Meena Pandey, a 54-year-old homemaker in north Delhi, had built a small gold jewellery reserve for her daughter’s wedding. Some of the gold was from her own marriage and the rest was bought from the “family jeweller” over the past 30 years.
One day, ahead of her daughter’s wedding, Pandey pulled the jewellery out of the bank locker and took them to a hallmarked jewellery shop that was promising no value deduction if one exchanged old gold for new. “Even our family jeweller would have deducted 4-5%, so trying a hallmarked shop seemed like a good idea,” says Pandey.
However, when the gold items were tested on a caratometer in the shop, their purity was found to be of 18 carats, not the 22 carats Pandey had paid for. In one swoop, her gold jewellery items had lost a major part of their current market value.
Failing the test
India has more than 300,000 jewellers and most of the gold jewellery they sell is believed to have a purity of 22 carats (22 parts gold and two parts other metals).
Because gold is too soft for use in its purest form (24 carats), it is mixed with either silver or nickel to make it sturdy.
Given wide scope for adulteration, jewellers are supposed to specify the purity of gold they are selling and charge customers accordingly. In reality, this is seldom the case, especially in towns and villages, where the local jeweller’s verbal assurance on purity is considered enough.
Pandey was not the only customer to feel cheated.
Most buyers come to know of the amount of adulteration in their gold items many years after the purchase, when they go to sell or exchange their jewellery.
To check such cheating incidents, in 2000, the central government introduced a voluntary hallmarking scheme to promote sale of certified gold by retailers. This requires the jewellers to register with the Bureau of Indian Standards (BIS) — the governing body for gold hallmarking. The hallmarking is then done at one of the 877 BIS-recognised assaying and hallmarking centres (AHCs) across the country, for a fee of Rs 35 per piece. Hallmarking is done through laser that does not spoil or bend the jewellery.
Today, hallmarked jewellery accounts for 40-50% of total gold item sales. However, only 26,019 or 8.7% of the jewellers across India have registered with BIS.
Thus, the buyer’s mistrust of the jeweller appears to be intact. In an October survey by LocalCircles, community social media platform, 59% of the 56,000 respondents said they had low trust in their jewellers while 48% said they or their families had been cheated by jewellers.
While gold standard has been established only for 14, 18 and 22 carats, in reality, gold in India is sold in many variants — from 1 carat to 23. “It is common to find jewellers selling 23 carat gold items if one goes to Akola or Solapur in Maharashtra while in Haryana, Punjab and western UP, they usually sell 20 carat gold,” says Chirag Sheth, a consultant at Metals Focus, a precious metals consultancy that provides data to the World Gold Council (WGC), the market development organisation for the gold industry.
Since the hallmarking scheme has been voluntary so far, many jewellers have been found to be misleading buyers. For example, ‘916’ on the gold item denotes 22 carat purity.
But if there is no accompanying BIS logo, the gold may not really be 22 carat. Other jewellers are said to conveniently get only a part of their stock hallmarked and claim that all their gold is 100% hallmarked.
“Some jewellers even sell non-hallmarked jewellery by forging the BIS logo,” says a gold industry expert, not wanting to be named.
To end adulteration of gold and ensure customers pay for exactly what they buy, hallmarking of gold jewellery will no more be voluntary but mandatory from January 15, 2021.
According to the consumer affairs, food & public distribution ministry, jewellers will be given a year’s time to get their stock hallmarked and more assaying and hallmarking centres will be opened to speed up the process.
Non-compliance will invite a fine of Rs 1 lakh that could go up to five times the item’s value along with a year’s jail term. Trade experts have welcomed the move, but with riders. “Compulsory hallmarking will bring the trust back in the gold industry, benefiting consumers and traders,” says Somasundaram PR, managing director of WGC India.
According to a WGC survey in November, 48% of the respondents said they did not invest in gold due to mistrust.
The new regulation would mean that all 3-lakh-odd small and large jewellers in every nook and corner of India will have to compulsorily register with the BIS and sell only hallmarked gold jewellery from January 15, 2021.
But are the jewellers ready?
“No doubt the new rule will propel the growth of the organised jewellery sector. But BIS certification centres are presently limited to cities and large towns. The challenge will be to manage this aspect so that retailers in small towns can also shift to hallmarked jewellery,” says TS Kalyanaraman, chairman of Kalyan Jewellers, a Thrissur-headquartered jewellery chain.
Currently, hallmarking centres are present only in 234 of India’s more than 700 districts. There are no centres in Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Sikkim, Lakshadweep, Andaman & Nicobar, Daman & Diu and Dadar & Nagar Haveli while Tripura has just one such centre.
The first task of the government will be to open new centres in remote areas. “We are already working on this aspect. In the next one year, centres will come up in almost every district of the country,” Consumer Affairs, Food & Public Distribution Minister Ram Vilas Paswan tells ET Magazine.
Looking for four marks
Under the new norm, for standardising purity of gold jewellery, four marks will have to be present on every gold article that is sold: a BIS logo, a three-digit number signifying purity along with carat, the jeweller’s unique ID mark and the sign of the centre that hallmarked the piece.
Gold industry experts say that ensuring the four marks on every article will be a major challenge along with taking the scheme to jewellers across the country, who have over the years devised unique ways of signifying gold purity, oblivious of the concept of hallmarking.
“Even in small towns, where jewellers and buyers are waking up to the idea of hallmarking, we know how difficult it is for them to transport precious metal to the assaying and hallmarking centres located in some far-off city,” says Haresh Soni, former president of All India Gems and Jewellery Trade Federation.
With the government deciding to formulate standards only for 14, 18 and 22 carat gold, selling gold of any other purity will be illegal. “We will work on only three grades (14, 18 and 22 carats). No other grade will be permitted for sale from January 2021,” HJS Pasricha, deputy director general-hallmarking of BIS, tells ET Magazine.
Spreading awareness about hallmarking in the hinterlands will be crucial, say experts. “More frequent checks and audits by BIS will go a long way in making retailers follow uniform standards,” says Sheth of Metals Focus.
Old gold problem
Old gold lying with people for decades has been kept out of the scheme’s purview. But it may become difficult to sell old gold jewellery without a BIS logo.
“Once hallmarking is made mandatory, which jeweller will accept non-hallmarked gold? And even if the jeweller does, the customer may have to deal with the whims of the retailer on the price she gets,” says the chairman of a leading gold retailer on the condition of anonymity.
Industry players point to another loophole. “What if a customer, who bought a piece of hallmarked jewellery, gets the design altered or the piece mended? Won’t there be chances of adulteration then? Will the retailer get every piece of ornament hallmarked again?” says Piyush Gupta, director of PP Jewellers, a Delhi-based jewellery chain.
Even as there is a widespread belief that mandatory hallmarking, if implemented well, can change the image of the segmented gold industry, it may also take longer than a year to implement the rules.
“Right now, big retailers showcase 100% hallmarking as their USPs. But in rural areas, neither retailers nor buyers have any idea about hallmarking. Unless people in the remote areas are made aware and they start demanding hallmarked jewellery, the scheme will continue to benefit only a select section,” says Soni. “Rather than just making it a regulation, the government ought to create awareness so that the demand (for hallmarked jewellery) comes from consumers. Only then can the scheme be successful.”