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Mandatory Hallmarking: Biggest opportunity to regain customer confidence

Neelambari Dasgupta, Bullion Bulletin

The Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, Government of India brought out the Hallmarking of Gold Jewellery and Gold Artefacts Order 2020, on 15th of January 2020 (please refer to page no ).  According to the order, from January 15, 2021 every article of gold and gold artefact weighing above two grammes and meant for sale in Indian market must be hallmarked (of purity 14, 18 and 22 carat only) and must be sold only by registered jewellers through certified sales outlet. Gold article meant for exports, bought under consignment for hallmarking and reexport and gold articles for use in medicine, dentistry, veterinary, scientific or industrial purpose are not covered under the order.

Is it possible to hallmark all the jewellery produced?

According to Mr. Harshad Ajmera ex-president of Indian Association of Hallmarking Centres, there are 900 Hallmarking centres in India, each with a capacity to hallmark 2020 pieces of jewellery per day. At present many of them are used only at 10-15% of their capacity. In FY19, out of 1,000 tonnes of gold consumed in the country, about 450 tonnes were hallmarked. Around 100 new hallmarking centres are in the pipeline, especially in states where there are no centres now. So, with the existing facility and the proposed new centres, it is possible hallmark every piece of jewellery produced in India for domestic market. Thus, hallmarking centres would not be a constraint.

Taking clues from the discussions at IIGC 2019, for hallmarking purposes, should we move completely to XRF based methodology in our hallmarking centres? The argument is, hallmarking centre only test whether a given article is of certain purity level or not? Hallmarking does not measure the exact gold content in an article. So, fire assay need not be mandated at hallmarking centres. It is important for the industry to sit with authorities and decide on this aspect now. Based on the outcome, additional capacity requirements can be decided.

Registration of jewellers- big task ahead, although doable

Conservatively, it is estimated that there are about 100,000 jewellers in India. Some put the number at 300,000. It is difficult to put an exact number to it. Even assuming the number of jewellers at 100,000, only 30,000 jewellers of them are registered with BIS Hallmarking Scheme.

So, there is an urgent need to register the remaining jewellers. Associations at local, regional and national levels have to play a very important role in getting the jewellers on boarded. This can be using awareness programmes as well as strict enforcement measures.

Benefit to the jeweller, especially small jeweller

Mr. Surendra Mehta, National Secretary, India Bullion & Jewellers Association (IBJA) said, “Mandatory Hallmarking is brilliant step taken by government after almost 19 years to protect the interest of consumer. Hallmarking is prevalent in many other countries to protect consumer rights and assure delivery of promised quality jewellery. The mandatory hallmarking will bring a level playing field between big and small jewellers as same purity of material will be available at both retail outlets. In fact, it will help small jewellers as they would be able to compete better in terms of pricing with big jewellers due to their lower operating costs.”

 

Are jewellery manufacturers ready?

Mr. K. Srinivasan, Managing Director of Emerald Jewel Industry India said, “Manufacturers should be very careful to ensure that purity should not be less than 91.6% in case of 22 carat. Although gold content is measured of finished goods, a manufacturer should be very careful in maintaining the purity at every stage of manufacture. Using right machinery and right processes are key to ensuring the right purity in the finished goods. Using an ERP solution greatly helps large manufacturers such as ourselves in quality assurance as well as in nett weight.”

What about small manufacturers? The level of preparedness could vary. Targeted approach to educate and upgrade manufacturers may be attempted, although it could be a long-drawn process given the diversity and product range a manufacture makes.  This could perhaps be the toughest part also as there is an extensive practise of job-work within the industry.

Awareness on Hallmarking low: Needs huge investments in smaller cities and rural areas

Mr. Debajit Saha senior analyst-precious metals demand, GFMS, says, Hallmarking gives consumers an assurance regarding purity of the gold ornaments they bought, but awareness is lacking. In the study of GFMS, it was observed that, virtually no hallmarked gold jewellery sold in the smaller cities and rural areas. Consumers are often unaware of hallmarking system. It was also found that some suspicious jewellers who are selling under carat jewellery with hallmark claims, who are cheating the customers across the value chain. This is largely happening in eastern and some parts of northern and central India. But in South India the consumer awareness is high as compared to rest, so the situation is much better.  Mr. Saha mentioned, that in the field study across the country, the jewellers are selling 916 purity jewellery to customers but those are often not more than 80% pure.

 

 

 

Traceability: A big challenge in the current system, but technology can come to rescue

In the current scheme of things, although it is mandatory to put the house mark of the jeweller as well as hallmarking centre, on really small pieces of jewellery such marks become indistinguishable and difficult to decipher. This would make enforcement difficult, if not impossible. Technology based solutions such as digital marks linked to a distributed public ledger system such as blockchain could provide answer to it. Government is already taking steps in this direction. Traceability is most important aspect of the entire programme not only to assure customers but also to identify and punish offenders.

Mandatory Hallmarking: a unique opportunity for industry to demonstrate leadership

As seen above, mandatory hallmarking implementation roadmap would involve all players along the value chain starting from supplier of metal (refiners or banks), jewellery manufacturers, wholesalers and retailers, hallmarking agencies and government agencies. National bodies such as IBJA, GJC, GJEPC and IAHC can form a special taskforce specially for implementing the Mandatory Hallmarking programme. World Gold Council can support government and private initiatives in creating awareness campaigns and programmes across India over the next 12 months. Infrastructure such as Precious Metals Assay and Training Centre (PMATI) can be used to provide skill upgradation training to staff in existing hallmarking centres and also additional resources to jewellers.  The jewellers should be persuaded to use the opportunity to align themselves with the government objectives of bringing transparency, assure quality and adopt digitization.

The jewellery demand in India is not growing. Part of the problem is decline in the trust factor, most of it is either on account of under-caratage or under-weight or lack of transparency in pricing. Mandatory Hallmarking would provide an opportunity to correct two of the problem areas. If the industry associations convince their members about the potential impact of wholehearted adoption of the programme, then revival of demand growth for gold jewellery is sure to happen. This is the best opportunity for the industry to demonstrate leadership and win the customers back.

 

Disclaimer: Views are personal and not the views of the publisher.