27 May 2016

Hallmarking rule on cards to ensure quality

Jewellery buyers in the country would now be sure of the purity of gold and silver used in the ornaments they buy, as hallmarking could soon be compulsory.

The government had passed the Bureau of Indian Standards (BIS) Act, 2016, on March 21 this year. The new rule is yet to be implemented, but market players expect hallmarking to become mandatory by Diwali. This Act makes it mandatory that all precious metal jewellery and articles sold in India are hallmarked according to the defined standards. This is a game-changing move that will bring significant benefits for customers and make the industry more accountable and transparent.

It has been an age-old experience of Indian gold consumers that they have usually ended up getting low purity jewellery than what they paid for.

With the new law cleared by both Houses of Parliament in March; all gold, silver and platinum jewellery would have a BIS-certified quality. Coins and bars would also have to be hallmarked.

China, incidentally, implemented mandatory hallmarking of jewellery from this month.

However, there would be implementation challenges also. Tanya Rastogi, director, Lala Jugal Kishore Jewellers, said: "For those not doing hallmarking, the cost would go up by one per cent." At present, hallmarked gold jewellery is costlier by around Rs 500 per 12g piece than one which is not. In silver, 95-purity hallmarked jewellery (considered the best quality) is sold at a mark-up of 25-30 per cent compared to the non-hallmarked variety. The question is who will foot the additional bill.

Gold jewellery hallmarking began in 2001 and of silver jewellery in 2005. However, it was not mandatory.

At present, there are only 375 BIS-certified assaying and hallmarking (A&H) centres in the country. Rastogi says, "There is an implementation challenge. We need at least 5,000 hallmarking centres and this is the biggest problem. Small towns don't have the centres and carrying jewellery to bigger towns (for hallmarking) would involve a lot of risk." He recommends the government take some initiative in this regard.

Sudheesh Nambiath, lead analyst for precious metals at GFMS Thomson Reuters, adds: "It is very unlikely that the hallmarking scheme will be rolled out nationwide at one go. It will likely be a phase-by-phase implementation." GFMS estimates half of jewellery produced is hallmarked at present.

The other key question is whether the existing hallmarking centres are capable of handling the additional business. Some believe they are. K Anand Kumar, secretary, Indian Association of Hallmarking Centres, says: "The existing capacity is enough."

He, however, clarifies that after the rule is implemented, such centres can hallmark only 14 (585 purity, used mainly for exports), 18 (750 purity, for diamond studded jewellery) and 22 (916 purity, used for jewellery making) carat jewellery.

Coins and bars of gold, as well as 24-carat gold, will be hallmarked by BIS-certified refineries and these products will contain the BIS mark and refinery code number. So far, the demand for hallmarked coins has been met through import. It will be the first time that domestically hallmarked coins will be introduced.

While it is still unclear on how and when the scheme will be implemented and who will pay the new costs, Sudheesh sums up on a positive note. He says, "The Act finally makes room for the much-awaited 'Indian Standard' gold, certified by BIS. The current trade practice is to import one kg of LBMA (London Bullion Market Association) or DGD (of the Dubai Multi Commodities Centre-accredited gold bars. This (new move) could be another important step towards making the Gold Monetisation Scheme acceptable to banks, due to the standardisation of gold bars."




A GAME CHANGER
  • Hallmarking for gold jewellery was first introduced in India in 2001 and for silver jewellery in 2005
     
  • GFMS data show only half of the jewellery is being hallmarked at present
     
  • Mandatory hallmarking will cover all precious metals, coins and bars of gold
     
  • Implementation likely before Diwali but in phases
     
  • Low number of hallmarking centre seen as an implementation challenge

Source: http://www.business-standard.com/article/markets/hallmarking-rule-on-cards-to-ensure-quality-116052300017_1.html

No comments: