj and abolition of the 80:20 formula for gold import introduced by the Government in July 2013. GJF has also demanded a reduction in gold import duties 2% from 10%.
GJF and all major G&J Trade Associations, who jointly represent over 3 lakh jewelers & 6 lakh industry constituents in India, expressed complete disappointment over the Government's ignorance of the industry, which had a size of Rs. 400,000 crore (in 2013) and employs over 2 crore people. The Gold Control Raj has resulted in the Indian Gems & Jewellery Industry facing the worst-ever crisis and a battle of survival. The industry is facing problems such as shortage of gold for manufacturing jewellery for domestic and export markets; high premiums; joblessness/ unemployment; high import duties, imbalanced gold distribution, customs procedural delays. Our policies are building up business in neighbouring countries from where gold jewellery is smuggled in tons and resulting in creating a parallel economy. The Union Finance Minister didn’t even mention the G&J industry in his interim Budget presented recently and totally ignored the Gems & Jewellery sector and the sad plight of lakhs of artisans, craftsmen and goldsmiths.
Mr. Haresh Soni, Chairman, GJF, said, “It’s time for all of us in the industry to unite and take some concrete steps to enforce action. Gold should not be single handedly held responsible for CAD (current account deficit). The Government must clarify its stand on how much it can afford to spend on import of gold for satisfactory CAD position. The Government should curb smuggling and not allow monopolies to benefit a few people and agencies. The Government must allow consignment gold imports to ensure fair open market controlled business. We urge the Government to keep import duties on ready finished imports moderately high to protect Indian industry, still not banning imports.”
Why 80:20 formula for gold import is not workable and the problems it has created…
- The 80:20 formula for gold import has linked domestic jewellery manufacturing to exports, which is not feasible
- The 80:20 Rule has created more paperwork and confusion but not facilitated the requisite supply of basic raw material. It has led to shortage of the basic raw material – gold
- It has also led to procedural delays in customs clearances and transit problems for jewellers. Customs are taking too long to clear the consignments which are ultimately affecting the import of fresh consignment of gold in the country by the nominated agencies.
- Since the entire control of gold supply rests in the hands of the banks/ nominated agencies, there is no assured or definiteness on regular supply of gold and even allegations of favouritism
- Jewellers have to bear a sharp increase in financing cost of gold, which has risen to 12-13% as compared to 2-3% in neighbouring countries
- Increasing costs and uncertainty over raw material supply are helping neither exports nor the domestic manufacturing sector besides jeopardising the entire demand and supply chain.
- The 80:20 Rule has made finished goods manufacturing more expensive and it is cheaper to import finished jewellery. The gap/ differential between the finished products and raw materials has to be atleast 10-12% in the absence of which, it becomes attractive for Indian jewellers to import jewellery. Since Import duties gap has reduced, jewellery imports increased
- Sales to NRIs have reduced drastically during Q3 & Q4 FY2014 whereas neighbouring countries have posted a huge growth.
- Due to the Gold Control Raj, manufacturing in India has reduced or come to a standstill while that in neighbouring countries has witnessed a sharp rise
- ‘Gold Control Raj’ increasing instances of gold smuggling resulting in the return of the Crime Syndicate; ultimately funding unscrupulous elements and activities such as terrorism
- The cost of exports have risen substantially due to huge Bank Guarantee that the exporters now have to keep as a cover for 10% import duty on gold
- Due to scarcity of gold and lack of consumer demand, Indian craftsmen, kaarighar, artisans, who live on jobwork, are finding it difficult to survive as there are no jobworks available
- The government is reluctant to start the Replenishment scheme which used to account for 30% of the exports of gold jewellery from DTA in the country. On the present each kg exported will mean 4 times the import and so restrict such export also.
GJF & all the major G&J Industry Trade Associations have demanded the following…
- Abolish the 80:20 Rule for gold import and keep import duties low. The Government should set limits for imports and review yearly. Currently, it should keep gold imports to around 600 tonnes
- Gold Jewellery production is intrinsic to India and closely linked to the country's arts and culture; and therefore should not be curbed by the Government or RBI. Preserve the rich culture and craft of the 2,000-year old G&J industry
- Revoke restrictions on gold loans under SBLC (Standby Letter of Credit). Gold Loan Financing module is followed by most of developing countries and it is seen as a good price hedging mechanism to manage high international volatility in rates. This safeguards jewellers inventory and finances as the sector is always under tight monetary limitations
- The Government shouldn’t single out and target G&J Jewellery industry. The Government should stop seeing the G&J industry as the sole culprit of CAD
- The Government should stop other oppressive policies that result in increasing smuggling and lead to the emergence of anti-social and unethical business practices
- Abolish policies, which are against the organized G&J trade and discourage the industry from getting organized and more professional
- The Government should keep a minimum of 10% gap between raw material and finished goods to keep the trade alive. Create a fair open market controlled business
- Stop policies leading to unfair distribution of raw material in the industry and creation of a monopolized business practice
- Stop making transit of raw material a major issue wherein despite having official documents, bonafide and certified documents, G&J goods are unnecessarily delayed which costs dearly
- Government’s urgent intervention is needed in getting the RBI (Reserve Bank of India ) to clear the Rashtriya Swarn Nivesh (RSN) Scheme proposed by the GJF for unlocking the idle domestic gold for the circulation of manufacturing purpose. Although the scheme has been approved principally, it has not taken off, even though one of the leading banks is ready to take it forward
- During the interim budget the Government has allocated Rs. 1,000 crore for training human resources and producing skilled artisans and craftsmens under the National Skill Development Council of India. When the trade itself is going thru critical times and facing sustainability issues and stagnant how is the G&J Industry going to absorb trained manpower?
- Recognise gold is best social security and better than any other social security programme. Jewellery is a value added commodity that helps bring employment, preserve craft and culture
- From custom duties collected for gold and diamond imports allocate and distribute 25% to encourage manufacturing and exports. Additional support to manufacturing and exports will develop focus to help raise foreign exchange
- Allow imports and re-export of gold. Make India the hub for gold trading. Move London and Dubai trading to India. India should fix global gold rates instead of London
About GJF: GJF is the national nodal and the largest single trade body in India for the promotion and growth of trade in gems and jewellery across India. It represents over 6,00,000 players comprising manufacturers, wholesalers, retailers, distributors, laboratories, gemologists, designers and allied services to the domestic Gems & Jewellery industry. The Gems & Jewellery industry is a hand crafted and labour intensive with over 1 crore strong labour force engaged in the manufacturing of jewellery industry in the domestic sector. The industry size is estimated to be in the region of Rs. 4,00,000 crore. The Federation’s mission is to support and promote the progress and prosperity of all the members in the gems and jewellery industry across India. It also provides regular news updated on notifications, rules and regulations declared by the Government. It promotes the trade, by participating in promotional events on a national level. It encourages the trade through the organization of consumer exhibits in India. It also counsels educational and research institutes that help in developing superior quality and high standards for effective functioning of the trade.