Recently, the government has set its sights on the gold jewellery industry. According to the government, it wants all pieces of gold jewellery to be hallmarked in a bid to increase transparency and accountability within the industry for the foreseeable future. Since the industry possesses some issues about opacity and unethical business practices, these regulations provide for a much more ethical market, but it won’t be so easy to do so.
The concept of hallmarking is an extremely simple one. Just like when we look for the stamps of quality issued by the FSSAI for when we’re buying a new packet of biscuits, the same will now be done for gold and gold jewellery. Getting a piece of gold or an article of gold jewellery hallmarked will essentially act as a quality control check, which will state that the piece or article in question is authentic and does use pure gold in its making.
All of this seems like a good thing, because as of right now there are no significant quality control checks for gold and gold jewellery in the industry, and doing so will increase the accountability of sellers since each article of jewellery sold will be certified with a hallmark stamp, further assuring the customer of its quality and durability. But, this is the place where the double-edge exists.
As per the government’s plans, it not only aims to hallmark every piece of gold and/or gold jewellery in the country, but to hallmark them with a special six digit UID; essentially a Unique Identity Number. What does this mean? This means that now every piece of gold and gold jewellery in this industry will have its own unique identity code imprinted on itself, with the six digit code acting as the jewellery’s own Aadhaar Card.
So, what does this six digit UID consist of? Well, this six digit code that will be imprinted on every piece of jewellery will essentially enable the identification of the jeweller which sold the piece, the price at which it was sold, and the location at which the sale took place. It even includes the name of the place that hallmarked the said piece of jewellery, along with the addresses and phone numbers of all the parties that were involved in the transaction.
Sounds strange, doesn’t it? But the government doesn’t think so, since it wants to reduce the flow of impure grade of precious metals that are being used for manufacturing jewellery, and for a host of other reasons as well. However, this host of reasons has its own set of problems, which are not going anywhere without putting up a fight.
The first issue that arises with this process is about the existing stock of gold and gold jewellery in this country. We all know that Indians (Bappi Lihiri in particular) love gold like anything, and therefore, does the process of hallmarking essentially mean that the existing stock of gold and gold jewellery with the public goes to waste?
Not quite. The government says that the existing stock is not an issue, and that consumers can send their gold and gold jewellery to the hallmarking agencies to get them authenticated, and to be imprinted with the six-digit unique identification code.
The second issue that arises is the efficiency of the hallmarking process possessed by the industry as of now. According to the numbers reported by the Economic Times, the annual production of gold jewellery ranges between 100-120 million, with an existing stock of 60-70 million which already needs to be hallmarked. The current speed of hallmarking is capped at about 200,000 pieces a day, which makes the entire hallmarking process at current capacity and production to take a time of 3-4 years to complete fully.
Furthermore, the process of hallmarking is manual and not digital, so it is not abnormal to see that once something is sent to be hallmarked, a delay of a few days takes place, which pushes the time taken for the entire hallmarking process to increase significantly.
The third issue that arises out of this new initiative is that since every piece of gold jewellery needs to be hallmarked, small retailers will have to log onto the site of the Bureau of Indian Standards to input all the said details manually, and only then send in the piece to get it hallmarked. This process further increases the delay faced by the sellers, and may in turn lead to a reduced amount of sales due to the unavailability of gold jewellery in the first place.
The last issue that arises is that since the six digit UID essentially has all the information about the jewellery as well as the seller, when coupled with the hallmarking process, puts an increased degree of burden on the sellers of gold jewellery, since earlier low quality gold was offloaded in the production of jewellery, and this quality control check which aims at making the supply chain more robust, puts a negative pressure on businessmen to actually even be part of the industry anymore.
After taking into account all of these issues, we can safely say that the government is trying its best to regulate the market so as to ensure that the quality of products being sold is absolutely authentic, but due to the presence of the six digit code, this just might be the last straw that tips the whole ship upside down. We all are well aware that the industry possesses a certain level of opacity, at least in terms of the sourcing of raw material, as well as the quality of the said raw material being used for the production of jewellery itself.
But we also have to realise that with this bid, the government is trying to wipe the slate cleaner than it was before, but this attempt of weeding out the impurities might result in no impurities at all in the future, since such regulations might just reduce the desire of businessmen in the gold industry to stay in the industry anymore. And as we all know that stringent governmental regulations act as a barrier for entry for firms and any sort of a market in an economy, this might just do the same for the jewellery industry.
However, all of these issues remain to actually come to fruition, since the development of the said initiative is still in its preliminary stages. If the government does decide to go ahead with this regulation, it will be upon the jewellery industry’s attitude to decide if this initiative passes, or if it fails.
