Major jewellery manufacturing centres in south India are facing acute shortage of gold ahead of the wedding season despite the industry’s claim to have seen a record import of the yellow metal last financial year.
Centres like Coimbatore in Tamil Nadu and Thrissur and Kochi in Kerala are facing huge shortage of gold. These centres constitute around 15-20 per cent of India’s overall annual demand of the yellow metal. “Nominating agencies that are responsible for supplying gold to jewellers have failed to meet up the industry’s requirement in the south Indian states with supply becoming a major constraint in these smaller regions,” said Vipul Shah, chairman of the Gems and Jewellery Export Promotion Council (GJEPC), on the sidelines of a seminar here today.
The government has nominated banks and large private sector companies to import gold directly. Besides retailing gold products, including coins and bars, private companies can supply gold to other companies depending upon their capabilities. These companies, however, remain restricted to supply gold to small players with regional presence. Confirming the shortage, Mehul Choksi, chairman of Gitanjali Gems, said: “While export-oriented units do not face any problem because of their credible business model and sound creditworthiness, small size players do face problems of gold availability in the south.”
Meanwhile, GJEPC has suggested the government allow tax-free import of gold to encourage export of jewellery which consists of around 14 per cent of India’s merchandise exports.
Restrictive measures and a raise in import duty would not reduce gold imports to India, which has been proved by a recent report by the Reserve Bank of India (RBI). According to RBI’s data on balance of payment, gold imports in the first nine months of the last financial year were reported at $37.8 billion against C Rangarajan-headed Prime Minister’s Economic Advisory Council’s estimates of $36 billion for the full financial year.
The World Gold Council, the global market development body for the gold mining industry, has been maintaining its oft-stated conviction on India’s unabated appetite for the yellow metal. David Lamb, its global managing director-jewellery, recently forecast India’s gold import at between 865 and 965 tonnes in 2013, higher than last year’s 864.2 tonnes.
India is facing a burgeoning current account deficit at 6.7 per cent of the gross domestic products (GDP), which can only be partially bridged by promoting gold and diamond jewellery exports with the help of adequate supply of raw materials, said Shah.
Echoing similar response, Vasant Mehta, ex-chairman of GJEPC, said gems and jewellery industry was recovering from its worst days in the past and therefore, bankers should have greater confidence in this industry for a mutual benefits.
Other gold jewellery centres including Rajkot, Mumbai, Kolkata and Delhi do not have any shortage of gold availability due to its proximity with nominated agencies and greater marketing and risk management ability.