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The high import duty on gold and its effect on retail price coupled with poor demand is jeopardising the domestic jewellery business which may leave thousands of ‘skilled workers’ permanently unemployed, according to a senior official of the domestic jewellery trade promotion council.
“Due to high gold prices (on account of import duty) and the rupee weakening, our business has come down by almost 30 per cent volume-wise in the last six months as compared to the previous year,” said N Anantha Padmanaban, Chairman, All India Gem and Jewellery Domestic Council here on Friday.
At a press conference to highlight the current scenario of the gem and jewellery industry and to present the Council’s recommendation for the upcoming Union Budget, he said: “Due to the slowdown in the business, many workshops are closing down. There is a temporary phase of unemployment and it should not become permanent. Almost 10 per cent of ‘skilled workforce’ has left the industry.”
Slash import duty, GST
According to the council’s statement, over one crore skilled labourers are engaged in manufacturing jewellery in the domestic sector. The council has been requesting the government to roll back the hike in customs duty introduced in the 2019-20 Budget. The customs duty on imported gold was raised from 10 per cent to 12.5 per cent, while GST on jewellery was fixed at 3 per cent as compared to 1 per cent previously.
“What we recommend to the government is that not only the customs duty should be reduced to 6 per cent, it should also set up GST refunding stalls at airports, so that NRIs who buy jewellery from local sellers can avail 3 per cent GST refund as in every other country,” Padmanaban said.
Highlighting that high import duty has also abetted gold smuggling, Padmanaban said: “Today, anybody who wants to smuggle gold will get a margin of more than 10 per cent. Almost 110 tonnes of gold worth more than ₹37,000 crore has been smuggled into India in 2018, according to reports from World Gold Council and Metal Focus,” he added.
He also added that smuggling will go up by another 20 per cent in 2020 due to increase in margins.
“Many Indians are now combining their holidays and gold purchase plans. They are buying gold from Dubai, Nepal, Sri Lanka and Singapore due to high price in the domestic market,” Padmanaban said.
Noting that liquidity is another area of concern, he said, banks are staying away from lending to jewellers due to recent incidents of fraud and bankruptcy in the sector.
“Banks have not released a single rupee to this sector in the last two years. Jewellers are forced to borrow from private lenders at 18-24 per cent% interest rate as compared to 9.5-13.5 per cent from banks,” Padmanaban added.
He also said that despite the Reserve Bank of India (RBI) cutting the policy rate five times, banks are not transferring the benefit to end customers.
Noting that the government’s Gold Monetisation Scheme (GMS) is a ‘non-starter’, Padmanaban urged the government to appoint jewellers as agents since they have direct engagement with the end consumers.
The government should consult industry players before making any policy decisions, he added.