Budget Analysis - Gems and Jewellery

GEMS & JEWELLERY Customs duty on import of roughs and polished zirconia and rough coral halved to 5 per cent.

The measures

Acknowledging that the gems and jewellery industry responded well to the duty reductions made last year, the Finance Minister has cut customs duty on import of roughs and polished zirconia and rough coral from 10 per cent to 5 per cent in a bid to encourage value addition and exports.

The context The imports of zirconia and carol roughs account for around Rs 2,000-3,000 crore of the overall industry size of Rs 70,000 crore. The country imported rough diamonds worth Rs 33,261.93 crore ($7257.68 million) in the 10-month period ended January 31, 2008 compared with Rs 33,289 crore ($7,263.68 million) in the same period last year. Zirconia and carol, thus, imported and processed in the country is then exported to countries such as the US, West Asia, EU.

The impact It is a major leap in strengthening the $16 billion diamond processing industry. The industry, however, wanted import duty on roughs to be completely removed because of business losses on high labour and R&D costs and, most importantly, the rupee appreciation. Sanjay Kothari, chairman, the Gems & Jewellery Exports Promotion Council (GJEPC), said: “The Indian currency has appreciated by around 14 per cent over the last one year and the export-dependent diamond processing industry needed a major boost. Nonetheless, the cut is a positive move forward for the betterment of the industry.”

Lauding the decision, Mehul Choksi, MD, Gitanjali Gems, said the cut in import duty would benefit consumers. But, a duty cut across all roughs and polished imports would have been more appreciable. “Zirconia and corol, the two prominent rough varieties, form a very small part of our total rough imports. Hence, a wide gamut of diamond lovers are still left out in the Budget,” said Ashish Goenka, MD, Suashish Diamonds.

He added that the industry was facing job cuts due to unprofitable business, and restrictions imposed by rough mining countries on exports thereby, putting pressure on domestic processing units either to source roughs at high prices, shift units to mining countries under harsh terms and conditions or close down their units.