Jewellers seek nod for direct foreign loans

Hit by non-availability of dollars, the gems and jewellery industry has urged the government to liberalise financing norms and allow it to directly borrow greenbacks from foreign banks. Almost all the raw material it needs come through imports.

The Antwerp Diamond Bank recently opened a branch here and has lent working capital to a number of Indian companies abroad. It is ready to loan dollars to units here, too, but current rules do not allow companies to borrow from foriegn banks directly.

“Non-availability of the dollar from Indian banks has affected overseas sourcing of raw material. On the other hand, high interest rates for working capital are unnecessarily raising cost of production in India. Hence, we have urged the government to allow gems and jewellery manufacturing units to avail dollar loans from overseas banks,” said Rajeev Jain, chairman of the Gems & Jewellery Export Promotion Council, at a conference here on Thursday. “Many foreign banks are ready to provide working capital for Indian units at competitive interest rates, which we are not allowed to avail. Ultimately, we are competing with countries like Belgium where the interest rate is half the rate prevailing here.”

 

The annual turnover of the industry is about Rs 300,000 crore, of which Rs 50,000 crore is exports. The value of raw material used is about 80 per cent of that overall Rs 300,000 crore. As mentioned, the input supply — gold, diamonds, gem stones, etc — is fed though imports, and the scale is huge. For instance, about 11 of every 12 rough diamonds mined across the world are processed in India, for both domestic sales and exports.

The Rs 250,000 crore domestic turnover has risen four-fold in six years. The industry requires adequate working capital to prepare jewellery items with contemporary designs, for customers’ requirement in the next month’s wedding season, where half of all jewellery sales in a year come from.

“Also, we have urged the government to allow us to open dollar accounts in which transaction of only dollar-denominated business would be possible. This account will helps us meet dollar requirements as and when we want,” said Jain.

Agreeing, Mehul Choksi, chairman of Gitanjali Gems, said, “Dollar availability is a major issue currently in the industry. If not addressed, it will affect overall growth of the industry. Further growth potential lies in smaller centres like Southeast Asia, the Middle East, Latin America and China. It would be prudent to allow rapid growth for diamond jewellery in these trajectories through innovative designs.”

“Availability of raw material is a major issue today for Indian jewellers. Since the shift of the industry’s growth is partly towards the domestic market, the industry needs to ensure availability of raw material to keep the momentum going,” said Ashok Minawala, ex-chairman of the Gems and Jewellery Trade Federation.