With raising working capital becoming increasingly difficult, jewellery exporters have urged the government to grant the sector Rs 6,000 crore under the Technology Upgradation Fund Scheme (TUFS), to save small businesses becoming extinct.
“We are planning to put forth a proposal to the Union Finance Minister Nirmala Sitharaman seeking to extend a TUFS for small business units. We have already discussed the same with the Finance Minister in our last meeting about a month ago. We hope it will be approved for gems and jewellery sector,” said Pramod Agrawal, Chairman, Gems and Jewellery Export Promotion Council (GJEPC) on the side-lines of 3rd India Diamond Week being held in Mumbai.
Currently, the government has allocated Rs 6,000 crore each for the textile and leather sectors. Interest rate subvention and similar reliefs are offered under TUFS.
Since the Rs 12,000 crore Punjab National Bank (PNB)–Nirav Modi scam erupted some two years ago, public sector banks (PSBs) have stopped financing the gems and jewellery sector. Thousands of small and medium enterprises and micro, small and medium enterprises (MSMEs) were hit badly due to the lack of working capital following this move. A number of SME and MSME units have shut down, while others have cut production drastically.
Despite having no exposure, non-banking finance companies started facing trouble as the IL&FS default crisis took a toll on overall financing to the manufacturing sector, of which jewellery SMEs and MSMEs are integral parts.
“The proposed TUFS would benefit SMEs and MSMEs abundantly in terms of low interest rate on working capital and the money saved due to government subsidy. The saved money will come back into the system and will help SMEs and MSMEs increase their working capital,” said Agrawal.
Taking a cautious view on the gems and jewellery sector, PSBs have strengthened their monitoring and surveillance on every borrowing proposal they receive. Some banks have been asking for 120-130 per cent collateral against working capital finance.
“In fact, a private bank approached us seeking 200 per cent collateral against working capital loans to SMEs and MSMEs. We are working with banks to get working capital for SMEs against their offices in BDB,” said Mehul Shah, Vice President, Bharat Diamond Bourse (BDB) on the sidelines of Bharat Diamond Week.
Meanwhile, India’s gems and jewellery exports have declined by 7 per cent so far this financial year. Despite a revival in buying sentiment following the easing of the US-China trade war and onset of stockists’ orders for Christmas and New Year in the United States, India’s overall gems and jewellery exports are estimated to end this financial year with a decline of around 7 per cent.
In order to boost sentiment, Indian jewellery exporters are now exploring export potential in Japan, the Middle East and South Korea, which have already shown remarkable growth in their gems and jewellery import from India. Jewellers are also looking at Australia as an emerging market for gems and jewellery exports.
While imports of rough diamond declined in the six months to September 2018, miners have started investing aggressively on brand promotions to attract buyers.
According to Agrawal, sentiment is gradually improving. “We estimate India’s gems and jewellery exports to be better next financial year,” he said.