Gold supply policy for jewellery exporters liberalized

Dilip Kumar Jha | Mumbai | September 28, 2013 Last Updated at 21:40 IST

Now, jewellery exporters would have easy access to gold, and this would help increase exports With the relaxation in gold supply norms, jewellery exports from India are set to rebound in the coming months.

On Friday, the Directorate General of Foreign Trade (DGFT) agreed to all the suggestions of the Gems & Jewellery Export Promotion Council (GJEPC) for smooth supply of gold to exporters.

In the April-August 2013 period, gold jewellery exports from India fell 57.12 per cent to Rs 15,609.54 crore from Rs 36,404.17 crore in the corresponding period last year, primarily due to unavailability of gold for exporters. The unavailability had resulted from import restrictions by the government, aimed at containing the country's current account deficit. Now, jewellery exporters would have easy access to gold, and this would help increase exports. Since the supply restrictions were implemented on July 22, a huge quantity of imported gold has been held at ports. Importers continued to pay demurrages; a number of export orders were cancelled, leading to huge losses for jewellers. This led to losses of at least Rs 25,000 for

jewellery exporters for every Rs 1 crore of exports. The loss multiplied for diamond jewellery exporters, owing to higher costs of manufacturing. "The gold export business will come on track now, with the fresh clarifications issued by DGFT. We will be able to receive gold smoothly, as all hazards have been cleared," said Pankaj Parekh, vice-chairman of GJEPC. A recent Reserve Bank of India (RBI) circular mandates the supply of 20 per cent imported gold to exporters. Jewellery exporters were afraid a higher quantity would be denied to them. And, banks were keen to supply only 20 per cent under the central bank's 20:80 formula. But now, jewellers would be able to secure higher quantities if they needed to, Parekh said. Another major issue was documentary evidence proving inward remittance of foreign receivables of jewellery exports, showing the use of the first lot of gold procured from banks. This was required to secure a third lot of gold for jewellery exports, irrespective of the quantity. GJEPC argued exporters would have to wait for at least 280 days from the date the first lot was secured; this included 90 days of jewellery making, 180 days of inward remittance and 10 days of procedural delays. This would not only make business unviable; also, exporters would have to opt for new business. Now, DGFT has clarified a proof of exports would suffice and make jewellers eligible for a third lot. "Another big hurdle was the supply of gold from bonded warehouses. Since the record is maintained both by customs and banks, the onus of the proof of gold supply should not lie on customers. With the undertaking given by customers, banks will now be able to supply gold without seeking clearances from multiple authorities every time," said Vipul Shah, chairman, GJEPC.

Now, the ex-bond bill of entry wouldn't have to be filed every time, as mandated by the Customs earlier; a one time receipt would suffice, said Shah. With these clarifications, both gold and diamond jewellery exports were expected to pick up soon, Parekh said.

August gold jewellery exports up vs July, seen rising ahead

Reuters Sep 24, 2013, 05.23PM IST

(Gold jewellery exports) MUMBAI: Gold jewellery exports climbed in August from the previous month on improving U.S. demand even though exporters faced tight supplies of the metal on central bank steps to tackle the rising trade deficit. Exports could climb in the coming months as the Reserve Bank of India has tied metal imports by the world's biggest bullion buyer to its overseas shipments and the government recently clarified how the rule will work, potentially easing the tight supply situation for exporters.

India exported $561 million worth of gold jewellery in August compared with July's $441.4 million, the Gems and Jewellery Export Promotion Council (GJEPC) said in a statement on Tuesday. In tonnage terms, this would mean 12-14 tonnes depending on quality.

"Exporters were using their old stocks... August to November have generally been stronger months, and we have seen more sales to the U.S.," said Colin Shah, managing director of Kama Schachter, a gold jewellery exporter based in Mumbai. India's efforts to stem buying of gold, the second-biggest item in its import bill, and protect its currency include a rule that 20 percent of all imports must be turned around and sold for export as jewellery. But confusion over how the rule would work had virtually stopped imports since the end of July. They are expected to resume soon after a high-level meeting of government officials last week to clarify the rules. "Right now, their issue is getting the raw material even if they have export orders. From October onwards, exports will recover after exporters start getting delivery of the yellow metal from the banks," said Shah. Most banks would re-start placing orders with their suppliers after their stock, which is estimated to be at about one tonne, is cleared by the customs department at the airports just ahead of the peak Christmas season. A majority of India's gold imports are made through banks. India shipped out $2.68 billion worth of gold jewellery in value terms from April to August, down 59.4 percent on year. Total gems and jewellery exports fell 13.4 percent to $13.84 billion during the same period. Exports usually total only about 60-70 tonnes per year and compete for markets from the Middle East to the United States against jewellery from Thailand and Turkey. India had imported a record 162 tonnes of the metal in May, about three times the normal monthly average. Imports totalled more than 380 tonnes in April-July. India's total gold imports could now be below 750 tonnes in the year to March 2014, Arvind Mayaram, economic affairs secretary at the finance ministry said last week, about 60 tonnes per month under the new rule. Silver jewellery exports rose 68 percent to $120.11 million in August on year, and jumped 143 percent in April to August to $634.16 million.

"Exports of silver jewellery will continue to rise as a majority of the jewellers who are in fashion segment have turned to silver," said Ariez Tata, managing director of Mumbai-based Yash Jewellery, which ships 75 percent of its output to the United States.

To push gems/jewellery export, duty refund rate raised by 31%

shishir.s@thehindu.co.in (This article was published on September 16, 2013) The Saumitra Chaudhuri Committee had suggested a revision on the basis of parameters such as prevailing prices of inputs, rates of duty and value of export goods. In an effort to boost gems and jewellery export, the Finance Ministry has raised the duty refund rate by nearly 31 per cent, compared with June. The incentive scheme, better known as duty drawback, now stands over 100 per cent higher than last year. Duty drawback allows the exporter to get back the duty paid on an item when it is exported. The duty drawback rate on gold jewellery now stands at Rs 227.20 per gram of net gold content, against Rs 173.20 in June, and Rs 100.70 in 2012-13. The rate has also been revised for silver jewellery to Rs 3,436.80 a kg of net silver content, against Rs 2,590.80 in 2012-13. The new rates will be effective from September 21. The rates have been revised to neutralise the increase in import duty on gold and silver. During the current fiscal, the import duty on gold has been revised twice, the latest one on August 13, when duty was raised to 10 per cent from 8 per cent. On the same day, import duty on silver was raised to 10 per cent from 6 per cent. This was done to curb imports to check the rising current account deficit.
Total drawback

While announcing the new rates, the Finance Ministry said the Government would continue to support exporters with substantial total drawback. The rates were revised on the basis of the recommendations of the Saumitra Chaudhuri Committee, which suggested a revision on the basis of relevant parameters, such as prevailing prices of inputs, rates of duty or tax and value of export goods.

The increase in duty has been factored in in the revision of duty drawback, Ajay Sahay, Director General of the Federation of Indian Exporters (FIEO), told Business Line, adding that this would encourage gems and jewellery exporters. Total exports turned positive in the end of August, but gems and jewellery export are still negative. However, Sahay expects that with the revision in drawback rates, annual exports of this sector will also register a positive growth. The Commerce Ministry did announce that overall export grew by nearly 13 per cent in August, but it is yet to give out sector-specific data. However, data till July show that gems and jewellery registered positive export growth in April, but was negative for the next three consecutive months. Sahay said it was expected that September data would show positive results.

RBI relaxes foreign currency lending norms for jewellery exporters

Diamond World News Service , Sep 27 2013 5:01PM

The Reserve Bank of India (RBI) has relaxed foreign currency lending norms for jewellery exporters. It has asked banks to re-allocate export credit in foreign currency, based on a bank's policy to cover currency fluctuations. This may either raise or lower the rupee equivalent of the foreign currency component of export credit. The relaxation came amid complaints by jewellers they were unable to meet export commitments due to the rupee's steep fall against the dollar. As a result of the fall, jewellery exporters' credit limit was also squeezed, as this limit is sanctioned in foreign currency, depending on borrowers' financing capability, export volume, annual turnover, etc. Alternatively, banks may denominate the foreign currency component of export credit in foreign currency to ensure exporters are insulated from rupee fluctuations. The foreign currency component sanctioned, disbursed and due would be maintained in foreign currency. Vipul Shah, chairman, GJEPC said that there is nothing new in the RBI guidelines and that there will be no impact on jewellery business.