India’s gold trade in meltdown over new hallmarking rules

India’s US$60 billion gold jewelry industry is in chaos after the Narendra Modi government suddenly imposed new hallmarking rules.

Hallmark stamps represent the purity, jeweler, hallmarking center and Bureau of Indian Standards (BIS) and are recognized internationally.

The problem lies with a new standard to be introduced, known as the Hallmarking Unique Identity (HUID), which was made mandatory in July. Thousands of small businesses must hallmark their products for the first time, causing huge new bottlenecks.

Jewelers say the industry could collapse under a cumbersome process in which each item must be uploaded on to a portal with its weight and a request for hallmarking.

Businesses have been left collectively with millions of dollars of stock they can’t sell while they wait, possibly for more than a year, for it to be hallmarked. Traders in remote areas face hurdles uploading details online due to poor connectivity and unfamiliarity with the technology.

Gold has a central role in Indian culture as a store of value, a symbol of wealth and status and a fundamental part of many rituals. The country is one of the largest global markets for gold, and growing affluence is driving growth in demand.

The new rules will introduce a six-digit alphanumeric code at the time of hallmarking. This will help identify the jeweler or center which hallmarked the jewelry.

The government says it has introduced the measures to monitor hallmarking centers and that the new system will be an important tool in tracking jewelry as each piece will carry the code.

Hallmarking protects consumers from cheating on weight and purity. About 860 hallmarking centers currently operate in India.

The government made it mandatory for all jewelers, apart from a few with low turnover, to hallmark gold jewelry from June 16.

Craftsman jewelers who represent a big part of the industry and sell their products in their own shops support hallmarking but say their businesses are on the verge of collapse due to the demands of the new rules.

Dinesh Jain, director of the All India Gem and Jewellery Domestic Council (GJC), said: “The existing stock of approximately 50 million jewelry pieces are required to be hallmarked.

“At the current capacity of hallmarking centers, 100,000 pieces per day, it will take around 500 days, equivalent to 18 months to hallmark the existing stock.

“At peak capacity of the hallmarking centers it would still require 250 days, equivalent to nine months to hallmark the existing stock.

“This will eventually lead to the collapse of the industry,” he cautioned.

India’s gold jewelry market was until late 2015 primarily dominated by small, unorganized jewelry makers selling in their own shops as opposed to the organized sector selling brands.

This is changing and recent reports say the organized sector now has more than half the market.

The share rose mainly because of demonetization in 2016, implementation of a goods and services tax in 2017 and changes in consumer preference for hallmarked jewelry.

Jewelers say that under the new rules any jewelry above two grams must have a hallmark with HUID marking.

“We are not against hallmarking, this really is a great step and is in the interest of consumers, but mandatory hallmarking unique ID of jewelry is not at all acceptable to us,” jewelers say.

Fatehchand Ranka, a member of the National Task Force on Hallmarking, said the system was frivolous. Jewelers did not want to be dragged into the HUID administrative process, which had no relevance to the purity of the product.

Yogesh Singhal, task force member and president of the All India Bullion & Jewelers Federation, said the system in use for 20 years was the accepted norm and followed across the globe.

“I do not understand, what were the failures of the previous hallmarking system and why were the new marking system and HUID and its processes required?” he said.

“If there was any failure of the previous system, who will be responsible for millions of jewelry pieces that were hallmarked previously and shall remain in circulation for decades and who will be the victim of those blunders?”

As of August 2, the BIS website said more than 98,000 items were received for hallmarking in a day, of which only a third, or just over 33,000, were hallmarked.

Courtesy: Asia times