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India Good Delivery key for success Gold Spot Exchange

Surendra Mehta and Nilesh Gupta from IBJA

During IIGC 2019 Bullion Bulletin team met Mr. Surendra Mehta National Secretary, IBJA and Mr, Nilesh Gupta, Director IBJA and had a discussion on the current scenario of Gold Industry and what is expected from the Govt in future. Excerpts below.

In the union budget, the finance minister increased customs duty on precious metals including gold. For gold, this is the first increase after July 2013. What is the signalling effect that you see in this move?

Mr. Surendra Mehta: It was an unexpected move by the Government, the commerce ministry has been requesting the finance ministry for reduction in the customs duty. Even in the Niti Aayog report, one of the recommendations was for reduction in customs duty. In spite of all these, the customs duty was increased which was a surprising move. What I understand is that the Government has a lot of pressure on the revenue collection and hence they have resorted to this step.

Probably they want to bring down the import of Gold. In my opinion, the jewelers do not have any problem with the increase in customs duty because no jeweler sells jewelry at a discount. In fact, it is the bullion that is sold at a discount. I feel these things will get absorbed but it will take a little time. Unfortunately, Gold prices are also increasing so the 2.5% increase in customs duty has a double effect with increase in Gold prices.

Mr. Nilesh Gupta: Customer usually looks at the total amount. So, in my opinion, the quantum of gold jewelry purchase is likely to come down. But at the end, if you see, customers are happy with the gold price increase because whatever gold they are holding has increased in its value. So, if the retailer and manufacturer are crying about this hike in custom duty, it has no point.

In the last decade, Gold price has moved up from Rs 5,000 per 10 gm to Rs 30,000 per 10gm. That is adding to the kitty of the customer. So, any investment in the Gold is good from a customer’s perspective.

India Good delivery is the key to spot exchange, what are your thoughts on that?

Mr. Surendra Mehta: For the spot gold exchange, the blue print is released by the steering committee of the World Gold Council. The entire country is united on this idea so that the gold trade becomes totally regulated as it is in other countries such as China and UK. The key factor for the success of spot gold exchange would be India Good Delivery, which should be approved by BIS.

Mr. Nilesh Gupta: Quality assurance has been one of the dominant issues faced by the industry. The industry is unable to win the trust of new customers, many of whom perceive it as an unregulated industry. So, we have to get a regulation in the industry, where norms are set in a transparent manner and the norms are strictly followed. Through India good delivery we are trying to bring all the variables within set parameters.

Mr. Surendra Mehta: So the success of the exchange depends on two-way transaction, the exchange should not only buy and deliver it should also be able to sell and deliver. So exchange can only be successful with India good delivery. Since the blue print for exchange is released and blue print for India good delivery is also released a year back by IBJA and has been handed over to BIS, we hope it will come out with very own standards once it gets approved by the Government.

 

Can compulsory hallmarking enable a small, single store family owned jeweller to compete against organised multiple location corporate?

Mr. Nilesh Gupta: Hallmark has not been mandatory yet, but IBJA always endeavours to bring accountability, transparency and clarity in trade and making hallmarking mandatory is a welcome step in the process. Because until and unless you make our jewellery hallmark there is no quantification of purity and plus there is no supervision of any regulating authority. So irrespective of the size of jeweller hallmarking should be made mandatory.

Mr. Surendra Mehta: Gold is not a consumable item, which means it’s an investment product. Even the jewellery is an investment product. The labour charges you pay in the jewellery is because you want to use that jewellery. Gold can be melted no matter in what form it is and the price can be recovered at any point of time. So, from my point, one cannot cheat customer in an investment product. You have to give the exact precision as written in the bill or invoice, whether its 22k or 18k. So the trust can only be build up with hallmarking.

The jewellery market is in transformation. Probably it will take another year or two for jewellers to understand what the Government is intending to. The jewellers who are not fulfilling the commitment, the jewellers who cheat customers will no longer exist. It’s time to reorganize and reinvest themselves.

Anything you would like to say to the Industry?

Mr. Surendra Mehta: Gold will remain an essential part of everyone’s life, I don’t see the consumption of Gold going down. For all the customers the jewellers need to explain that gold jewellery is an investment product and not a consumable item. May be a prices are little more fluctuating but in future we are heading for a very good gold market.

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