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Consumer Protection of Gold in India

Consumer Protection of Gold in India

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Published by: MUTHUSAMY R on Aug 16, 2011
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The LBMA Indian Bullion Market Forum New Delhi, 30-31 January 2003 Page 81
 
Consumer Protection on Gold in India
Dr (Mrs) Sneh Bhatla, Director, Central Marks, Bureau of Indian Standards 
 
The Bureau of Indian Standards launched its hallmarking scheme for gold jewellery three years ago. Asmost of you know, in India there is a great fascination with gold jewellery. It is given in the form of giftsduring all the intimate family occasions in India, be they weddings, the birth of a child or weddinganniversaries.Until the late 1980s gold jewellery was only purchased from traditional jewellers – from those jewellersthat would also have sold jewellery to the forefathers, grandparents or parents of many Indians. After theGold Control Act was abolished in the early 1990s, a lot of jewellers mushroomed in various parts of thecountry. The younger generation came up with the idea of purchasing different brands and differentdesigns of jewellery, which were available from these new jewellers.Since the price of gold was fixed, these new gold jewellers tried to compromise on the purity of the jewellery. This came to the attention of the Ministry of Consumer Affairs in the late 1990s, which wasconcerned about the lower purity of gold jewellery being sold in the Indian market under the guise of higher caratage gold. At that time, the standing committee on gold and precious metals at the ReserveBank of India decided that an organisation with the relevant infrastructure and competence should monitor and control the purity of gold jewellery sold in India. As a result, in January 1999, the Bureau of IndianStandards (BIS) was designated as the sole agency to operate a hallmarking scheme for gold jewellery.The BIS is the national standards body of India and is also engaged in certification schemes such as product certification, quality system certification, environmental management certification, andoccupational health and safety certification. In April 2000, the BIS launched its hallmarking scheme. The basic objectives of the scheme were consumer protection, to enhance exports, to improve the quality and purity of gold jewellery produced, and to monitor any loss to the economy due to improper caratage, be itunder- or over-caratage.The BIS hallmarking scheme operates under the Bureau of Indian Standards Act, 1986. This scheme isvoluntary in nature – it was regarded as best to start this scheme only on a voluntary basis. The scheme is based on the quality management system’s principles. Here, as for this scheme, jewellers get a licensefrom the Bureau of Indian Standards to enable them to have their jewellery hallmarked at any of the BIS-recognised hallmarking centres.The hallmarking centre is given permission to operate, based on criteria, which are in line with theinternational practices adopted by the International Convention on Marking of Precious Metals, theVienna Convention. The main objective of aligning the BIS criteria with the criteria of the ViennaConvention was to enable the BIS to become a member of the Convention, after displaying adequateconfidence in running hallmarking schemes in India.In the three years that the BIS has been running the hallmarking schemes, it now believes that it hasgained enough confidence to apply to become a member of the Vienna Convention in the near future. Ithas already formulated Indian standards on gold and gold alloys, based on guaranteed licenses or certification given to jewellers, and the recognition given to hallmarking centres.These Indian standards are: IS 1417, the standard on gold and gold alloys; IS 1418, covering the assayingof gold in bullion, gold alloys and gold jewellery; IS 2790, which gives guidelines for the manufacture of different types of gold alloys; and finally, IS 3095, which specifies the solders, types of solders and theguidelines to manufacture solders for jewellery. As for this scheme, the BIS certifies the jewellers under the product certification scheme of the BIS, that is, as per IS 1417.
 
Consumer Protection on Gold in India Sneh BhatlaThe LBMA Indian Bullion Market Forum New Delhi, 30-31 January 2003 Page 82
 
The testing by the hallmarking centres is done as per IS 1418, which is aligned with the internationalstandard, with no deviations from that standard.The Indian hallmark consists of five marks. The first mark is the standard mark, which is very similar tothe BIS corporate logo. The second mark, which is put on the hallmarked jewellery by the hallmarkingcentres, is the fineness mark, 916. Purity can be marked for different finenesses, such as 916 for 22 carat,750 for 18 carat, or, in the case of lower caratages, there’s a provision in the standard to mark sixcaratages, starting from 23 carat to 9 carat. The third mark, which is one of the components of thehallmark, is the assaying and hallmarking centres’ logo. The fourth mark is the jeweller’s logo, and thelast one is the year of marking, which is denoted by a letter. When the scheme started in 2000, the mark used was “A”, 2001 was “B”, 2002 was “C” and for 2003, the letter “D” is being used.Once a jeweller is certified, they have certain obligations. They must ensure the homogeneity of the jewellery, which they receive, from the designer. In addition, they must ensure the homogeneity of the purity of the lot, which they offer to the hallmarking centres for hallmarking purposes. Certified jewellersmust maintain certain quality control checks on this jewellery. Each certified jeweller can get their  jewellery hallmarked from any of the BIS recognised hallmarking centres. There are 11 hallmarkingcentres in the country at present.It is obligatory on the part of the certified jeweller to submit the jewellery with the jeweller’s logo andyear of marking. Jewellery can be submitted either in finished or semi-finished form, and polishing, if required, can be done at a later date. There is one mandatory requirement for all the certified jewellers,aimed at improving consumer awareness and to educate the consumer – the display requirement. All BIScertified jewellers have to adhere to the display requirement which means that they have to have somedisplay board, where the consumer can see that hallmarked jewellery is available in the store. This must be written on the board, along with the BIS license number. Hallmarked jewellery must be differentiatedthrough special counter tags or labels. Because hallmarking is not mandatory, the BIS-certified jeweller does not have to hallmark its entire stock of jewellery in one go. Gradually, the jeweller can convert hisstock into hallmarked jewellery, but it is his responsibility to differentiate hallmarked jewellery from non-hallmarked jewellery.To educate the consumer, the jeweller has to show in the display requirement, how the hallmarked jewellery is distinguished from non-hallmarked jewellery. This may be achieved by having a specialcounter, or hallmarked jewellery can be differentiated by using different colours. Again, it is obligatoryfor the jewellers to illustrate the hallmark components to educate the common consumer because today’sconsumer is not aware of what exactly the hallmark components are, or what they should look for.Indian consumers have become familiar with caratage, but they are less knowledgeable about the metal’sfineness, although, as per international practices, fineness is marked on the jewellery and not the caratage.The BIS has made it mandatory that the certified jewellers display the equivalence of each caratage tohelp the consumer. Jewellers must make a magnifying glass available because the size of the hallmark isso small that it cannot be seen with the naked eye. The two permissible sizes used by India’s hallmarkingcentres are 0.5 mm and 1mm only. Although, as per international practices, two more sizes, 0.75mm and1.5mm, should now be available at the hallmarking centres.Finally, under the display requirements, the name and address of the jewellers selling hallmarked jewellery are required.In the hallmarking scheme there are three main players: the BIS, the jeweller and the hallmarking centres.The BIS gives licences to the jewellers, who can get the jewellery hallmarked at the BIS-recognisedhallmarking centres. The pre-requisite for a laboratory or an organisation to get recognition from the BISto set up hallmarking centres is that the applicants have to have an independent legal identity.The operators of the hallmarking centres must not have any links with the jewellery trade, whether retailing or manufacturing. The centre must be capable of implementing a quality management system.The centres have to have complete test facilities as per IS-1418, which is the same as is found in the ISOstandard, and they must have trained and competent manpower. They also must have adequate samplingand hallmarking tools; they have to have adequate security and safety arrangements; and they must be
 
Consumer Protection on Gold in India Sneh BhatlaThe LBMA Indian Bullion Market Forum New Delhi, 30-31 January 2003 Page 83
 
able to hallmark jewellery within a given time-frame, which the BIS has specified in its criteria, as 48hours. All these requirements are quite similar to those demanded by international criteria.If an organisation fulfils all the above requirements, only then will the BIS consider an application toqualify as a hallmarking centre. Further, the BIS assesses an applicant’s competence, complete testingfacilities, safety and security measures, and the quality management system implemented. Only then willthe BIS grant the necessary recognition to become a hallmarking centre.Once recognition is given to the hallmarking centre, it has to observe certain obligations. It has tomaintain funds confidentiality and provide service to all the BIS certified jewellers. The centre has to participate in proficiency testing and inter-laboratory testing programmes to promote confidence in thetest results. It has to communicate any changes in the equipment or in personnel to the BIS, and mustimplement BIS-approved sampling plans and hallmarking charges. Centres have to follow BIS directivesfrom time-to-time.Regarding the procedure of hallmarking, any BIS-certified jeweller who intends to hallmark jewellery cancome to any of the BIS-recognised hallmarking centres. The hallmarking centre checks the homogeneityof the lot by testing each and every article. If a lot is found not to be homogeneous, it is returned to the jeweller with the request to segregate the lot into articles of uniform purity. Where the lot ishomogeneous, then a minimum 10% of samples are drawn from that particular lot, and a sample is takenfrom that 10% to make one composite sample, which is tested by the fire assay method. Once the samplehas been passed, the whole lot is hallmarked. In case a sample fails, it is retested three times and, again, if it does not reach the declared purity, it is returned to the jeweller, either with a reject mark or downgraded.The BIS maintains surveillance on the certified jewellers, on the hallmarking centres, as well as on themarket. Periodic surveillance is done by the BIS through audits on the operations of the certified jewellers, as well as the hallmarking centres. Usually about twice yearly, BIS officers visit certified jewellers to verify that they are implementing quality control procedures on jewellery when they aresending it for hallmarking. Samples are picked up from the jewellery showrooms and are tested to reviewthe performance of the certified jewellers.Hallmarking centres are visited two to three times a year to verify the implementation of the documentedsystem. The BIS also checks the hallmark samples available in the open market and sends it to differenthallmarking centres to re-verify the purity as marked on it. Based on this surveillance, the BIS allows thehallmarking centres to continue marking. If necessary, it will request centres to stop marking, which canhappen if the purity is lower than that marked on the jewellery. An investigation is immediately launchedto determine the reason for the discrepancy. Corrective action is taken and only then can the centre restarthallmarking.The BIS standard does not permit any negative tolerance. Thus 916 means that 915.9, for instance, is not permitted. If results show 915.9 when a lot is hallmarked in a sample from the open market that we havetested, the BIS issues a warning letter to the hallmarking centre and, also, a letter to the jeweller todetermine how this has happened and how it can be rectified. A hallmarking centre is also subject to BISscrutiny and can be relieved of its duties by the BIS due to unsatisfactory performance and lack of integrity.
BIS Certified BIS RecognizedJewellerA&H CentreReturn to Unsatisfactory100% Check oJewellerhomogeneitySatisfactoryDraw min. 10%sample from lotReject orRetestFire Assay Testdowngrade3 timesPassto confirmHallmarking
PROCEDURE FOR HALLMARKING
JewelleryFailPassFail

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