A delegation led by the Commerce Secretary Gopal K Pillai will meet representatives of the gems and jewellery industry here tomorrow to discuss the issue of gold distribution by importing agencies and dollar lending by banks.
The delegation, which will be accompanied by officials from the Ministry of Finance, Ministry of Commerce, Director General of Foreign Trade and others, will also meet Reserve Bank of India officials and representatives of leading banks later in the day.
Twenty three importing agencies were earlier nominated by the government for gold distribution in the country. However, industry sources say only 4-5 are operating. So, jewellery manufacturers are facing difficulties in availing the yellow metal, especially in rural India, where they are forced to procure gold from private players at a premium.
“Gold availability is an issue even 150-200 km away from the metros,” a jeweller said.
But, what is even more troubling is that rural banks and nominated agencies, even if available, could not meet the desired demand, especially in the wedding season, causing huge losses for retail jewellers.
The Gems & Jewellery Export Promotion Council (GJEPC), the apex body of gems and jewellery trade in India, has been urging the government to either allow companies, with a turnover of above Rs 500 crore, to import duty-free gold or engage banks and other nominated agencies to avail gold at the prevailing price.
A source, scheduled to attend the meeting tomorrow, said that there were some regulatory issues also. Though banks have been directed to provide dollar finance, the industry is not benefitting due to unavailability and high interest rate.
“Dollar is not available to the extent we require. More so, the interest rate is too high to borrow,” said Sanjay Kothari, ex-chairman of GJEPC.
According to government guidelines, banks should provide dollar finance at an interest rate of between 7 and 8 per cent. But, the industry is demanding it to be brought down to 5-6 per cent. But, as deposit rates of banks have been revised upwards, they do not find lending worthy at the interest rate demanded by the industry.
Also, the government raised the pre-shipment credit limit from 180 days to 270 days and post-shipment credit limit from 90 to 180 days. According to industry sources, some banks have already adopted these credit limit norms while others are yet to do so. Struggling to cope with worsening economic slowdown, gems and jewellery exporters hope some solution will be reached in tomorrow’s meeting.
According to a Care Ratings report, India’s gems and jewellery sector is one of the fastest-growing industries in the country. It contributed about 13.42 per cent to the country’s total exports in 2007-08 and provides employment to 1.3 million people, directly and indirectly.
