Jewellery sector piles up debt

India's gems and jewellery industry is in a tizzy over mounting debts. This year the overseas debt is estimated to be $7.5 billion, almost 9 per cent higher than last year.

India accounted for roughly 30 per cent of the total global cutting centre debt which stood at $6.9billion. This is despite 22 per cent rise in exports.

Industry officials said they were concerned as servicing the cutting centre debt could become a grave issue if interest rates begin to climb.

India's close competitor Israel was second with cutting centre debt of $1.5 billion, compared to India's $2.2 billion.

The global rise in debt was attributed to increased activity levels within the industry as well as a reflection of extended credit terms.

Though India's debt situation was offset by strong exports, Gems and Jewellery Export Promotion Council (GJEPC) was pulling in reins. It would like trade credit period to be cut down from the current eight to nine months, to 90 days.

Bharat Diamond Bourse, Diamonds Exporters Association and Bombay Diamond Merchants Association have also joined the drive to reduce the credit period.

Sanjay Kothari, chairman, GJEPC, said recently, "The Indian gems and jewellery industry is the world's largest manufacturing centre for cut and polished diamonds contributing to 60 per cent of the world's supply in terms of value, 85 per cent in terms of caratage and 92 per cent in terms of pieces. We cannot give credit to developed countries."

GJEPC has taken up this matter with export finance and other financing agencies. It had suggested amendments in the Exim policy to reduce circular trading in rough diamond and plain gold coins flouting the incremental licence benefit. However, it has not been fulfilled.

In 2003, the exports from Israel fell 25 per cent while there was a 2.19 per cent rise in Belgium's exports. The Indian industry is however, expected to achieve the $16 billion export target set for 2007.