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Gems and Jewellery have been a part of the Indian civilization since its recorded history. It has
now grown to become one of the leading export oriented industries in India recording an export
turnover of around Rs 91617.53 Crores during 2008-09, making it a significant foreign exchange
earner for the country. By the formation of SEZ in gems and jewellery in India it improved the
contribution of industry at 70% of the World gems in terms of quantity and 45% in terms of
value. By this the formations rules for setting up an industry have been made easy, government
has given many advantages to the companies in SEZ¶s. The potential and salient features of gems
and jewellery have been drastically increasing in the recent years. The present SEZ¶s and
upcoming SEZ¶s in the gems and jewellery industry the companies advantages from SEZ¶s are
noted. Recommendations which are done by industry to the government for the improvement of
the gems and jewellery industries are also mentioned. At last the requirements needed for the
setting up a SEZ are also put in this assignment.



 

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The main objective of SEZ is to ³Increase in Exports´ of the country in a specific sector (sector
specific SEZ) or various sectors (multi product SEZ) by providing State of the Art Infrastructure.
This policy intended to make SEZs an engine for economic growth supported by quality
infrastructure complemented by an attractive fiscal package, both at the Centre and the State
level, with the minimum possible regulations. SEZs in India functioned from 1.11.2000 to
09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made
effective through the provisions of relevant statutes. Domestic regulations, restrictions and
infrastructure inadequacies are sought to be eliminated in the SEZs for creating a hassle free
sought to be eliminated in the SEZs for creating a hassle free environment.

The SEZ policy in India was come from the EXIM Policy (1997-2002) introduced a new scheme
from April 1, 2000 for establishment of the Special Economic Zones (SEZs).

The policy was succeeded by SEZ Act 2005 envisaging role for the State Government in creation
of SEZ infrastructure role for the State Government in creation of SEZ infrastructure.

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XSimplified procedures for development, operation and maintenance of the SEZs and for setting
up units.

XSingle Window Clearance provided for setting up SEZ, matters related to central and state
governments.
XSimplified compliance procedures and documentation with emphasis on self certification.

Gems and jewellery industry in India is rising like the morning sun
in the sky, with the most glistening shine by being the greatest manufacturing center for gems
and jewellery where the domestic market was guessed to be approximately USD16.1 billion in
financial year 2009.

Not only this, in the year 2010 India outshined as the world¶s largest trading center of gold with
USD16 billion. It fills us with surprise when we come to know that India depletes 20% of the
world gold consumption making it the largest consumer of gold in the whole world. To instill
confidence in investors and signal the Government's commitment to a stable SEZ policy regime
and with a view to impart stability to the SEZ regime there by generating greater economic
activity and employment through the establishment of SEZs, a comprehensive draft SEZ Bill
prepared after extensive discussions with the stakeholders. A number of meetings were held in
various parts of the country both by the Minister for Commerce and Industry as well as senior
officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in
May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules
were widely discussed and put on the website of the Department of Commerce offering
suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive
consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February,
2006, providing for drastic simplification of procedures and for single window clearance on
matters relating to central as well as state governments.

THE MAIN OBJECTIVES OF THE SEZ ACT ARE:

(a) Generation of additional economic activity

(b) Promotion of exports of goods and services

(c) Promotion of investment from domestic and foreign sources

(d) Creation of employment opportunities

(e) Development of infrastructure facilities

India Gems & Jewellery Industry ± Highlights

Jewellery market size ± US$ 13 billion

Diamond jewellery ± US$ 1.2 billion

Gold jewellery market growth year on year ± 15%

Diamond jewellery market growth ± 27%


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'Y The Industry exports is close to USD 28 Billion (March 2010) and recorded a 16.6%
growth (yloly) (GJEPC)
'Y The Indian gems and jewellery industry is competitive in the world market due to its low
cost of production and availability of skilled labour.
'Y In addition, the industry has a worldwide distribution network, which has been
established over a period of time.
'Y India has set up more than 3,000 offices worldwide for promotion and marketing of
Indian diamonds.
'Y According to Bullion Association of India (March 2009), ³the share of Branded Jewellery
Market in India is growing at a pace of 20-30 percent only.
'Y India has the world¶s largest cutting and polishing industry, employing around 800,000
people (constituting 94 per cent of global workers) with more than 500 hi-tech laser
machines.
'Y The industry is well supported by government policies and the banking sector - around 50
banks provide nearly US$ 3 billion credit to Indian diamond industry.
'Y India is therefore a significant player in the world gems and jewellery market both as a
source of processed diamonds as well as a large consuming market.

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The Indian gems and jewellery sector is largely unorganised at present. There are over
15000 players across the country in the gold processing industry, of which only about 80 players
have a turnover of over US$ 4.15 million (Rs 200 million). There are about 450,000 goldsmiths
spread throughout the country. India was one of the first countries to start making fine jewellery
from minerals and metals and even today, most of the jewellery made in India is hand made. The
industry is dominated by family jewellers, who constitute nearly 96 percent of the market.
Organised players such as Tata with its Tanishq brand, have, however, been growing steadily
carving a 4 per cent market share. As India¶s jewellery market matures, it is expected to get more
organised and the share of family jewellers is expected to decline. There are more than 6000
players in domestic diamond processing industry. The average gestation period for setting up a
diamond cutting and polishing unit is 15 months. The low gestation period, coupled with low
capital cost allows easy entry into the sector. This has led to the industry being largely
characterised by a large number of small scale players. However, just as in the case of jewellery,
the share of the organised sector has increased significantly in recent years due to an increase in
demand for better and finer quality finished goods.


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Hyderabad Gems SEZ Ltd. Ranga Reddy District, Hyderabad, Andhra Pradesh Gems and
Jewellery

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SEEPZ Special Economic Zone Mumbai, Maharashtra Electronics and Gems and Jewellery

# $

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% $    '(()

Manikanchan SEZ, West Bengal Kolkata, West Bengal Gems and Jewellery

Jaipur SEZ Jaipur, Rajasthan Gems and Jewellery

Gems and Jewellery SEZ / Jewellery Park in Surat

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1. SEZ units shall be a positive net foreign exchange earner. Net foreign exchange earning shall
be calculated cumulatively for a period of 5 years from the commencement of commercial
production.

2. Exemption from Customs Duty on import of capital goods, raw materials, consumables,
spares etc.

3. Exemption from Central Excise Duty on procurement of capital goods, raw materials,
consumables spares etc. from the domestic market (DTA).

4. Reimbursement of Central Sales Tax paid on domestic purchases.

5. 100% Income Tax exemption on export sales for a block of 5 years and 50% exemption for 2
years thereafter under section 10-A of IT Act.

6. SEZ Units my sell goods, including by-products and services in the DTA in accordance with
the Import Policy in force, on payment of applicable duty. Domestic sales by SEZ units will be
exempt from SAD. 2.2.7 100% foreign direct investment is freely allowed in manufacturing
sector in SEZ units.

7. SEZ units may subcontract a part of their production or production process through units in
the DTA or through other SEZ/EOU/EPZ/EHTP/STP, with the permission of Customs
authorities.

8. Subcontracting by SEZ gems and jewellery units shall be subject to the conditions that,
goods, finished or semi-finished, including studded jewellery, containing quantity and purity
equal to the gold/silver/platinum so taken out, shall be brought back to the Zone within 30 days.
Wastage loss for subcontracting/ exchange by gem and jewellery units in transactions between
SEZ and DTA will be allowed.

9. Gem & Jewellery units in SEZ can receive precious metal i.e. gold/silver/ platinum prior to
exports or post exports equivalent to value of jewellery exported. This means that they can bring
export proceeds in kind against the present provision of bringing in cash only.

10. Restriction of one year period for remittance of export proceeds removed for SEZ units.

11. Netting of export permitted for SEZ units provided it is between same exporter and importer
over a period of 12 months.

12. SEZ units permitted to take jobwork abroad and exports goods from there only.

13. The value of capital goods imported by SEZ units will be amortised uniformly over 10 years.

14. SEZ units will be allowed to sell all products including gems and jewellery through
exhibitions and duty free shops or shops set up abroad.

15. SEZ Units will have access to International Finance at International Rates through Off-shore
Banking Units (OBU) to be set up within the SEZ.

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Gems and jewellery industry is often referred as the diamond industry as nearly 80
percent of the entire turnover of this industry is contributed by diamonds.
According to Gems and Jewellery Export Promotion council i.e. GJEPC the export of cut and
polished diamonds have gone down by 8 percent which is near about $13024.53 million in
financial year 09-10 as against $14194. End of March 09 again faced a fall in the quantity of cut
and polished diamond by 7 percent to 402.05 lakh carats.
In the financial year 2010, the industry was hit hard because of the increasing demand from the
export-oriented countries.
Now the industry with its apex body is striving hard to improve on its lost competitiveness and is
seeking for some measures with the help of the government to overcome this melt down and fall
in prices.
In order to come out of this problem the industry looked at the immediate necessity of increasing
the flow into the industry by continuing the present credit limits to the exporters with a good past
record and improving the credit facilities as well.
The United Arab Emirates (UAE) was the largest importer of gems and jewellery from India in
2008-09, with a share of 31 per cent. This was followed by Hong Kong with 25 per cent and the
US with 20 per cent. The gem and jewellery sector accounted for 13 per cent of India¶s total
merchandise exports.

The export industry mainly comprises of small-to-large units based in various special economic
zones (SEZs) supplying primarily diamond-studded jewellery.

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Though in the beginning Indian official denied the impact of US meltdown affecting the Indian
economy but later the government had to acknowledge the fact that US financial crisis have
some impact on the Indian economy and gems and jewellery sector is one of them to have
impact.

The gems and jewellery sector in India has laid off approximately 100,000 skilled and unskilled
labourers because of poor demand from the much dependent US market.

US is passing through economic slowdown which has impacted India¶s diamond jewellery sector
badly. India¶s jewellery sales, constituting over 35 per cent of annual revenue, to the US declined
over 20 per cent on the occasion of Christmas and New Year. Last financial year, India exported
in excess of $21 billion dollar.

Moreover, the domestic demand has also declined by over 20 per cent which is evident from
piling up inventories currently running for 12 months from the normal level of 3-4 months.
Which means the industry will continue to sell if it does not produce anything for 12 months.
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'Y Industry representatives also appealed to the Government to incentivise units in SEZs and
EOUs.
'Y ³Certain schedules proposed in the Direct Taxes Codes like search and seizure
provisions, tax on gross assets are highly penalising to the industry which is already
reeling under the effects of global recession,´ Mr. Vasant Mehta, Chairman, Gems and
Jewellery Export Promotion Council (GJEPC), said.
'Y Observing that the proposed provision of search and seizure has the potential of abuse
owing to the unique characteristics of stock-in-trade, he said it will also lead to loss of
exports and defaults in commitments to deadlines.
'Y ³Most of the stock is purchased on bank loans. We suggest these stocks be inventorised
and not seized, as proposed by the Government,´ he said.
'Y A delegation of gems and jewellery trade bodies has sent a representation on the issue to
the Finance Minister, Mr. Pranab Mukherjee, and has also approached the Commerce
Ministry with its recommendations.
'Y On the issue of taxes, the gems and jewellery industry also suggested that no tax should
be levied based on value of assets of the company. It also sought credit of tax paid on
value of assets to be available for setting-off tax payable in subsequent years.
'Y Its other recommendations included continuation of the tax incentives in SEZ and EOUs
and also providing objective parameters to enable rule based determinations of residential
status of foreign companies.

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Exemption from electricity duty or taxes

Allow generation, transmission and distribution of power within a SEZ

Exemption from State and local taxes, levies and duties

Providing water, electricity and such other services

Delegation of power to the Development Commissioner inclusive of power with respect to work
men employed by the developer

Declaration of the SEZ as a Public Utility Service

Providing single point clearance system to the developer and Unit under the State Acts and Rules



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The Gitanjali group will develop an exclusive special economic zone (SEZ) for gems and
jewellery on a 200-acre plot at Kancha Imarat

Gems and jewellery SEZ in Gurgaon

Aerens Gold Souk Group plans to set up a special economic zone (SEZ) for jewellery and gems
in Gurgaon

Gems and jewellery SEZ in Kolkata.

Gems and jewellery parks in Surat and Bhavnagar

Chhattisgarh: India's 21st century city ... a five-star hotel, an IT SEZ, a gems and jewellery SEZ

Anil Dhirubai Ambani Group India's is also want to setup gem & jewellery SEZ at Butibori
Nagpur.

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'Y Minimum area of land 10 hectares for gems and jewellery SEZ
'Y Fifty thousand square meters minimum buildup area
'Y Provide also that at least fifty percent of the area shall be earmarked for developing
processing area.
'Y Facilities such as Free Trade & Warehousing Zones, International Financial Services
Centre may be approved for establishment within the Processing Area
'Y For facilities for exclusive use of the Units such as canteens, public telephone booths,
first aid centres, creches, etc
'Y Minimum Processing Area Required of 50% (40000 Sq mtr for BT & 50000 Sq mtr for
G&J)
'Y Investment should be more than Rs. 250 crores or
'Y Net worth* of Rs. 50 Crores

 

India is the country which large producer and consumer of gems and jewellery
but it is largely equipped with family owned business. So after the setup of SEZ¶s in
gems and jewellery sector the Indian gems and jewellery market was boosted to large
extent by mass production and exporting the items to different countries. Even India is
having a value of 16.26% of world share in exports of gems and jewellery market with 29
billion$. The raw material used for manufacturing gems and jewellery is imported from
other countries, therefore the country should take necessary polices to improve imports of
raw material which helps in the improvement of Gems and Jewellery industry.
     

1. Article from Business Standard newspaper Wednesday, Oct 13, 2010 topic Gems, jewellery
exporters urge relaxation in SEZs written by Namrata Acharya / Kolkata June 02, 2009.

2. Article from Economic Section British High Commission, New Delhi 11 May 2006

3. Article from µUS Financial Crisis: Causes and its impact on India¶ Written by Debabrata
Sutradhar

4. OUTLOOK FOR INDIAN GEMS AND JEWELLEY SECTOR: 2009 Prepared by Nusrat
Ahmad ASSOCHAM Research Bureau

Article from The financial express newspaper Posted: Monday, Aug 08, 2007

India Brand Equity Foundation (IBEF) Report on Gems & Jewellery, Gems & Jewellery Export
Promotion Council (GJEPC)

Report on ³The Global Gems & Jewellery Industry, Vision 2015:Transforming for Growth´

Industries Commissionerate / iNDEXTb

Reports of Special Economic Zones (Amendment) Rules, 2006, w.e.f. 3-02-2009

Reports prepared by IL&FS Infrastructure Development Corporation Ltd.

Reports from Government of India Ministry of Commerce and Industry Department of


Commerce (SEZ Section)

Data from some of the official sites like:

http://www.sezindia.nic.in/index.asp

http://www.sezindia.org/sez/index.htm

http://www.sezindiainvest.com/

http://www.sezindiaweb.com/

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