Govt tightens value addition norms for gold jewellery to stop circular trading

Industry estimates suggest since last few years round tripping of gold is estimated at around 150 tonnes

In the new Foreign Trade Policy announced on Wednesday, the government has tightened value-addition and wastage norms for the export of gold jewellery. The new norms will help restrict round-tripping of gold and cut its import of the commodity into the country.

Round-tripping refers to import of gold, followed by export, with minor value-addition, to avail of several benefits. It leads to greater import.

According to estimates, round-tripping of gold in the recent years accounted for about 150 tonnes annually; two years ago, it was as high as 200 tonnes, though there are no official estimates of that.

LOSING SHEEN

• The new norms will help restrict round-tripping of gold and cut import of the commodity into the country
• Round-tripping refers to import of gold, followed by export, with minor value-addition to avail of several benefits
• For plain jewellery articles, the wastage norm has been cut from 3.5 to 2.5%, while that for value-addition has been raised from 3 -4%
• The value-addition norm for machine-made jewellery has been raised by 0.5% to 2%

For plain jewellery articles, the wastage norm assumed has been cut from 3.5 to 2.5 per cent, while that for value-addition has been raised from three per cent to four per cent.

This adds to the cost of exporting, making round-tripping unviable. Genuine jewellery exports, however, won’t be hit.

An official said the government’s decision followed several rounds of discussion.

Pankaj Parekh, vice-chairman, Gems and Jewellery Export Promotion Council, said, “The new norms will help control circular-trading of gold jewellery; those genuinely adding value will continue to do well.”

In 2014-15, star trading and export houses are estimated to have imported about 400 tonnes of gold, with a part of it being exported. Some entities are said to have exported the gold with negligible value-addition.

The value-addition norm for machine-made jewellery has been raised by 0.5 per cent to two per cent, making circular-trading unviable, said an analyst, adding gold import would decline by 150-200 tonnes a year.