RAPAPORT... The Gems and Jewellery Export Promotion Council (GJEPC) seems to be in no mood to enter the New Year still carrying the baggage of negativity that surrounded the industry in 2008. To make sure that the year 2009 is beneficial to the industry players, the council has appealed to the government for various relief measures. The appeal follows a 34.25 percent falloff in gems and jewelry exports in November 2008 and an average decline of more than 20 percent in orders for the period of April through October 2008. Adding to the urgency are the recent layoffs of 65,000 workers engaged in the cutting and polishing business.
Government Appeal
In light of the current situation, Vasant Mehta, chairman of GJEPC, said: “The hardest-hitting fact is that thousands of people who are dependent on the gems and jewelry industry for their livelihood are jobless at present. The industry needs some measures of correction and, with this in mind, the council had a few suggestions for the government that would help revive the industry. We have strived hard to become world leaders in the processing of diamonds and only if we get our act together will we be able to retain our position. The efforts of the past four decades cannot be allowed to go to waste.”
The government already has provided some relief. Earlier, it gave exporters a 2 percent credit relief on interest until March 2009. The problem is the industry had asked for a 4 percent relief. Repeating that request, Mehta said “For survival, every drop counts and we do welcome the respite extended to us by the government, but I would also like to comment that 2 percent is not enough and also the time period that they have offered — until March 2009 — is too short. We need a minimum of a year for things to fall into place.”
The other relief measures proposed to the government by the council include the following:
• Increased availability of adequate dollar credit lines by the Reserve Bank of India (RBI) so that the industry continues to get an uninterrupted supply of financing.
• The release of government funds from its reserves to be used as credit lines for the industry.
• Continued extension of credit by banks, based on the limits that previously applied to each individual exporter, in absolute dollar terms rather than on fluctuating exchange rates.
• Discontinuation of the current practice of declaring an exporter’s account as Non-Performing Asset (NPA) because of delayed collection. An NPA declaration brings the exporter’s credit rating down.
Again and again, Mehta stressed the 65,000 workers who were laid off in just the three-month period from August through October 2008. Explaining the forces behind the layoffs, he said: “There was a reduction in orders of more than 20 percent in value terms in April through October 2008 as compared with the same period of 2007, and the figures for November and December are expected to be worse. Some of the units that ideally would take just a 20-day holiday for Diwali have yet not reopened their factories.” Diwali was celebrated on Oct. 28.
Industry ReactionBakul Mehta, convener of GJEPC’s Diamond Panel Committee, commented that “Earlier, the crisis revolved around the decline of demand, but today, we are facing a liquidity crunch as well, which is of utmost concern.” Paras Mehta, vice president of sales for Dimexon Diamonds Limited, agreed that “The financial crisis has impacted the diamond industry seriously. Most diamond manufacturing and sales companies had a huge leverage with banks and now, because of the financial crisis, the banks do not want to extend any further credit to this industry.”
Commenting on sales for Dimexon this holiday season and goods that are in demand in the market, Mehta added, “The sales have dropped by at least 35 percent from 2007. What is in demand for this season includes small and white goods below 0.18 points.” Harsh Arora, chief executive officer (CEO) of Angel Jewellery Pvt. Ltd., said he feels that demand this holiday season saw a 50 percent hit as compared to 2007 and the market is far from seeing a correction, at least for another six months.
Article from the Rapaport Magazine - January 2009. To subscribe click here.