All that Glit­ters May Be Gold

Consumer Voice - - Contents -

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

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