Margins of jewellery exporters will improve: Vipul Shah

Interview with Chairman, GJEPC

The Gems and Jewellery Export Promotion Council, controlled by the ministry of commerce, is expecting to witness a turnaround in exports during the current financial year, growing at 12-15 per cent, against a fall of nine per cent in 2012-13. The Council's Chairman Vipul Shah spoke to Rajesh Bhayani on how margins are set to improve for exporters and other developments regarding the sector. Edited excerpts:

Recently, in case of one gem and jewellery exporter, banks revoked a Standby Letter of Credit (SBLC), which created a big problem. How serious is the issue for the sector?
While we cannot comment on company-specific issues, what had happened in the recent case was that some banks exercised a specific clause in an SBLC that allowed them to invoke all outstanding letters of credit (LCs) when even a part of the payment was delayed. The recent controversy was about import of bullion. But, we feel banks would be very cautious for some time to open such LCs till better clarity emerges. Also, it is likely that the RBI (Reserve Bank of India) may come out with guidelines for standby LCs and when an LC can be invoked.

Can more bullion importers face such a situation?

As a body looking after the interests of gem and jewellery exporters, we don't have much to say about bullion importers. Still, we would say banks need to take a relook at the whole process of issuing such LCs and invoking these. Banks should be more careful in assessing the risks before invoking LCs.

There are reports of gold exports in the form of crude jewellery, practically resulting in round tripping? How does the Council view such exports?
As far as exports are happening on record we don't have anything to say. But, we encourage value-added jewellery exports and don't encourage round tripping.

How do you see falling gold prices affecting exports? How are diamond prices moving?
Falling gold prices have resulted in better demand. Jewellers have taken a one-time hit due to this with regard to inventories of gold they had purchased prior to the fall. However, that gets adjusted over a period of time and we see volumes going up due to lower gold prices.

Diamond prices have remained more or less stable. Still, margins of jewellery exports will improve.