Business Standard: What do you think of the government's gold import policy?
V M Kapoor: The government's present policy has resulted in a remarkable improvement in the supply of gold for domestic market.
Gone are the days of gold control. As a result, more and more gold jewellery shops have sprung up, providing employment to lakhs of goldsmiths.
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Besides, the government's policy of allowing non-resident Indians (NRIs) to bring in 5/10 kgs of gold at a nominal duty in foreign exchange has curbed smuggling and enriched the country with the income of foreign exchange in the form of customs duty.
India is the biggest market for gold jewellery for its heritage, customs and tradition.
There is a great demand for the Indian-made gold jewellery in the foreign countries as large number of Indians are settled abroad.
Also, the demand for ethnic jewellery is increasing all over the world.
The central government has many schemes for replenishment of the gold at the international price to encourage the exports.
BS: Is there a shortage of raw material for jewellery? Why ? What are your suggestions to overcome it?
Kapoor: As you know gold is the basic raw material to manufacture jewellery.
And it has always remained in short supply in the domestic market.
This is because there is no domestic production and the trade has to fully depend on recycling and less quantity of imports.
For the purpose of exports, the government's policy of gold replenishment at international rates through canalising agencies like the SBI and MMTC and till date they are working successfully. The MMTC introduced a scheme for gold loans for the purpose of exports, and the scheme has proved successful.
But due to haphazard way of giving loans by MMTC and the misuse of the scheme by some unscrupulous exporters, gold meant for export could not be utilised.
At this stage, the customs department discovered that a lot of gold which was supplied duty-free has been swindled away.
As a result, the government stopped the duty-free import through the canalising agencies and introduced a scheme of `bonded warehouse'.
As far as the MMTC is concerned, they had agreed to make bonded warehouses, but SBI has some reservations because being a banking institution, they cannot open bonded warehouses at different places.
And with the introduction of the Gem and Jewellery Export Promotion Council, the status quo is to be maintained till the February 15, 1997. After that, the SBI will not be able to import duty-free gold without a legal bond. According to SBI, they can give a bond on the basis of bank guarantee given to them by the exporters.
And the exporters say that they are getting the gold as replenishment and there is no import duty.
Then why should they give a bank guarantee?
Whereas exporters get gold on full payment of it in advance gives a bank guarantee equal to the difference between the national rate and the international rate plus 5 per cent. Moreover, there has been no lapses under the scheme under the liberalised economic policy. Restrictions in the continuous supply of raw material must be removed.
Exporters demand that duty-free supply of gold should be available to achieve higher targets of exports. They have suggested that import of gold under export obligation should be under the OGL scheme against payment of customs duty of Rs 22 per gram (as per NRI scheme) and refund the duty under duty drawback scheme after exports. There has always been shortage of gold because of lesser recycling of it and the restrictions on free import of gold. Only NRIs can bring gold and the same can be imported on special import licence of the export houses.
BS: Is gold jewellery exports scenario not-so-good. Why?
Kapoor: No, it is not true. In fact, gold jewellery exports are improving year after year (see the table below).
We have started exporting studded jewellery of the international standard from the export processing zones and that of quality of ethnic jewellery from the domestic tariff area (DTA).
During the current year, we have made progress in jewellery exports but not as expected, thanks to the interruption in the supply of gold.
We feel that there has been a few instances of mis-appropriation of gold scheme and mismanagement in implementation of scheme.
However, if one compares it with the progress made, the loss is insignificant.
BS: What is the position of Indian gold jewellery in the domestic as well as the international market?
Kapoor: Our gold jewellery situation in the domestic and international market is fairly good, and there is a scope for further increase in the exports if the liberal policy is adopted in supply of raw materials.
BS: What will be the emerging trends in the export market in the coming days ?
Kapoor: I foresee a much brighter prospects of gold jewellery in the export market. At present, our share in the international market is negligible.
We have to improve our designs and quality to match the international standards.