The shortage of gold is threatening jewellery export orders, with the consequent delay in manufacturing of ornaments. However, the trade is hopeful of a substantial improvement after a Monday meeting with Customs officials.
Gold import has almost stopped, with the confusion for a month in the Reserve Bank of India guidelines. Industry sources say gold is scarcely available, even at high premiums, as nominated agencies and star trading houses have stopped its import after the ambiguity.
RBI issued one formula on July 22, followed by a clarification on August 14. RBI first restricted gold imports through letters of credit, asking importers to pay the entire money upfront. This was later revised to 20 per cent mandatory supply to jewellery exporters. Also, until the proof of 20 per cent exports is given, gold is not to be made available to jewellery manufacturers, RBI said.
Importers see no profit in supplying gold to exporters, as they pay lower margins. Until now, they used to make hefty margins through supply to domestic jewellers.
The frequent changes in regulations were not accompanied with the notification issued by the Customs department, which actually monitors import into the country. This has squeezed supply.
On the brighter side, the Central Board of Excise and Customs (CBEC) said on Monday the clarification would be issued soon. Also, "we had two recommendations to the CBEC that were accepted in a meeting with the officials," said Pankaj Parekh, vice-chairman, Gems and Jewellery Export Promotion Council.
The first set of suggestions were that export certificates, once issued by Customs, should be acceptable for all export consignments.
Second, banks will change their import practices. Currently, banks are not allowed to import a third lot of gold unless the remittance of the first export consignment is reflected in the account of exporters. "Conversion of gold into jewellery and export thereafter takes at least 90 days. The normal time for receivables is currently 180 days. This means the remittance for the first export order will normally take nine months. After availing gold nine months ago, jewellery exporters will have virtually no work until the revenue gets transmitted into their account," said Parekh.
He says he's confident that CBEC's clarification will ease the supply squeeze and bring jewellery exporters back on track.
The scarcity of gold has affected these exports badly in the first four months of the current financial year. In April–July, gems and jewellery exports declined 11.3 per cent to Rs 62,312 crore as against Rs 70,232 crore in the corresponding period last year. Meanwhile, silver hit a five-month high at Zaveri Bazaar here on Monday, amid hope of a revival in demand following a series of measures taken by the government to boost industrial activities. The price jumped by Rs 470 or 0.9 per cent to close at Rs 54,730 a kg, the highest level since March 26. Spot gold declined a marginal Rs 25 to close at Rs 31,765 per 10g on Monday.