Regulations stifling gold industry: Jewellers

The government might be deriving some consolation from declining gold imports from a high of $135 million a day in the first 13 business days of May (till May 20) to about $36 million in the next 14 days, but jewellers feel that the trade is suffering.

The biggest grudge is the move by the Reserve Bank of India (RBI) to permit import of gold under all categories only on 100 per cent cash margin basis on June 4, resulting in trade body All India Gems and Jewellery Trade Federation (GJF) meeting finance and commerce ministry officials in New Delhi on Thursday.

Speaking to Deccan Herald after the meeting, GJF Chairman, Haresh Chamanbhai Soni said, “The supply chain has been disturbed. There are certain ambiguities in the June 4 notification as a result of which banks (licenced to import gold) are not accepting new contracts or going slow. If official channels of import are affected, unofficial channels (smuggling) will get activated.”

He said that the impact of the 100 cash margin stipulation to moderate gold imports has spiked finance costs for jewellers. “Earlier, it used to range from $1-1.5 per troy ounce, these days it is about $5.5 to 6. This is affecting us.
”
He said the delegation also suggested the government to formulate a gold scheme to bring out idle gold lying with consumers to which it received a positive response.
Soni added that gold imports are down by about 30 per cent, partly because of the June 4 notification and also due to the lean season kicking in.

The 100 per cent cash margin on gold imports has resulted in gold difficult (to procure) and dearer for jewellers, which ultimately will have to be passed on to end consumers, said the CEO of Bangalore-based Abaran Jewellers and member of GJF's governing board, Pratap Kamath. “We have to make advance payment and wait for taking delivery, which takes about 3 to 5 days normal course. This has resulted in operating costs going up for us,"he said.

There are about 3,000 jewellers in Bangalore and the city consumes about 3 tonnes of gold every month, according to jewellers. India's gold imports stood at 162 tonnes in May and 144 tonnes in April this year, a substantial hike due to the record decline in prices but in the process driving the trade deficit to unprecedented levels.