The diamond market in Mumbai was relatively slow in terms of trading in April, as domestic demand weakened thanks to the jewelers’ strike in the country. Festivals like Hindu New Year and Akshay Tritiya went by during the month with low jewellery sales. Trading in the diamond market was rather slow in both polished and rough diamonds, despite production picking up during the month. Jewellers planned to continue to protest 1% jewelry excise duty but the Indian government has stuck to its stand that luxury goods like jewellery need to be levied tax.
Towards the end of April, the Gem & Jewellery Export Promotion Council (GJEPC) of India announced the provisional data which showed that India’s cut & polished diamond exports for March 2016 amounted to $1.82 bn as against $1.74 bn in Mar ’15, a rise of 4.34 percent. Rough imports recorded decrease of 5.31 percent to $1.39 bn for Mar ’16 as against $ 1.47 bn in Mar ’15. Rough exports showed an increase of 0.51 percent, registering $ 0.156 mn for Mar ‘16 as against $ 0.155 mn for Mar ‘15. A positive trend was seen in cut & polished imports, with a decline of 51.87 percent for the month of Mar ’16, recording about $0.26 mn as against $0.542 mn in Feb ’15.
Diamond manufacturing activities in Surat has picked up gusto but certain issues are bothering the sector. Recently, Surat's diamantaires protested against a new campaign instituted by the Surat Municipal Corporation (SMC) to collect ‘professional tax' from the diamond manufacturers in Varachha, Katargam and Mahidharpura. Some two dozen small units, each with four or five diamond emery wheels, have reportedly shut down in the last few days in Varachha after they were served with notices for the outstanding professional tax payment by the SMC.
While the cutting & polishing sector is returning to its original self, industry leaders are wary of inventory piling up again. So, the Surat Diamond Association (SDA) has appealed to diamond unit owners, especially small and medium units, to refrain from stocking rough diamonds and close the units for summer vacation to reduce over-production and bring about recovery in the market.
Recently, a delegation led by GJEPC chairman Praveenshanker Pandya had met Union commerce minister to seek solution of issues faced by the diamond industry. The specific predicament highlighted was challenge of extremely high inventory levels. The GJEPC has urged the government to include gems and jewellery industry in Merchandise Exports from India Scheme (MEIS) as well as allowing goods to enter the country on a consignment basis for manufacturing.
Diamond financing has been a bane for the Indian diamond industry in recent time and the decision of the Royal Bank of Scotland (RBS), the UK-based bank to close its banking operations in India comes as a shocker. For a number of years now, RBS has been selling non-core units of its India business, which it had to undertake after overextending itself during the 2008 financial crisis, leading eventually to a bail out. Unfortunately, this comes when the industry is in dire need of financing help from banks!
Regarding overseas connected news, the industry was glad when the GJEPC of India organized ‘India Pavilion’ at this year's Vicenzaoro Dubai (VOD) for the second consecutive year and received good response. But, in another incident, news of robbers attacking Indian diamantaires in Hongkong has upset them to the extent of diamantaires threatening to move out their diamond business from Hongkong to safer countries. The Kohinoor was in the news as well, with the Indian government on April 19 saying that it would make all possible efforts to bring back the Kohinoor diamond in an amicable manner, while emphasising that it had achieved the return of several artefacts. Good luck with that!!!
Of late, the Indian government has been more proactive with issues regarding the Indian gem & jewellery industry. On April 23 the Ministry of Finance, Government of India formally announced the constitution of the sub-committee of the high level committee to look into issues related to the imposition of Central Excise duty on jewellery. It simultaneously also deferred the date for completion of registration of jewellers with the Central Excise department till July 1, 2016.
In another case, the Indian government also plans to change jewellers’ logo also along with the hallmark logo. “Ït is difficult to identify jewellers currently, which are having codes like AJ, KJ and MJ. Instead of these jewellery codes, alpha numeric codes which are given for the jewellers’ licenses would be hallmarked to identify the shop owner. So, with the introduction of BIS Act 2016, the Indian government will allow only 22k, 18k and 14k gold jewellery to be sold by jewellers in its hallmark logo instead of purity marks such as 916 and 875. This is a step in the right direction, which will safe guard the end consumer.
Refusing to relent on excise duty levy on non-silver jewellery goods, India’s Finance Minister Arun Jaitley said a ‘luxury item’ cannot remain out of tax ambit when taxes need to be paid on many essentials. So, with excise duty on jewellery becoming a certainty, Indian jewelers across India called off their over 40 day strike, and reopened shops before the Hindu festivals of Tamil New Year and Akshaya Tritiya on 9th May, which are big business opportunities for jewelers. Maybe the jewellery sector should learn to live with the laws of the land after all!
In the last week of April, an All-India Jewellers Meet was called by GJEPC in Mumbai of all major trade associations to ensure a coordinated attempt to solve the crucial issue of Excise duty. The committee will include representatives of Gem & Jewellery Export Promotion Council (GJEPC), All India Gem & Jewellery Trade Federation (GJF), All India Jewellers Action Committee, Indian Bullion & Jewellers Association (IBJA), and others. Praveenshankar Pandya, Chairman GJEPC said, “The all India jewellers meeting just concluded on a positive note. All groups have joined together to create a National Committee to find a solution on excise matters.”
Indian government’s Gold Monetisation Scheme is slowly picking up in that the Tirumala Tirupati Devasthanams (TTD) has deposited 1,311 kg of gold with Punjab National Bank (PNB) under the scheme. The TTD is negotiating for better terms for making more such deposits. To make the scheme more attractive, the Government of India has allowed investors to redeem the deposits in Indian Rupees as well as even in gold. This move is expected to attract temple trusts, many of which have a significant amount of gold under their control.
MMTC, the Indian government agency handling marketing of the first such national coins, is likely to enter into an agreement with India Post shortly for the purpose. The Indian gold coins may soon be available across the country. The government has also allowed MMTC to use the gold that is being deposited under the Gold Monetisation Scheme, mostly from temples, for minting the Indian Gold Coins.
Some sops come by from the Reserve Bank of India (RBI) for the industry as it permitted certain banks to approve clean credit for import of rough and polished diamonds for a period exceeding 180 days from the date of shipment subject to certain conditions. The RBI circular said that the decision has been taken in consultation with the Government of India ‘to ease the operational difficulties faced by the importers.’
Meanwhile, the domestic jewellery sector returned back to business after the 40 plus days of interruptions and shut downs. Malabar Gold & Diamonds, one of the leading jewellery retailers announced the opening of its 146th outlet in Oman at Ruwi, Muscat on April 14.
For the first time in two years, an Indian bank - Punjab National Bank (PNB) - has received US $0.15 million from a Middle East client of Winsome Group, which is reported to be only a miniscule amount compared to the loan the Group owes the lending banks.
The online jeweller Bluestone, which is backed by Ratan Tata, is set to raise $30mn to fund an expansion plan. “Consumers still like to browse through jewellery sites and the online model is the best suited for this experimental category”, said Gaurav Kushwaha, Founder and CEO. The portal is staying away from the offline models; despite its nearest competitors like Caratlane have 10 brick and mortar stores. However, BlueStone is willing to send its staff to its customers' home once he or she decides to buy and try on the jewellery selected.
According to the Platinum Guild International (PGI), platinum jewellery’s retail sales grew 24% in 2015. It was also the only category to consistently grow every quarter. PGI is also optimistic about 2016 with all types of jewellery, but especially platinum and diamond jewellery. It forecasts a growth rate of 23%.
Aruna Gaitonde, Editor-in-Chief of Asian Bureau, Rough & Polished
