Faced with around $2 billion of payment receivables stuck with jewellery importers in China due to the coronavirus outbreak, the Gems and Jewellery Export Promotion Council (GJEPC) has sought a six-month extension in credit from lenders.
Currently, the latter grant credit for six months (180 days in trade parlance) on export consignments from India. The trade says this is insufficient at this juncture.
“The Chinese new year (a peak consumption season) was a whitewash in terms of jewellery sales in China as people remained indoors amid fear of virus spread. Shops and factories remained closed for weeks, resulting in receivables getting stuck for two months. We, therefore, have written to leading banks and the ministries concerned to grant another six months for receivables. The overall impact of coronavirus on India’s gems and jewellery would depend on how long factories and shops are shut in China,” said Colin Shah, vice-chairman of GJEPC, on the sidelines of the India International Jewellery Show here on Thursday.
Lenders have Rs 40,000 crore of cumulative exposure to the sector. State Bank of India is estimated to have extended a cumulative Rs 6,000 crore; Indian Bank has exposure of Rs 7,000 crore.
China takes nearly 30 per cent of India’s gross annual jewellery export of around $40 billion. Of the $12 billion China takes, about $6.5 billion is for domestic consumption; the other $5.5 billion is redirected after local labelling and branding to developed countries.
Industry sources said jewellery sales during the Chinese new year remained upbeat; these are 25-30 per of annual sales in China. Jewellery retailers normally start preparations for the occasion and place orders with suppliers in India at least four or five months in advance. Indian jewellery exporters also book Chinese orders and execute consignments for display in Chinese stores at least a month in advance.
News of the coronavirus outbreak first came to light in early January, taking major Chinese trade cities into its grip. The government there had extended the new year leave initially by two weeks but traders shut shop indefinitely amid fear of the virus' spread.
“Since the outbreak, not only gems and jewellery sale but the entire trade has come to a grinding halt. The Reserve Bank of India has granted us a six-month timeline to get export receivables. Another six months would certainly help borrowers mitigate the risk of getting into default for no mistake of theirs,” said Sabyasachi Ray, executive director at GJEPC. India’s gross export of gems and jewellery fell by about 5 per cent in the first nine months (April-December) of this financial year, due to unfavourable global economic conditions. The fall deepened in January to 9 per cent. This financial year (ending March 31) is set to end with a nearly seven per cent fall, says Ray.
Pramod Agrawal, chairman of GJEPC, says export would hopefully revive into positive territory by the July-September quarter.