Jewellers' stocks rose sharply on Thursday in an otherwise dull market amid expectations of a relaxation of the gold import norms, including the 80:20 rule, following a report that United Progressive Alliance (UPA) Chairperson Sonia Gandhi had written a letter to the government seeking such a move.
In the letter to the commerce and industry ministry, she urged to look into the demand of the gems and jewellery sector for appropriate action. Finance Minister P Chidambaram, however, ruled out any such relaxation. "Till we have a firm grip on the current account deficit (CAD), I do not contemplate any rollback of any measure." He said he had not seen the letter.
"We sent several representations to the ministry for relaxation of gold import norms, including the 80:20 rule, since the CAD, for which these had been imposed, has come under control. These restrictions have squeezed the supply. Therefore, the time is ripe to relax these," said Vipul Shah, Chairman of the Gem & Jewellery Export Promotion Council (GJEPC).
While the share price of Kolkata-based Shree Ganesh Jewellery House shot up nine per cent to Rs 28.8 apiece, Tribhovandas Bhimji Zaveri's jumped seven per cent to Rs 139.5 apiece. Other jewellers' stocks also moved in tandem.
"Through import restrictions, India has entered the gold-control era of 1960s. The sector suffocated due to non-availability, lost a large chunk of skilled artisans to other sectors. These were unrecoverable losses," said Haresh Soni, chairman of All India Gems & Jewellery Trade Federation (GJF).
The 80:20 rule mandates importers to channel at least 20 per cent of the import quantity to jewellery exports. Also, the jewellers have been asked to give proof of the export realisation of the first consignment before seeking delivery of the third tranche from importers.
"A duty cut is not going to provide any major relief to jewellers as restrictions have not really reduced the gold appetite of Indians. Import has lowered only on government books. Gold is being smuggled. Hence, a duty cut is not going to serve any purpose. The government must relax the 80:20 rule," said Daljeet Kohli, head, research, IndiaNivesh Securities. The duty is 10 per cent.