Last Updated : 14 June 2009 at 06:35 IST

Lack of duty free gold hits India bullion exporters

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Commodity Online
MUMBAI: India's gems and jewellery exporters and merchants have called upon the new government to issue a series of incentives to boost the jewellery industry in the country.

In the recently held discussions with the Honorable Finance Minister, Shri Pranab Mukherjee, representatives from various export sectors put forth their issues, problems and expectations from the forthcoming budget. Representing the Gem & Jewellery industry, Mr. Vasant Mehta, Chairman, Gems and Jewelry Export Promotion Council (GJEPC), presented a plan that would not just help the Industry sustain its leadership position but enable it to grow.

Outlining the challenges being faced by the Industry - which included the threat from the growing influence of a highly competitive China; worldwide fall in demand; the increasing unemployment of its highly skilled and world-class workforce; and the volatility of Gold prices – Mr. Mehta presented a series of corrective measures that need to be implemented immediately to give a fresh thrust and boost to the G&J Industry.

The charter of expectations sought Government intervention as under:
• Increasing the flow of dollar liquidity to the industry which has a projected need of at least $3-4b in the coming year. Such additional dollar finance may be made available from the foreign exchange reserves of the country.

• Domestic funding at internationally competitive rates (LIBOR based) as opposed to the high interest rates being charged by the Banks at present. This can be facilitated with an interest subvention of 2%.

• The interest subvention of 2% on Rupee finance to be extended for Dollar finance also.

• Citing the peculiar nature of the Industry, characterized by daily price fluctuations, as a major cause for taxation dispute, the GJEPC has proposed the levy of a flat 1% Turnover Tax in place of all forms of current direct taxes, thereby doing away with arbitrariness, confusion and delays in finalization of tax returns. Owing to recessionary pressures, income on export earnings should be made tax-free for the next two years.

• Export credit limits sanctioned by the banks as on 01 April 2008 to exporters of the Gem & Jewellery Industry should be continued till 31 March 2011.

• The lack availability of duty free gold in many parts of the country severely constrains small exporters who find it difficult to procure their primary raw material and are unable to be competitive in the International markets. As a relief to them, the introduction of a duty draw back scheme for Gold Jewelry exports has been proposed by the GJEPC.

Emphasizing the need for these measures to be implemented on an immediate basis, Mr. Vasant Mehta said, “The recession has not only debilitated the Industry from inside, but has also led it to the precipice of non-competitiveness and loss of market share. The implementation of these measures will enable us to bounce back and re-establish our pre-eminence in the International markets and also ensure the long-term growth of the Industry. We are hopeful of a positive response to our recommendations and look forward to seeing these reflected in the coming budget.”

In another meeting called for by Honorable Minister of Commerce & Industry, Shri Anand Sharma, Mr. Mehta tabled some of the measures required to provide relief to the Industry. These include reduction in import duty on machinery from 10% to 5%; reduction in import duty on Plain Gold Jewellery below 22k form 10% to 5%; removal of import duty on Rhodium and Rough Coral; and Reduction in import duty on Precious Metal Scrap from Rs. 257.50 per 10 gram to Rs. 100 per 10 grams.

India is the world’s largest manufacturing centre for gems and jewelry and the Industry contributes over 12% to the total export earnings of the country and employs 1.5 million workers who are considered to be highly skilled and amongst the best in the world. The recent recession has rendered over 3-4 lakh workers jobless with many hanging up their tools to pursue other avenues. The GJEPC has proposed the setting up of a long-term welfare fund jointly with the Government, with the aim of providing these workers with employment guarantees, training and other benefits.