After easing some restrictions on gold imports which were earlier imposed in 2013, the government on Wednesday said it has no plans to impose any further curbs on gold imports as the current account deficit (CAD) is under control.
Currently, duty for gold that companies import stands at 10 percent but a reduction in duty will help consumers, says Nilesh Parekh, Chairman of Shree Ganesh Jewellery House in an interview to CNBC-TV18.
Going ahead if policy remains constant, the EBITDA of the company will turn positive, he added.
Below is the verbatim transcript of the interview:
Nigel: You all had great time in this festive season, how good was the last quarter?
A: Last quarter for the industry generally was quite good because the government policy, if it is stable then it helps the market per se and jewellers also understand whether the duty structure which was very effective, there was a change of duty and the policy that kind of dismantle the whole thought process, but now since the government has come out with positive future talks about having a consistent policy and not having any curbs, I think this will also help the industry in the right stream.
Ekta: Can you tell us how important would be a reduction in the import duty for you. Is it the need of the hour or do you think that you can sustain operations at current levels?
A: Reduction of duty also helps not only us as importer or manufacturers but it also helps the consumers because India is one of the largest consumers of jewellery and imposing such high duties like 10 percent, is a big setback for the consumers and couple of percentage of duty to begin with, should help the consumer and the market to grow because we all are looking towards 'Make in India' product which ultimately want to be exported out of India, if we are at par with the duty international duties then we will do fairly well.
Ekta: Could you tell us what the duty drawback scheme contains and what does the industry mean when rationalisation of duty drawback is something that you are talking about?
A: I think it is going to be very confusing basically we have 10 percent duty on gold that we import, so rationalising means let us be at par with the international markets, let us not impose high level duties at the moment.
Ekta: What would the international rate be?
A: Anywhere between 1 percent and 2 percent, what we started with, is a welcome for the industry beyond that there are other means of gold import which happens in India, which we do not want because that gold is not sustainable gold, we cannot manufacture from that gold and the whole industry is looking forward for a reduction in duty to approximately 2 percent, gradually they can reduce it, so that we can do 'Make in India' objective successful.
Nigel: On operational front when can we expect to deliver positive numbers?
A: Last year was a year of lot of changes of imposing different kind of policies then the policies turned. We need to see in March, if no changes come then you will see a positive result in the industry per se and even for my company.
Nigel: By Q1 of FY16 we can expect a positive EBITDA, if things remain constant?
A: Yes.
Ekta: How the festive season was for you in the months go by. Can you tell us what the volume and pricing growth was and compare it to the last festive season though it wasn't different months – October and November.
A: The price suddenly reduced, so now we have to look at the volume only, not the pricing because pricing is just a pass-through whether it's in India or abroad. However, volume 20 percent higher in the festive season and that's impressive looking at the stiff unstable duty structure, unstable government policy but now as we have seen, government has assured the industry that there will not be any erratic decision on imports, there will not be any curb. So it will grow the way it is. Generally gem and jewellery grows at a pace of 8-10 percent and if it is a good and a stable government, it would go to 15-20 percent.
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