Need of the hour: Hallmarking

The Indian government postponed the implementation of the Gold Hallmarking Act, which was scheduled to come into effect from 1 January 2008, due to apprehensions by jewelers, led by the All India Gems and Jewellery Trade Federation (GJF), officially representing about three lakh retailers across India. The hallmarking act would have made mandatory for all gold jewellery to be certified for purity at centers spread across the country.

According to GJF, licensing is the major issue which will hamper the growth of the jewelry industry. The BIS (Bureau of Indian Standards) licensing, which reminded jewellers of the ‘Gold Control Act’, is applicable only on the jewelry industry, echoing the times of the ‘Licensing Raj’. “We’ve seen the draconian effect of Gold Control Act, and we’re not ready for that experience again. The paperwork and procedure should be simple and transparent with the absence of taxation and rigidity in licensing system,” commented Atul Jain, director of AR Diamond Gem Grading Services. Some of the other objections raised included insufficient infrastructure and the precondition for a jeweler to have a license for selling hallmarked jewellery. Jain also mentioned that the license charges should be made affordable for the small jewelers, rather than catering to just the bigger players.

SL Palkar, regional coordinator, BIS-western region told JCK India, “Earlier the charges for licenses were Rs25,000 per year, but we are now charging the same amount for three years.” It was also necessary for BIS officials to visit the showroom prior to approval, but now the BIS requires jewelers to submit a photograph of the showroom with a declaration that they will not stock cadmium jewelry. “We issue licenses within two hours of the submission of required documents,” Palkar claimed.

Out of the 35 states and union territories in India, currently there are 106 hallmarking centres in 14 states, which have close to 5,000 licensee jewelers, according to the Indian Association of Hallmarking Centres (AIHC). An additional 12 states have more than 500 licensee jewelers, but no hallmarking centres. The remaining nine states and union territories have neither licensee jewelers nor hallmarking centres.

The four metropolitan cities of New Delhi, Kolkata, Mumbai and Chennai currently have 41 hallmarking centres. The AIHC is adding 17 to take this number up to 58 by the first week of January 2009. Industry experts say this is still a fraction of the estimated infrastructure requirement of 500 centres for the successful infrastructure implementation of compulsory hallmarking.

Remarking on the weak infrastructure issue Uday Kumar Vummidi, secretary, Gems and Jewellery India International Exhibition (GJIIE) commented, “Hallmarking will definitely facilitate the growth of the industry, but it should be made mandatory only with adequate arrangement of proper infrastructure. It should be convenient, comfortable and accessible to every jeweller.”

However, BIS deputy director general P Sengupta finds the demand for more centres baseless, as even most of the existing ones are underutilised. “Despite this, the government is providing huge financial incentives for new centres, offering subsidy of Rs1-1.5 crore on each centre.

According to Indian Association of Hallmarking Centres’ Secretary, James Jose, only around 10 percent of the 106 existing hallmarking centres are working at full capacity. “There are huge unutilised capacities in the hallmarking centres - the average capacity of a hallmarking centre is roughly 2,500 pieces or 35 kilograms per day, which works out to 10 tonnes per annum.” Thus, the 106 centres across the country can hallmark more than 1,000 tonnes of jewellery every year, versus the actual hallmarking happening of less than 200 tonnes.



India’s annual consumption of gold jewelry went up from an estimated 65 tonnes in 1982 to 620 tonnes in 2000. However, there was no hallmarking of jewelry done in this period. For the first time, a mere two tonnes of jewelry was hallmarked in 2001, when jewelry consumption touched 615 tonnes. By 2007, India hallmarked 180 tonnes of jewelry against a consumption of nearly 560 tonnes.

Anticipating mandatory hallmarking, which was to be implemented in January 2008, many new centres sprang up in small towns as well as in the metros, irrespective of the volume of jewelry that can be hallmarked in these places. Commenting on low capacity utilisation, Jose said: “For instance, though the existing volume of hallmarked jewelry in Mysore is not sufficient even for a single centre, it has four hallmarking centres. The same is applicable for Kollam in Kerala, where daily hallmarking volumes are hardly five percent of installed capacity. Of all the licensee jewelers, only around 25 percent go for 100 percent hallmarking.”



The act also calls for jewelr y below five grams to be hallmarked, though it will not have enough space to be stamped. Jewelers demanded exemption of such jewelry from the act. They believed “the onus of lower purity of hallmarked jewelry should lie on the hallmarking centres and not jewellers,” and are demanding this aspect be clearly stated in the amended act. Also, hallmarking done by manufacturers should be acceptable and need not be double-checked by the retailer.

Despite supporting the government’s stance on hallmarking, most jewellers want to see serious measures taken on the issues like certain kinds of jewellery, like meenakari, kundan and polki type handcrafted jewelry, being exempt from hallmarking. Speaking in favour of hallmarking, Tumal Jain, secretary, Delhi Jewellers Association said, “Hallmarking is always better for the trade. It is going to help to win consumer confidence.” But he also believed jewelry having less than five percent metal elements (which is worth Rs20 lakh, but comprises precious metals worth Rs5,000) should be exempted.”

Vivek Kala, president of Jaipur Jewellers Association agreed with Tumal Jain. “There should be a proper declaration of the clauses mentioned in the act. Jewelers like us who deal with colored stone or diamond-studded jewellery, need to certify the diamonds, emeralds, rubies and sapphires. The government should also take into account special cases like customised designs. If a customer goes for his choice of designer ring, the already hallmarked pieces will remain unsold.”

“Jewelers should be allowed to keep both certified and non-certified jeweller y. The customer is well educated; he has a clear idea of what he is buying. If the customer himself starts demanding hallmarked jewelry, jewelers will have to stock it,” Atul Jain said.

Interestingly, a 2006 government survey of 16 cities found that of 162 samples, more than 90 percent failed in terms of purity. This means a customer who bought gold jewelry labelled 22k could have in reality been cheated by being sold 18k jewelry.

Commenting on errors in karat declaration, BIS’ Sengupta commented: “We have found many such cases, where the customer is fooled by the jeweler. The jewelry is actually 22k; but the jeweller sells it as 24k jewellery, which in today’s scenario could cost an additional Rs1,200- 1,300.”

In 1998-99, World Gold Council (WGC) and the Reserve Bank of India (RBI) together introduced hallmarking in India on the back of the RBI Precious Metal Committee’s report stating the need of quality control in jewelry to safeguard the consumers’ rights. After the inception of the first hallmarking centre in April 2000, the committee conducted surveys in 2001 and 2006, and both times the findings were uninspiring. Also, as per a recent BIS survey around 87 percent of the gold jewelery sold in India is below the stated karatage level. All these reports were more than enough to force the government to make it compulsory for the jewelry industry to hallmarking the jewelry, officials explained.

The government is now reforming the act, the bill for which is pending in parliament, considering the issues raised by the jewelers. Representing jewelers’ optimism, GJF chairman, Ashok Minawala, told JCK India, “We showed loopholes in the bill, which would have acted as big hurdles in activation otherwise. The government has promised us that it is going to make amendments considering our demands.” The government has also assured the industry of a sixty-day-preparatory period before the act is finally implemented.

“Among the recent developments in the Hallmarking Act was the inclusion of a new karat introduced in the industry, namely the 17 karat (with a fineness 708), so that the items rejected on 18 karat fineness can also be put up for sale with a marking of lower karatage,” Jose said, adding: “Marking to next lower fineness or karatage is possible in 22 karat and 18 karat too, and jewelry below two grams and nine karat is exempt from hallmarking. The hallmarking technology too has improved as the centres can now hallmark up to 99.9 against 99.5 earlier.”

Kala believed hallmarking will work as a catalyst for jewelry trade, but should be a voluntary process. “Jewelers who stock hallmarked jewelry can promote themselves through extensive media campaigns. It will create awareness among consumers, which in turn will further push the demand for hallmarked jewellery. Those who will deny hallmarking will suffer losses and will have to opt for hallmarking. Therefore consumers’ education is the best means to implement hallmarking.”

An interesting point was raised by Gaurav Anand, owner of Indore-based Punjab Jewellers, who said that hallmarking should be implemented at the manufacturing level, so damages can be cleaned up before the jewelry reaches the retailer. “There is only one hallmarking centre in Indore and it is sufficient to cater to the needs of Indore jewelers.”

Though India is home to various types of handcrafted jewelry, exports are limited only to cut and polished diamonds. According to industry experts, mandatory hallmarking along with the Vienna Convention will create new avenues for jewelry export. “It will make Indian jewelry acceptable anywhere in the world without any further quality checks,” Jose said.


(click on image to enlarge)