The government's plan to make hallmarking gold jewellery mandatory by Diwali has its merits, but could lead to many complications unless necessary spadework is completed before its formal enforcement. Most big jewellery houses in large towns have already begun to get their products hallmarked for those discerning consumers who do not mind paying a bit extra to get ornaments of standard purity and fineness.
Nearly 80 per cent of India's annual gold consumption of around 900 to 1,000 tonnes is in the form of jewellery. However, short-changing consumers by misrepresenting the purity of gold is rampant in this sector. Besides mixing more alloy than is specified for different carats of gold, liberal use of soldering alloys is a common malpractice. Standardisation and tests-based quality marking of high-value gold products, therefore, would definitely protect buyers' interests. Such quality assurance can also help boost domestic investment in gold and may also contribute to the success of the gold monetisation scheme. The government has already taken some statutory measures deemed necessary for making hallmarking compulsory. The Bureau of Indian Standards (BIS) Act, 1986, has recently been amended to give the government powers to specify the goods that will need to compulsorily carry the standards mark. The amended law empowers the BIS to cancel licences, punish offenders with fines and order product recalls if found substandard.
So far, gold hallmarking has been optional. However, to make it mandatory, the government would need to expand the infrastructure for assaying gold ornaments. Arrangements would also need to be made to supervise the hallmarking process. At present, there are only around 375 recognised gold hallmarking centres. About half of these are located in the southern region where a substantial chunk of jewellery trade is in the organised sector. Some states have no more than one or two hallmarking units. The number of such assaying centres may need to be raised manifold to around 4,000 to cope with the anticipated increased workload. This may require outsourcing to designated private agencies.
The jewellery business is largely informal and designs, sizes and shapes of gold jewellery vary. Assaying as well as stamping each item is easier with machine-made ornaments than with hand-crafted items from goldsmiths in the cottage sector - a sizable chunk of the business in rural areas. The real challenge will be in the case of thin ornaments such as nose-pins, gold wire earrings and slim gold chains where putting the quality mark on each article may not be feasible. There will be difficulty also in assaying the quality of ornaments made by rural goldsmiths from gold scrap sourced from large jewellery houses. Many of these craftsmen have neither the facilities nor the skills to refine the scrap to remove added alloys before moulding it into new items. Ways and means will need to be conceived to assure the quality of such jewellery to safeguard the interests of rural consumers, many of whom buy gold products as a replacement for other forms of social security.
