Despite the Foreign Trade Policy (FTP) having been broadly supportive of exporters of gold jewellery, jewellery export figures are declining in volume terms, even as they rise in value terms. In the context, Pankaj Parekh, Regional Chairman – Eastern Region, Gem & Jewellery Export Promotion Council said about the Potential policy measures to facilitate exports!
This disparity is largely due to the rise in gold prices we have seen in recent years. To examine the reasons for the decline in volume and explore the remedial measures to reverse the downtrend, the issue needs to be tackled on two fronts, i.e. issues related with the policy and its implementation, and those related to Marketing India.
Policy-related/operational issues – Tackling the scarcity of duty-free gold In India, nominated agencies import duty-free gold for exporters. At a few ports, this gold is cleared the same day the shipment is landed (e.g., Delhi or Chennai). However, at some ports (e.g., Kolkata) customs officers delay the clearance of imported cargo for several days, often on some frivolous pretext.
The resultant delay results in a cost escalation due to demurrage and interest costs. For instance, due to these reasons banks are unwilling to import duty-free gold at Kolkata port. Instead, they prefer to use Chennai or
Delhi where the clearing process is smooth and expeditious; banks later transfer the gold to Kolkata. This escalates costs for the exporter in Kolkata as the cost of stock transfer is also realised by the banks in the form of increased premiums compared to the London settlement. Moreover, interstate stock transfers attract Integrated Goods and Services Tax (IGST), which the exporter pays up front. This requires more investment and interest costs, which reduces the competitive edge of the exporter.