The World Gold Council (WGC), in its recent report, observed that only 30 per cent, or 3 out of every 10 grams, of India’s gold jewellery is currently hallmarked. Worse, even among the hallmarked gold, purity varies based on the piece of jewellery. This is quite disturbing, as 600 tonnes or six lakh kgs of gold finds its way into our safes every year. Currently, Indian households are believed to be sitting tight on a massive 22,000-tonne gold chest. Going by WGC’s findings, just a quarter of this 22-carat gold conforms with 916-purity standard.
“The hallmarking mechanism we now have is not foolproof. Like many countries abroad, hallmarking should be made mandatory after eliminating loopholes,” says Joy Alukkas, Chairman, Joy Alukkas Group.
Hallmarking, or certifying purity, is voluntary in India. Bureau of Indian Standards (BIS) is the sole agency and the scheme has been aligned with the International Criteria on Hallmarking (Vienna Convention 1972).
Ironically, a mere 330 BIS-recognised assaying and hallmarking centres exist in India to certify all that’s being sold by more than 4 lakh jewellers. Among them, only 13,000 are BIS accredited.
Of the 330 centres, 60% are in 20 large cities but clustered in certain pockets leaving others underserved. “These centres have helped reduce under-caratage from between 20% and 40% to between 10% and 15%,” says Somasundaram P R, Managing Director, WGC India adding, “Not all hallmarking agencies are analysing jewellery properly. Even though the situation has been improving over the years, there is room for more.”
Certifying purity comes at a cost and needs resources. For instance, of the 35 lakh employed in the Indian gold industry, only a fraction — 2,000 — are engaged in certifying 1,000-1,500 items per day.
For each ornament, certification costs Rs 25 plus service tax. A simple back of the envelope calculation reveals that at Rs 25 for every gram of gold, for 6 lakh kgs, jewellers have to cough up roughly Rs 150 crore excluding service tax. This is chump change considering the Rs 15,000 crore they incur on buying 600 tonnes of gold.
Jewellers make money only on wastage and making charges. Avoiding certification costs may not result in handsome savings, but will ensure slightly better margins.
“Fake hallmarking agencies and firms which do not follow guidelines strictly are the black-sheeps in the industry. The law should uphold these agencies to safeguard consumer’s interest,” explains Mohammed Basheer, Managing Partner, Alpha Assay and Hallmarking Centre, a Kerala-based hallmarking agency.
Indian’s appetite for gold defies market conditions. Despite a 400% increase in the rupee gold price over the last decade, demand for gold continues to grow.
On the other hand, India exports $8 billion worth gold jewellery or 8% of the global market. If international purchasers could place this trust in Indian gold, this could raise to $40 billion, says WGC.
“Quality is a major concern, as exported jewellery undergoes tests overseas. Companies will be blacklisted if there is any quality issue,” warns Sabyasachi Ray, Executive Director, Gems and Jewellery Export Promotion Council.
As per the WGC, there should be one hallmarking centre for every 20 to 30 jewellers, with a national network of more than 1,000 hallmarking centres to certify purity.
Or as Alukkas puts it, until then buy gold only from a reputed and branded retailer.
Steps to improve purity of jewellery
■ Hallmarking should be made mandatory
■ Governance around hallmarking processes should be strengthened
■ Customer awareness of hallmarking has to be improved
■ Incentivise and facilitate targeted expansion of hallmarking centres should be done
■ Use BIS data to develop a ratings system for jewellers
■ BIS’ Unique ID scheme or other technology solutions should be in place to support hallmarking
■ Pursue membership of the International Hallmarking Convention/develop an Asian alternative
Hallmarking present scenario
■ India has around 330 BIS recognised assaying and hallmarking centres, applications for setting up 24 new centres are pending with the Central government as of March 31, 2015
■ Tamil Nadu tops the list of BIS recognised assaying and hallmarking centres with 57, followed by Kerala with 39. In terms of zones, distribution is uneven; the South has 153, the West has 65, the North has 111 and the Northeast has only one
■ In June 2015, government proposed a new Bureau of Indian Standards Bill, 2015 that will repeal the Bureau of Indian Standards Act, 1986. The bill is also expected to improve enforcement of Indian standards