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As the government is making more and more efforts to discourage import of gold and make it less attractive for customers, jewelers have intensified efforts to sell gold jewellery by offering several incentives and concessions, which have resulted in keeping prices lower or nullified burden of increased import duty on gold.
In the last 14 months, the government has announced a six-fold increase in import duty of gold; jewellers have so far nullified its impact through luring offers including incentives on “gold accumulation scheme” and hefty discount on making charges. Gold accumulation scheme is also ultimately offered to sell jewelery when the scheme ends.
The latest retail to enter the bandwagon was Gitanjali Gems. Through its Swarna Mangal gold and Shagun Diamond Jewellery accumulation plans, the company offers 4.5 times free bonus of the customer’s monthly deposits installment for 24-month scheme. Also, the company offers upto 60% discount on making charges on gold jewellery at the time of redemption.
Thus, the total annual returns for customer work out to 19% under the accumulation plan which is in addition to an average 6% discount on making charges (average making charge on gold jewellery works out to 10%). This gives customers total annual returns of 25% by investing in Gitanjali’s gold and diamond accumulation plans, the highest by any jewellers in India.
“Our aim is to add at least 20,000 new customers in one year under these schemes. The primary objective behind such offers is to democratize diamond sales in India. At the same time, we also want to expand our horizon in gold sales through attractive offers,” said Mehul Choksi, chairman and managing director of Gitanjali Gems.
Such schemes are not new to India. Other jewellers including Tanishq, Trobhovandas Bhimji Zaveri (TBZ) and PC Jeweller have been offering bonus installments to their customers for years.
Mumbai-based TBZ offers 3.5 times of bonus installments for 24-month scheme. Under this scheme, for example, an investor would get Rs 17,500 additional sum at the time of redemption if he chooses to invest Rs 5000 per month.
“This is just an additional service to our customers. Through such schemes, we have managed to understand our loyal customers better,” said Shrikant Zaveri, chairman, TBZ.
PC Jeweller, the Delhi-based, gold and diamond ornaments manufacturer and retailer, offers twice the monthly installment as bonus for just 12-month scheme. All these schemes start with a minimum monthly deposit of Rs 1000.
Despite government’s efforts, India’s gold import continued constituting worth Rs 2065 billion between April 2012 and December 12, 2012. Experts believe India’s gold import to surpass last year’s value of Rs 2695 billion by the end of the current financial year.
Gold miners’ body the World Gold Council (WGC) was also convinced with India’s unabated appetite of the yellow metal. David Lamb, global MD, jewellery, WGC, recently forecast India’s gold import to remain between 865 – 965 tonnes in 2013, higher than the last year’s level of 864.2 tonnes.
“The government’s attempt will only make gold costlier for consumers. It would not work for reducing buyers’ appetite at all. The government will have to look for other options for CAD,” said Ashok Minawala, an industry veteran and ex-chairman All India Gems & Jewellery Trade Federation (GJF).
