<div><em>The launch of new gold schemes is widely expected to reduce the volume of gold imports. However, the involvement of jewellers as collection centres under the Gold Monetisation Scheme, could yield far greater all-round benefits, says <strong>Stephen Rego</strong></em></div><div> </div><div>Last week, the Prime Minister personally unveiled three new schemes directly related to the gold and jewellery industry viz. Gold Monetisation Scheme (GMS), Sovereign Gold Bond Scheme (GBS), and India Gold Coins in the presence of many senior Cabinet ministers, government officials and representatives of the jewellery industry.</div><div> </div><div>The aim of the first two of these initiatives is to reduce gold imports which currently average about 800-900 tonnes a year. Reduction in the large forex outflow on this account will help the government’s attempts to keep the Current Account Deficit (CAD) within manageable limits.</div><div> </div><div>The gold and jewellery industry has generally welcomed this initiative of the government, though with some reservations. They say that the Bonds scheme may have some success, albeit limited, but the Gold Monetisation Scheme in its present form is not likely to have much impact. </div><div> </div><div><table align="right" border="1" cellpadding="2" cellspacing="2" style="width: 200px"><tbody><tr><td><img alt="" src="http://bw-image.s3.amazonaws.com/Stephen-Rego200.jpg" style="width: 200px; height: 200px; margin: 1px;"></td></tr><tr><td><strong>Stephen Rego</strong></td></tr></tbody></table>Two reasons are cited. Firstly, a lot of gold in India is purchased via cash transactions, and such buyers are unlikely to buy bonds or want to monetise their stocks without some sort of an amnesty, or assurance that they will not be subjected to detailed tax inquiries. At this point of time, the government appears unwilling to do this.</div><div> </div><div>Secondly, they point to difficulties that will arise under the current procedure involved in monetising physical gold. In its present form, the scheme requires that gold be handed over to authorised Hallmarking and Assaying centres or to participating banks which will then send the gold to the centres. Only after the gold has been assayed and refined will the depositor receive credit and start earning interest, a process that can take up to 30 days.</div><div> </div><div>Jewellers who have been using the existing infrastructure under the BIS Hallmarking scheme to have their gold ornaments hallmarked point to the woefully low number of such centres across the country, their heavy concentration in urban areas, and the fact that they are mostly in locations that are not easily accessible to the general public. Many consumers who may have considered participating, would opt out due to such constraints, they say.</div><div> </div><div>Moreover, till now, the centres have had little or no direct interaction with the consumer, so there is no readymade bond of trust between the two. Will not most individuals be wary of leaving gold or jewellery for testing with these centres? </div><div> </div><div>The solution, according to them, is to involve the jewellery community in the process. As the PM himself pointed out during his speech at the launch, most consumers have been buying from the ‘family jeweller’ for many generations. Even when they make purchases from others, the trusted ‘family jeweller’ is often consulted.</div><div> </div><div>Though the PM made a strong case for involving these goldsmiths or traditional artisans as agents for popularising and implementing the gold schemes, there is, as yet, no provision in the GMS for this.</div><div> </div><div>Leading jewellers and trade bodies have pointed to some of the advantages of authorising the industry to collect gold under the GMS. If jewellers become the interface between consumers and banks, the former will feel more secure while handing over their gold ornaments, and the entire process of collection, testing, refining and concluding a transaction under GMS will be streamlined.<br> </div><div>Industry leaders have suggested that initially only jewellers who have been registered under the Bureau of Indian Standards (BIS) Hallmarking scheme (about 13,000) could be authorised as collection centres. An alternative suggestion is that banks participating in the scheme can nominate jewellers to be collection centres. The banks are familiar with the industry as they have been offering finance or gold loans to jewellers and so will have their own independent process for evaluation and selection.</div><div> </div><div>According to these industry leaders, the turnaround time for testing, assaying and creating a deposit in the consumer’s name, as well as selling or lending the gold to the jeweller will reduce significantly.</div><div> </div><div>It is learnt that the government has already been discussing this possibility and may amend the GMS soon to give the industry a greater role. The PM’s strong reference to the importance of a ‘family jeweller’ and the need to make them agents for developing this scheme also gives an indication of the government’s thinking.</div><div> </div><div>Such restructuring of the GMS may yield far greater benefits for consumers, the industry and the economy than is conceivable under its present format.</div><div><br><em>(Stephen Rego has been a journalist since the mid-1980s, and has spent close to two decades tracking the gem and jewellery industry while holding different editorial positions in industry specific publications and websites)</em></div>
