The Hindu Business Line : Gems, jewellery exports may have beneficial fiscal regime

Indian gems and jewellery exporters have received a mixed reprieve with the US President, Mr George W. Bush, signing in the third week of December 2006 the necessary legislation that continues the Generalised System of Preferences (GSP) for two years until December 31, 2008, while incorporating new statutory thresholds to identify products that have reached a level of competitiveness implying that they no longer need duty-free benefits.

Accordingly, the current GSP statute includes two "competitive need limitations (CNLs)" on the eligibility of a product for benefits under GSP, namely, if the annual trade of a product from a specific country exceeds a monetary threshold ($125 million in 2006); or if the annual trade of a product from a specific country exceeds 50 per cent of total US imports of that product.

Based on available January through October 2006 import data, a preliminary assessment of CNL waivers meeting the new threshold include India-gold jewellery ($1.6 billion), with the USTR (United States Trade Representative) likely to issue a Federal Register notice in late February 2007, when full-year 2006 data would be available that would identify those waivers that meet either of the new thresholds and thus subject to potential revocation.

Given the current uncertainty and with an export target of $18.2 billion in the current fiscal against an actual achievement of $15.5 billion in 2005-06, the country's gems and jewellery exports could now look forward to a beneficial fiscal regime to be in place in the forthcoming Union Budget.

Industry sources told Business Line here that the impetus to a favourable fiscal regime stems from the fact that gems and jewellery exports accounting for 15 per cent of the country's total exports were now driven by the apprehension that the duty-free entry of their value-added products to the US under GSP might face the axe.

When contacted, the Minister of State for Commerce, Mr Jairam Ramesh, said that the M.R. Sivaraman Committee set up by the Finance Ministry at the initiative of the Commerce Ministry has recently presented its report to the Government.

He said the fiscal regime recommended by the Committee sought to reinforce the country's global position and make Mumbai the world hub for diamond trading, replacing Antwerp (Belgium). Mr Ramesh is hopeful that the forthcoming Budget would reflect the recommendations of the Committee to provide the leg-up to the sector and shore up its fortunes.

He said India's pre-eminent position in the gems and jewellery exports remained overwhelmingly reliant on imports of rough diamonds, gold and other coloured gemstones with security of supply of raw materials being a crucial factor as the country is importing close to $8 billion of rough diamonds. Hence, Mr Ramesh said that he had been holding detailed discussions over the past three months with the envoys of a number of countries including Russia, Canada, Australia, South Africa, Namibia Lesotho, Botswana, Ghana, Angola, Azerbaijan, Armenia, Uzbekistan and Venezuela.

The Minister said that the Vision Document 2015 roadmap for the gems and jewellery industry in collaboration with KPMG was a blueprint, which would be implemented by the Commerce Ministry.

He said details outlined in the Vision Document such as growing competition from China, rise of new materials such as palladium and steel, development of synthetic diamonds, consolidation in the global diamond industry and growth of new cost-effective cutting techniques were all possible scenarios which India must plan for systematically.

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