Post the lockdown, returning to work will be defined by strict hygiene compliances and taking cautious and calculated risks. Solitaire International spoke to a handful of government and industry stalwarts for their views on prerequisites for getting back to business post Covid-19
Covid-19 is an unforeseen and unprecedented situation that has turned the world upside down. And like every major disruption, it is pushing the industry’s boundaries of resilience. The industry – be it miners, manufacturers, retailers or wholesalers – will have to gear up for a world where the old norms will have to be reframed.
Instead, new rules and different social mores will have to be put into place. Resuming operations in the midst of a pandemic requires a lot of thinking through and courage – because this virus, so far, has no cure.
Already, the world over, the gem and jewellery industry has started resuming operations gradually and with caution. The wheels of the global economy are slowly starting to turn again.
Lucapa Diamond Company announced recommencement of scaled mining operations at Angola’s Lulo alluvial diamond mine. Similarly, in South Africa, Petra Diamonds said it was permitted to ramp up to 50% of labour capacity during the nationwide lockdown. Though stores in China are not open fully, the country is expected to return to normalcy within four months. Luk Fook Jewellery in region reported improved sales for the first two weeks of April.
Closer home, Jaipur’s EPIP and SEZ Zone 1 and 2 have started production. Surat Hira Bourse, too, has exported 10 shipments while Surat SEZ has started operations in eight units.
Pramod Agrawal, chairman, the Gems and Jewellery Export Promotion Council (GJEPC), said, “The Indian gem and jewellery industry has a backlog of over $1 billion-worth of orders. This needs to be delivered soon, or else there is fear of losing business to neighbouring countries like China or Thailand, as both the countries are operational. We are in talks with the Maharashtra government to allow minimal operations at SEEPZ, Bharat Diamond Bourse (BDB), etc., which are the most prominent export zones in India. GJEPC along with the Bharat Diamond Bourse is working with Maharashtra Industrial Development Corporation (MIDC) to formulate an SOP to commence minimal operations at BDB, while complying with Covid-19 safety guidelines set by the state government. At the same time, GJEPC, along with the SEEPZ authorities, is pursuing the state government to commence minimal operations with the objective to clear backlogs by adhering to the guidelines.” (See page 16 for the latest updates about the state government permitting gems and diamond business to resume limited jewellery operations).
Colin Shah, vice chairman, GJEPC, stated, “This industry has emerged from every crisis more resilient. This time, it will take longer to find the new normal, which could be about 20% below the pre-Coronavirus level in value terms. The industry collectively took a decision to halt rough diamond imports for a month starting from May 15th, 2020 to stabilise diamond prices and clear the existing inventory.”
While there’s a definite buzz in the industry to restart, a conscious effort will have to be undertaken to realign old ways with new ones. To shed light on the situation, Solitaire has endeavoured to put together a holistic view of the way forward through interviews with officials from the government, mining segment, marketing and jewellery retail.
As the business world slowly awakens from the never-ending nightmare that is the Covid-19 pandemic, there is a universal understanding and acceptance that things will never be the same again.
It is essential to remember that Covid-19 is – first and foremost – a humanitarian crisis, not purely an economic one. It should be acknowledged that the GJEPC had made health care its top priority years earlier when it launched the Swasthya Ratna health insurance scheme for employees of member companies. This was followed a few years later by the introduction of the Swasthya Kosh health insurance fund for the large number of independent jewellery artisans who hold the Parichay Card.
UNITE TO SURVIVE
Once the lockdown is lifted, the gem and jewellery industry needs to ensure that its massive workforce starts to slowly return to work and get the economic engine back on track.
RUPA DUTTA, Economic Advisor, Ministry of Commerce and Industry, Government of India
The future of the diamond, gold and gemstone industry remains uncertain, and it will take some time before we see exports revive. What steps can the industry take to resume operations and revive the industry’s moribund state?
Covid-19’s unprecedented impact on business across the globe has completely derailed established supply chains of various sectors and industries. Restrictions on travel by many countries have resulted in cancellation of business events, deferment of committed orders, reduced demand, elongation of receivables, etc.
Further, rising uncertainties and fear of severe value loss along with the prospect of instability in business has aggravated trade sentiments globally. It is severely impacting all sectors, especially the exportoriented sectors like gems and jewellery where the products are also high value items.
The future of all businesses including the diamond, gold and gemstone industry remains uncertain till some certainty is reflected on controlling and containment of the Covid-19 pandemic. It will take some time before we see some revival in exports.
However, once the lockdown is lifted, the gem and jewellery industry needs to ensure that its massive workforce starts to slowly return to work and get the economic engine back on track. For this, the industry will have to ensure availability of work and job security. Sustaining manufacturing over the next two to three months will be crucial and conserving cash on hand will be the key to survival for most businesses. As such along with government initiatives, the industry also should unite to help and protect the precious human resource.
What are the commerce ministry’s expectations from gems and jewellery industry leaders?
The coronavirus’ outbreak has created an unprecedented situation globally. Humans have encountered outbreaks of diseases earlier too, but this is the first viral outbreak/pandemic of this nature and scale.
The gem and jewellery community has initiated several reforms to fight and overcome the Covid-19 pandemic at individual industry levels. The Gem & Jewellery Export Promotion Council (GJEPC) has provisioned a fund of 50 crore for the sector out of which 21 crore has been contributed to the ‘PM CARES’ fund. The balance is being spent for the well-being of the industry, workers/artisans and employees to help them cope up with the present strain of the pandemic.
Now, we expect the industry to unite and survive this crisis by taking care of its workforce. We hope from that daily wagers are paid minimum wages required for survival till work is resumed. Additionally, the industry is expected to protect its employees’ pay and job by availing reserves created for such purposes or by any other means. The utmost priority at this time is just to save the job/work of the human resources so that they can survive in this crucial period.
What is the commerce ministry’s plan to support the industry during these tough times?
Both the government and industry must jointly do everything in their power to ensure that jobs are saved and families are unhurt by Covid-19’s economic impact. The government has already announced several fiscal measures to assist traders in this period of uncertainty. Various policy measures/relaxations and changes in regulatory compliance have been initiated to minimise the hurdles faced by the exporters/industry players and facilitate ease of doing business in such a critical time.
In a continuous process, the government is coming up with different relief measures for various sectors from time to time based on the changing economic situation in the country. While the Government of India has undertaken numerous measures and ensure availability of facilitating measures to help the industry in these tough times, it is also expected that this industry takes steps and devise measures where community members support, sustain and nurture each other.
Are there any new marketing strategy that the industry should focus on, since all the shows and events are postponed or cancelled?
During the lockdown, the entire world conducted business via video conferencing calls. The integration of technology in daily business will continue to grow in coming years. Now more than ever, the use of data and analytics will be crucial for studying sales information, analysing customer behaviour, maintaining efficient stock-keeping, reducing wastage, building a strong client database and connecting with potential customers through digital mediums.
Besides, the possibility of holding Virtual Fairs needs to be explored. Events can be held using the existing videoconference/teleconference platforms where the exporters, GJEPC and Indian missions abroad, along with prospective buyers can be brought on the same platform.
What about reviving the domestic market in some months? Could you suggest some plans of action to deal with the pandemic’s ramifications?
This will depend on how the coronavirus pandemic is contained in the coming months, followed by relaxations in lockdowns and resumption of necessary business activities in a phased manner. Even after the lockdown is over, millions will avoid going to work because of fear, bad health or lack of transport.
This shortage of workers will hit the supply of goods and services. Further, there will be a slowdown in demand in the gems and jewellery sector and people fearing a recession, may put off their purchases. As such, revival in the gem and jewellery sector will definitely take more time as compared to other sectors.
However, the coming festival and marriage seasons will surely help in some revival of domestic sales of gems and jewellery. Besides, usage of digital gold and other financial instruments, including the existing Gold Monetisation Scheme, should be explored. Focus on promoting sale of low cost and high value addition jewellery such as imitation and silver jewellery through e-commerce will help in creating demand as well as increasing margin of profit.
EMBRACE THE DIAMOND INDUSTRY’S RIPPLE EFFECT
Global diamond demand from the cutting centres may decline by 50-60% in 2020!
By CHAIM EVEN-ZOHAR AND PRANAY NARVEKAR
The now inevitable economic slowdown will impact the entire diamond pipeline, but each phase will be impacted in a different way – with the diamond cutting centres taking the more severe beating, only second to the producers. The economic phenomenon that explains with considerable certainty the ways diamond and players are going to be affected is the “ripple effect” – a theory that has proven itself over time within our industry.
If diamond jewellery retail consumption declines by only 15% by the end of 2020, I think we should consider ourselves extremely lucky. It is likely to be higher. We better prepare ourselves for more. The “destruction” of trillions of dollars globally as a result of stock market crashes and bankruptcies, the enormous unemployment which we will face in the post-corona era, the recession (if not outright depression) in the United States, the uncertainties about renewal of coronavirus attacks (new peaks in winter), the 10% or maybe higher decline in global GDP, will reduce the level of income and the savings of virtually all consumers.
EXCESS DISPOSABLE INCOME WILL FALL OR DISAPPEAR
The liquidity crunch and economic uncertainties are greater (and globally wider) now than they were in previous crises. The de-stocking by the retail trade and in the jewellery manufacturing sector, the resultant decrease in demand for polished diamonds and destocking in the cutting centres, will have a most severe negative impact on the rough diamond market. We are facing already a significant fall in rough demand, downward pressures on rough prices, shortage of liquidity and reduced pipeline profitability (especially on the level of the producers).
Consumers may not have any money left to purchase luxury items. Diamond jewellery will be impacted. Before explaining how the “ripple effect” (economists also refer to this as “bullwhip effect”) works, allow me a graphic illustration:
Another way to look at the ripple is shown in the following illustration. It shows how a small change (volatility) at the retail level can create enormous wave as the cutting centres and rough diamond production levels: let’s say 5%, could well trigger a correspondent rise of industry rough diamond off-take of some 15-20%.
The reverse may also be true, as we have seen in 2001: a small decline in retail sales, in conjunction with negative trade sentiments, may cause a substantial fall in demand for rough and cutting centre polished diamond sales. This occurrence is known as the ‘ripple effect’ and the ‘reverse ripple effect’.
How does this phenomenon manifest itself? If it takes an average of 22-26 months for a diamond to move from ex-DTC level to the consumer, this means that the total normal pipeline stock level is $36-$43 billion (rough and polished, expressed in wholesale polished prices). This figure is of vital importance.
HOW THE RIPPLE WORKS
The ripple works both ways – both in a growing and in a falling market. It is premised on the facts that under certain circumstances, increases of diamond retail sales of a few percentage points, retail level it takes almost one year for the inventory to be turned over (in some places it is slightly shorter).
If consumer purchases of diamond jewellery decline, as we expect will happen in 2020, the need for the retailer to replenish stocks falls accordingly. Depending upon trade sentiment, he will also be satisfied with a lower level of stock. Thus, a small reduction in retail sales will trigger a far greater decline in the level of replenishment. These dynamics will be repeated at every intermediate level of the diamond pipeline. This explains why even a 2-3% decline in the diamond jewellery retail market, coupled with a negative trade sentiment, can cause a 20-30% reduction in cutting centre sales.
This is the ripple effect. Take a hypothetical example (see following table): A retailer whose stock turns around once a year has an opening stock of diamonds of $100,000. His sales also totalled $100,000. In the next year, he sells $120,000, ie a 20% increase on the preceding year. Being optimistic about the future, he wants to have a stock of $120,000 at the year-end. Consequently, his diamond purchases went up that year by 40%, from $100,000 to $140,000.
Now let’s look at a different scenario in which the market falls. In the third year, the retailer’s sales declined by 10% to $108,000. Because of his now pessimistic view of the economy, he feels that his stock level should be adjusted in line with his sales volume. In such a year, the retailer’s diamond purchases from his wholesale supplier would plummet by a figure much greater than 10% (in this hypothetical view by 31%). What happens in the retail sector also occurs in diluted form at each stage of the pipeline, and this causes steep rough diamond sales fluctuations in the cutting centres.
One of the problems the industry is facing this time around is the suddenness and severity of the economic crisis caused by the corona pandemic, introducing exacerbating factors. The total standstill of the supply chain. Diamonds cannot move from mine to sorting centres and to sales offices. Half the world is in lock-down. Business has come to a halt at each level of the pipeline.
We are mostly concerned with the industry’s “front line”: the retailers. In Europe and the US there are already reports about credit lines being slashed – when a retailer doesn’t make sales he also will not have the funds to replenish, thus he simply won’t. He will have less goods to offer – and will sell even less. A bad year will dampen the retailer’s confidence. Whatever happens, given the negative sentiments, he will replenish at significantly lower levels in the year or years ahead.
That’s the Ripple Effect at work. As this still early stage we can only quote the stewardess (when we still were allowed to fly) who demanded that we fasten our seat belts and sit tight. We are in for a very bumpy ride.
CHAIM: INDIA WILL EMERGE STRONGER FROM THIS CRISIS
The Gem & Jewellery Export Promotion Council (GJEPC) organised a Webinar on “Indian Diamond Industry: The Recovery Options” on April 27, 2020.
The session included Chaim Even-Zohar, eminent industry journalist and analyst. He was accompanied by industry stalwarts from leading companies, including Dinesh Lakhani (Kiran Group); Hitesh Patel (Dharmanandan Diamonds); Vipul Shah (Asian Star and incumbent vice chairman of the GJEPC) and Russell Mehta (Rosy Blue). The session was moderated by GJEPC’s diamond panel convener, Sanjay Shah.
3,082 participants joined the session from across the world. Covid-19 has snowballed into an unprecedented calamity and India, the world’s largest manufacturing cutting and polishing hub, has been reviewing and taking stock of the situation, contemplating, and implementing measures to adapt and adopt new ways of doing business.
The collective initiative in the form of suggestion by Indian diamond industry to impose a month-long self-disciplined moratorium from May 15, 2020 on rough diamond imports is the first step to ensure that the supply chain pipeline is not overburdened.
HERE ARE SOME OF CHAIM’S KEY POINTS AND TAKEAWAYS FOR INDIAN MANUFACTURERS:
- Over 30 years, rough sales have gone up, but the diamond content in jewellery at retail has remained the same. Though money is being made from high turnover and greater production, the midstream value addition has remained constant at only $5 billion.
- India has a monopoly in cutting and polishing diamonds, so it should have more leverage and power over pricing.
- Producers have long considered diamantaires to be merely their distributors and dealers. And so, in a crisis, it is always the manufacturer who will go bankrupt.
- A recent Bain & Co. report shows mines are earning about 19-21% operating margin; retailers about 20%, and midstream is anywhere between -3% and +2%, despite taking the maximum pipeline risk. So, what’s the return on capital?
- The midstream should not go back to the status quo post corona because it was not making money.
- Use coronavirus pandemic as a turning point and become more united. If the industry leverages its collective strength, it will be the most powerful segment of the pipeline. The midstream is taking a huge risk, it doesn’t know what the polished demand will be in the market. The midstream needs to make more profit because it’s them who is taking most of the risk.
- Post Covid-19, there may be a short-term pent-up diamond jewellery demand from postponed weddings. The industry will see a flare of activity, but this will not translate into a renewed replenishment from cutting and trading centres, certainly not immediately.
- This industry has come out of every crisis more resilient, this time it will take much longer to find the new normal, which could be about 20- 30% below the pre-corona level in value terms.
- India realistically requires a three-month moratorium on rough diamond imports. Voluntary curtailment will bear good results.
- No one knows what polished prices will be post Covid-19, so don’t overproduce. Be resilient and add value to the midstream.
- Don’t compete with each other and don’t undersell polished goods. Restore price stability, and stop being too fixated on manufacturing for volume. Nobody should sell at a loss.
- Change the mind set and go for profit. Make it commercially viable since the industry has enough rough in India to last until end of 2020 – there is approximately $2.5 billion-worth of polished in the pipeline. Stop over-producing and competing with each other to the point of bankruptcy.
- India will emerge stronger from this crisis – but focus on marketing, along with bodies like the GJEPC. Educate people, hold town halls and take marketing very seriously.
- The time has come that producers should share the financial burden by offering credit to manufacturers.
- Think about new, innovative marketing ideas, people are spending time productively – in nine months there will a baby boom.
MINING PERSPECTIVE
At the March trading session Alrosa reduced the mandatory buyout limit for long-term contracts to 50% even before the session began. Clients were allowed to purchase not less than 40% immediately and postpone buying of the rest (up to 10%) until the end of May 2020
The Covid-19 pandemic hit the mining industry as well – production was scaled down, operations froze, and part owner of Canada’s Diavik and Ekati, Dominion Diamond Mines was forced to seek creditor protection under the insolvency law. An international travel ban added to the miners’ woes as rough diamond stocks couldn’t reach the market.
In an email interview with Solitaire International in April, Alrosa stated, “Our business is closely connected with travel, and travelling restrictions imposed between countries put on hold traditional diamond trade that implies experts’ visit to diamond miners’ offices to analyse offered goods.”
The lockdowns enforced in India and other countries impacted Alrosa’s business. “Main diamond trading centres and hubs around the world had to close under quarantine and social distancing rules. Indian authorities, who account for more than 90% of the world’s diamond cutting and polishing operations, had to put facilities in the state of Gujarat on hold to limit the infection’s spread. This has a direct impact on the demand for rough diamonds. At the same time, we are seeing a slump in consumer demand for diamond jewellery in developed economies, with stores temporarily closed and overall sentiment fading.”
What are some challenges that Alrosa is facing on a day-to-day basis? “Every day, Alrosa makes every effort to be prepared and to provide safety and, if necessary, treatment for its workers and all the people in the regions where it operates. Recently, it invested over 200 million rubles (approx. $2.7 million) to counteract the spread of Covid-19. We purchased lung ventilators with monitors and concentrators for them, bactericide units, thermal cameras, recirculators, non-contact thermometers, masks and protective suits, medicines. All this goes to equip our doctors and hospitals. We also launched sewing of protective suits for drivers of our joint ventures and subsidiaries. The company provides maximum protection for employees. Administrative staff switched to ‘working from home’ regime where possible.”
In times of crisis such as this, the mining companies have tried to minimise the burden on its clients. For instance, at the March trading session Alrosa reduced the mandatory buyout limit for longterm contracts to 50% even before the session began. Clients were allowed to purchase not less than 40% immediately and postpone buying of the rest (up to 10%) until the end of May 2020.
“It’s worth noting that we were the only large diamond miner with a trading session in March on schedule. Moreover, we supported our clients with full flexibility for the April 2020 trading session, lifting mandatory buyout requirements. Clients were free to defer up to 100% of (rough diamonds) allocated for April volumes to forthcoming sales periods of 2020 if they didn’t have an opportunity to purchase goods at the time of session. Those who were interested in buying rough, could apply for the required volumes.”
Due to the global situation, the company decided to cancel the upcoming auctions for special-sized (over 10.8 carats) rough diamonds, simultaneously offering customers to take part in a digital tender if they need such rough.
DPA PERSPECTIVE
The Diamond Producers Association has introduced an e-learning platform wherein retailers educate staff during the current period
DPA’s initiatives will be focused on skill building, keeping the trade engaged and encouraging consumers to support local jewellers.
While it may be difficult at this time to have consumers thinking of jewellery, David Kellie, CEO, Diamond Producers Association (DPA) believes that diamond jewellery is well positioned to connect with consumers as the world starts to open up.
“Consumer respect and appreciation for all things natural will be enhanced by the crisis. Also the desire for a connection between friends and loved ones as we come out of isolation will grow. Both trends will favour natural diamond jewellery.”
In order to show support to the trade community, DPA has introduced campaigns in various markets worldwide. These initiatives will be focused on skill building, keeping the trade engaged and encouraging consumers to support local jewellers.
One such initiative is the Jeweller Support Network that was launched recently. It is a coalition of bodies, resources and skills, bringing together the Diamond Producers Association, the National Association of Jewellers (NAJ), the Company of Master Jewellers (CMJ), Houlden Jewellers, the London Diamond Bourse, the Goldsmiths’ Company, the Goldsmiths’ Centre, the Society of British Jewellers, the Women’s Jewellery Network (WJN) and the Responsible Jewellery Council (RJC).
Its goal is to minimise the damage and disruption caused by Covid-19 by directing small and large business owners to relevant resources, including government financial advice, e-learning resources and trade-specific opportunities. Kellie stated, “For easy access, we have taken the digital approach through a dedicated web page and Instagram account. We’re also working to provide educational materials, webinars and other assets to independent jewellers to help them make the most of this challenging time.”
The DPA has introduced an e-learning platform wherein retailers educate staff during the current period. “The e-learning initiative has received an extremely positive response from trade partners. As physical presence in stores is minimal, this is the ideal time for sales staff to upskill and train in new ways of reaching consumers, building positive conversations around natural diamonds. The current situation has given us time to re-think our strategies and introduce new ways to leverage technology to engage with consumers and trade alike,” he said.
Kellie further added, “The digital medium is the most powerful tool we have at our disposal today. When people are stuck within the confines of their homes, they are turning more and more to technology to keep themselves abreast of the happenings around the world, connect with their loved ones and keep their minds engaged. We are leveraging not only our social media platforms to keep alive the interest and desire for natural diamonds, but also placing relevant advertising messages on over-the-top (OTT) platforms.”
RETAIL PERSPECTIVE
The jewellery retail trade has already started witnessing a huge drop in the cash-flow due to the ongoing lockdown. Banks have already cut exposure to the jewellery industry. There is liquidity crunch in the industry and the prevailing crisis will compound the scenario further.
In the present scenario, private equity investors may not be bullish about investing in the jewellery trade. So, unless the jewellers show value to the investors and banking institutions with sustainable business models and regulatory compliance, and the government offers relaxation in loan repayment norms, the industry will continue feeling the liquidity pinch.
VINOD HAYAGRIV, managing director, C Krishniah Chetty & Sons (CKC), Bengaluru
CKC & Sons hopes to gain more business traction on its CKC Live video-based shopping. It will pay home visits where requested once vehicular movement is permitted.
Hygiene and sanitisation will be the new watchwords after the lockdown is lifted, especially in the retail segment. Hayagriv is of the opinion that it is imperative to follow the stipulated guidelines set up by the government and World Health Organisation (WHO). The company has demarcated social distancing marked areas for its customers who will visit the showroom for shopping. “Our sales staff will wear masks, gloves and transparent visors to protect our clients at all times.”
In the retail segment, nearly 70% of costs constitute rents, staff salary, etc. Given the fact that overall consumption will continue to remain impacted for at least four to six months, sustenance will be an issue for most retailers. “We will have to observe on a week-by-week basis. In order to see the revenues build, we are looking to defer or waive rents wherever possible,” noted Hayagriv, adding that fixed salaries will be paid in full without delays even during the lockdown.
“While variables will be tempered in keeping with sales, and if and when the sales return to ‘normal’ we hope to share the gains back with our teams. It’s a sacrifice for all of us. We as directors are reducing our remuneration to 50% for the next three months. Our goal is to ensure all other services, manufacturing, vendor payments are not delayed beyond unavoidable limits due to lockdown, and we will make payments from our contingency funds and reserves. We are a conservative company otherwise. So we will continue to be cautious in our expenditure till normalcy returns. We may not reduce all marketing expenses but will be tempered to sales,” Hayagriv stated.
CKC is gearing up to strengthen its online activities. “We will be making a better sticky app as well, and increase our batches from the current 5,000 or so to around 7,500 to allow for more essential purchases being available online. We also have CKC LIVE video-based shopping, and are hoping to get more traction there. We will pay home visits where requested and as vehicle movement allows.”
The pandemic is expected to create a deep liquidity crisis post the lockdown. Hayagriv hopes that the banks, RBI, and the government will take more steps that will help businesses better. “We hope our representations will be heeded by the government quickly,” he stated.
His wish list for extended working capital credit lines include, extending gold loan repayment to 365 days from current 180 days; waiving interest on working and term loans and gold loans for three months; allowing EMI payment for jewellery purchases to consumers; allowing all tax disputes, if any, including search cases, to be paid without interest if assessed tax is paid within three or four months (if the assesse does not intend to appeal the case); extending PF payment schemes to all employees up to `50,000/- per month without limit of number of employees; no imposing of penalties for delayed statutory payments and statutory compliances; extending time to hold board and general meetings and other secretarial compliance requirements by three months; refunding all income tax, Customs duty and GST refunds within one month; extending additional funding facilities to businesses to the extent of 20%, if businesses warrant.
“In fact,” Hayagriv noted, “all banks, private and nationalised, could extend similar facilities. Other benefits already given by our honourable Finance Minister should be reviewed and extended, if required, based on the situation going forward; and reducing Customs duty or alternately crack down heavily on smuggling of gold which is a menace to organised business.”
Post Covid-19, CKC’s objective is to offer a lot more value to the client – not by way of discounts, but by getting more active on social media and digital platforms. “But going forward, we hope to reach 80% of normal sales in about three months, depending on how the easing of the lockdown is strategized,” Hayagriv predicted.
S AHAMMED, chairman, Malabar Gold and Diamonds, Kozhikode, Kerala
Every crisis – even the ongoing Covid-19 pandemic – presents an opportunity to reflect on the journey so far and reorganise the strategy. Ahammed commented, “While battling with the crisis, we have realised how important it is for the business entities to develop a sustainable business model to withstand such sudden shock. Going forward, we’ll intensify our focus on environmental, social and governance aspects while taking key business decisions.”
In general, the margins have always been under pressure in jewellery retail due to rising overheads and input costs coupled with weak consumer sentiment. The scenario has become even more challenging due to the Covid-19 impact on the economy. As a result, the business growth prospect has become further constrained. “Therefore, we have to focus on streamlining our operations and enhancing our cost-efficiency. We need to be cautious while deploying and managing our assets as cash-flow is affected by the nationwide lockdown. We will relook at our supply chain strategy, product strategy and customer acquisition strategy to achieve market competitiveness and strengthen business sustainability,” Ahammed opined.
Tax relaxation measures will improve capital adequacy in the businesses in this time of crisis, Ahammed believed, and says that the government should extend loan repayment tenure under the Gold Metal Loan by 180 days. “Deferring the GST return will also boost trade sentiment. Extending working capital credit lines to the jewellery industry with flexible terms is a great trade booster for the organized segment of the industry. The government should initiate a dialogue with the jewellery trade bodies to create the ground,” he stated. Malabar will be focusing on enhancing their already established digital platforms to enhance consumer engagement and loyalty.
SOME CHEER AMIDST THE GLOOM
The Ministry of Commerce and Customs department worked relentlessly for gearing up gems and jewellery exports amidst the covid-19 lockdown. The State Governments have allowed limited diamond and jewellery operations during the lockdown at Mumbai, Jaipur, Delhi, Surat and Chennai
Thousands of gems and jewellery exporters in Mumbai heaved a breath of relief as the government of Maharashtra allowed designated export units of diamond and jewellery to begin their operations in Mumbai. However, considering the ongoing covid-19 pandemic, the state government has permitted limited workforce in these jewellery export units. Additionally, transport of the employees will be the employer’s responsibility during the lockdown period.
Gem and jewellery industry’s exports $1bn worth is pending
This move is significant as gems and jewellery export operations will commence in Mumbai’s Bharat Diamond Bourse and SEEPZ, two of India’s largest jewellery export designated zones. Also, it is believed that Bharat Diamond Bourse has received export interest applications from the members worth $550 million from 1673 consignment parcels, while SEEPZ is expected to export $10 million worth of diamond exports from 50 units.
On the other hand, Surat Diamond Bourse and Jaipur resumed work after a gap of almost five to six weeks. These centres are operational by adhering to the covid-19 safety guidelines set up by Gujarat government. The Gem and Jewellery Export Promotion Council (GJEPC), along with other trade bodies, has been pursuing state and central government to make all major gem and jewellery centres operational across India. This will clear the backlog of orders from the pre-lockdown period.
Pramod Kumar Agrawal, chairman, GJEPC said, “This is a great step by the Maharashtra government as it will help commence the exports of gem and jewellery from Mumbai and clear pending orders. I would like to express my gratitude to Chief Minister, Uddhav Thackeray, and officials from the CMO for this landmark decision. I also thank Piyush Goyal, Union Minister of Commerce & Industry, Department of Revenue and Department of Customs for the continued support. Bharat Diamond Bourse and SEEPZ in Mumbai are major centres that have a huge backlog of orders and the industry is happy that these centres will be operational within few days. We would make sure that all factories and units are operational following strict guidelines of maintaining social distancing and ensuring frequent sanitisation of factory premises, equipment, and workers.”
Colin Shah, vice chairman, GJEPC added, “It has been a collective effort from all the stakeholders that has helped us start gem and jewellery exports. As always there has been a tremendous support from the Ministry of Commerce & Industry. The Customs department has remained open during the ongoing lockdown and officials have bravely come forward to ensure exports to take place. Both the Ministry of Commerce and Customs department worked relentlessly for the gems and jewellery exports and we as an industry thank them for their constant support. As a result, cancellation of orders were minimised from Mumbai SEEPZ, Surat Diamond Bourse and Jaipur.”
Jaipur is another important centre for gem and jewellery wherein on an average daily seven to eight shipments take place from ACC, Jaipur (DTA). Till date, 40 units in SEZ, Sitapura and 25 units in gems and jewellery zone of EPIP, Sitapura has commenced their production. DTA has cleared 185 shipments of value 22, 87, 79, 565 and from SEZ, 42 shipments of value 8,81,05,254 were cleared till May 9, 2020.
We would make sure that all factories and units are operational following strict guidelines of maintaining social distancing and ensuring frequent sanitisation of factory premises, equipment, and workers.
“Exports of gold, silver and imitation jewellery has started. Exports of studded jewellery will also begin soon,” added Agrawal.
Exporters are using the parcel services of logistic companies to send consignments as it is cheaper than booking directly on cargo flights following an increase in air freight rates. The parcel sizes are also smaller compared with usual times, as the output of factories has come down as the factories have not started in full strength. “Exports of gold, silver and imitation jewellery has started. Exports of studded jewellery will also begin soon,” added Pramod Agrawal.
At Surat SEZ, operations of G&J units commenced post 27 April, 2020 with the first export of gems and jewellery commodity taking place on 5 May, 2020. Eight units started their operations in Special Notified Zone, Sachin, Surat and two export shipments worth 109.12 lakh was cleared in first week of may, 2020. ACC, Ahmedabad cleared 10 shipments in April, 2020 worth 18.8 lakhs. Surat Hira Bourse is facilitating exporters in clearance of shipments and exports to Hong Kong has been possible from Mumbai airport with direct flight/cargo connection. Five units in Gem & Jewellery Park, Ichhapore, Surat have started operations with minimum strength of the staff.
One consignment export of gold jewellery commenced in May from Delhi Port and few silver jewellery exports are in pipeline. Noida SEZ is also operational. Few units of gems and jewellery exports in Chennai, too, have started functioning and exports to resume in May.
GJEPC and the trade fraternity is thankful to the support extended by Ministry of Commerce and Industry, Department of Commerce and State Governments across the centres. Customs at each Centre of Mumbai, Surat, Jaipur and Delhi have been providing continued assistance and backing the trade in clearing parcels both at Import and Export. It is expected that the Indian gem and jewellery industry will be gaining back its momentum slowly by strictly adhering to the Covid-19 safety guidelines set up by Government.