All that Glitters May Be Gold
BIS Puts New Initiatives in Place
Many of you very well know what gold means to most Indians. Be it for investment, trade or business, or as a fashion accessory, gold is one of the most-sought-after commodities. Regardless of being rich or poor, every household in India makes the effort to buy some gold at the first available opportunity. While the metal’s religious significance can be viewed from its sales figures during festive seasons, especially Akshaya Tritiya and Dhanteras, its perceived auspiciousness makes it the most essential element at Indian weddings. As the grapevine goes, if all the gold stocked in Indian homes were in the government’s treasury, the country could buy half the world.
However, as mentioned in the October 2014 issue of Consumer Voice, it is relatively easy for the customer to be a victim of irregular metal quality. A buyer, for instance, will be told that he has bought gold of 22 carats. When he goes to sell or exchange it, he discovers that the gold is actually only of 18 carats.
Among unscrupulous manufacturers and suppliers, there has been a tendency to deceive the common
consumer by supplying gold of lower cartage than declared. The convenience of gold alloying with less precious metals – silver or base metals like copper and nickel – has made the process easier for jewellers and the cumulative value of such forgery is estimated to run into thousands of crores of rupees in India. It is easy to perpetrate because with gold a considerable amount of alloy can be introduced without changing the colour.
Unless alloyed with a comparatively small proportion of some other metal, pure gold is too soft to withstand wear as an article for use or adornment. In India the majority of jewellery is still manufactured in the traditional method – that is, by hand using a mouth blowpipe with an oil or candle flame for soldering and melting, and alloyed using charcoal furnaces.
Tackling Counterfeit and Misuse
Realizing the plight of the consumer, the government mandated BIS to start the hallmarking scheme in year 2000. A hallmark indicates that the gold in the jewellery adheres to international standards of purity. While the scheme has gained in popularity, it has not met expectations in terms of being an effective guarantee against cheating. Mainly, there are two problems: first, the misuse of BIS hallmark by non-licensed jewellers, and second, the reliability of the hallmark itself.
To deal with the problems of counterfeiting and misuse of hallmark, BIS has proposed some changes in BIS Act, 1986, for imposing fine and sending imitators to prison. Once the amended Act is in place, it is hoped that the fear of retribution will prevent otherwise well-to-do traders from indulging in counterfeiting.
If the increasing number of jewellers and hallmarking centres every year is any indication, the popularity of the hallmarking scheme is undoubtedly growing (Figure 1). At the same time, with the use of hallmark on more articles each year, the percentage of samples failing is also increasing (Figure 2).
Jewellers are aware that few people buy jewellery with bill (they often convince the customer to save one per cent of the total cost by not insisting on a bill), and that even fewer people come back to complain. Even if someone happens to complain about lower purity, the jeweller promptly offers replacement with another article of equally doubtful purity. The hapless consumer does not have any other option but to accept the replacement.
Given the prevalent practice of selling or buying without a bill, it is very difficult for the consumer to get redressal in consumer courts. Hence, it became the prime concern of BIS to make sure that the mere presence of hallmark on jewellery is a guarantee of stated purity.
In order to increase the reach and reliability of hallmark, BIS has taken the following new initiatives:
a) Rationalizing the fee structure to encourage small-town jewellers to sell hallmarked articles:
The certification fee has been reduced substantially for small towns with population below 10 lakh.
b) Introducing the provision of compensation and penalty:
The jeweller shall take responsibility to redress any complaint received on a hallmarked article sold by him, with payment of compensation to the buyer at the rate stated below if a hallmarked article sold by him is found substandard on testing at a BIS referral laboratory: a. Compensation amount (Rs) = 3 x difference observed in testing of purity x weight of gold or silver in the article x gold/silver rate (MCX spot rate, in Rs) on date of issue of the test report by the BIS referral laboratory
c) Laying down the penalty structure:
The hallmarking centre responsible for doing assaying and marking on such article will have to pay penalty to BIS. The penalty amount will vary from 2 to 10 times the difference in the declared and the tested purity. If the purity of an article hallmarked by the assaying and hallmarking centre (AHC) is found lower than the declared value upon testing by a BIS-notified referral laboratory, the AHC shall be liable to pay a penalty as calculated below:
For first failure
Penalty amount = difference in fineness observed on testing x weight of gold/silver article x gold/silver rate x 2
For second failure (within 6 months from the date of drawl of first sample)
Penalty amount = difference in fineness observed on testing x weight of gold/silver article x gold/silver rate x 5
For third failure (within 12 months from the date of drawl of first sample)
Penalty amount = difference in fineness observed on testing x weight of gold/silver article x gold/silver rate x 10
Gold/Silver rate (spot rate at Multi Commodity Exchange of India – MCX) will be as applicable on the day of testing of the sample. The penalties specified above shall be applicable for a recognition period of three years. In addition to payment of the penalty, the AHC shall be de-recognized if three failures are observed in one year.
d) Categorizing discrepancies and penalties:
Various other discrepancies that can be observed at the jeweller’s outlet or at the AHC have been categorized and for each category penalty has been fixed. Similarly, in cases of unethical practices observed at a jeweller’s outlet or an AHC, provision of cancellation of license or recognition has been made. In such cases, license or recognition will not be issued for five years to the person responsible or to any of his relatives.
e) Giving a unique ID:
For hallmark to be reliable, it is necessary for it to be traceable to the centre’s records. For this purpose, a unique identification number will be marked on each article hallmarked by the centre. A card will also be provided on which the unique identification number, the weight of gold, a photo of the article and the QR code will be marked. After making the purchase, the consumer will be able to verify the genuineness of the article from the BIS website or through a mobile application. This scheme will be voluntary and the consumer will decide if he is prepared to spend Rs 100 to Rs 150 extra towards cost of having a unique number marked on his jewellery and printed on a card.
f) Changing the sampling method used for drawing market samples:
Now, sampling will be done only by drilling and not by scrapping. Thus, the nature of coating will now not affect the test results.
g) It has been made compulsory for a jeweller to
mention hallmarking charges on the bill. h) Jewellers and AHCs are required to sign an agreement and furnish BIS with a bank guarantee for an amount not exceeding five lakh rupees.
With growing quality awareness, consumer demand for gold jewellery of known purity has become the guiding factor for consumer protection. The new initiatives taken by BIS are expected to go a long way in ensuring protection of consumer interests and at the same time providing incentives to jewellers and AHCs to exercise due diligence in hallmarking.
Figure 2. Increasing trend of sample failure
Figure 1. Growth of hallmarking scheme