New hallmarking rules have led to supply-chain constraints for even top jewellery brands, which also face teething issues despite being prepared to implement the changes.
According to Ashok Sonthalia, CFO of Titan Company, which operates the Tanishq jewellery retail chain, more time is spent processing inventory due to the new hallmarking rules.
“Our supply-chain process has been slightly elongated by five-seven days because now there is an extra process, which is not completely seamless and smooth,” Sonthalia told Moneycontrol. “We need to keep five-seven days of buffer while planning inventory and this consumes more working capital. Even for five-seven days, given that it is jewellery, working capital could be a few 100 crore rupees.”
However, Sonthalia said that since Titan was well-prepared to implement the new scheme, it faces fewer issues than others.
Mandatory gold hallmarking started being rolled out in phases from June 16 in a bid to certify the purity of the precious metal.
“We started hallmarking activity by January-February while others have just reacted or been expecting a further extension,” he said.
He stressed that while hallmarking is a good move by the government, the implementation of hallmarking unique IDs (HUID) is causing teething issues.
Token strike
Sonthalia’s statement comes when jewellers across the country have gone on a token strike against the hallmarking rules as they struggle with inventory pile-ups in assaying and hallmarking centres. They oppose the HUID system, contending it is nothing more than a tracking mechanism.
According to Dinesh Jain, a member of the National Task Force on Hallmarking, an estimated 100 million-120 million pieces of gold jewellery are manufactured in India. With the existing stock of almost 60 million to 70 million pieces yet to be hallmarked, the total count of pieces to be hallmarked in a year is 160-180 million.
“The current speed or capacity of hallmarking centres is about 2 lakh pieces per day. At this speed, it will take almost 800-900 days, which is equivalent to 3-4 years, to mark this years’ production,” said Jain, who is also director of the Gem and Jewellery Skill Council of India.
The jewellers claim that the norms for HUID came as a surprise and had not been mentioned in their talks with the government. HUID is a unique code assigned to each piece of jewellery to help identify the jeweller or the assaying and hallmarking centre that hallmarked the jewellery.
According to jewellers, the government had assured them that the process of HUID would be restricted to the assaying and hallmarking centres.
However, the jewellers, too, are required to tag each item in their inventory with a unique ID, upload the details to the Bureau of Indian Standards website and then send it to the hallmarking centre.
Also read: What is HUID and how it is plaguing the jewellery industry
Organised sector to benefit
Organised retail chains have hailed the government’s move despite the initial hiccups being faced in the implementation.
“Mandatory hallmarking will standardise the purity of gold jewellery and take the industry towards being more structured as well as further push the ongoing shift of business and customers from the unorganised to the organised jewellery segment,” Ramesh Kalyanaraman, executive director of Kalyan Jewellers, told Moneycontrol earlier.
India is the second-largest consumer of gold in the world and consumed 140 tonnes of the yellow metal in the first quarter of 2021, according to the World Gold Council. ICICI Securities said in a report that about 70 percent of the gold jewellery market in the country is still unorganised.
What are the new hallmarking rules?
The government has made it mandatory for jewellers to hallmark gold jewellery but with some relaxations. Jewellers with an annual turnover of up to Rs 40 lakh will be exempted, as will jewellery for international exhibitions and government-approved business-to-business domestic exhibitions.
Watches, fountain pens and special types of jewellery such as Kundan, Polki and Jadau have also been granted relaxation under the new regulations. It will also allow hallmarking of additional carats – 20, 23 and 24.
There will be no penalties imposed until the end of August so that manufacturers, wholesalers and retailers of gold jewellery get enough time to comply with the norms. Also, a committee comprising representatives of all stakeholders, revenue officials and legal experts will look into issues that may emerge as the scheme is implemented.
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