CAG had spotted lacunae in gems and jewellery sector

A CAG report of 2016 had pointed out irregularities in the gems and jewellery sector, much before the bank fraud involving Nirav Modi was reported

GN Bureau | March 7, 2018


#CAG   #CAG Report   #Bank Scam   #PNB  

There was a sharp increase in the share of import of gold after 2007‐08 because of its rise in its asset demand. Interestingly, in 2013‐14 the export of rough diamond and non-monetary form of gold was also at maximum levels of 10.10 and 11.04 percentages, respectively, said a CAG report that was tabled in parliament in 2016.

“The difference between the transaction wise valuation of trade between India and its exporting/importing partners indicated that India ranked 4th in volume of illicit financial outflows in the world.  This was almost $83 billion in 2013 and growing, akin to the last ten years trend.  It is around 4.5 percent of India’s GDP (against global average of 4 percent) and totally comprises of outflows due to trade mis‐invoicing,” said the performance audit on natural or cultured pearls, precious or semi‐precious stones, precious metals, metals clad with precious metal and articles thereof, imitation jewellery, coins.

The latest banking scandal to hit the headlines is about billionaire  Nirav Modi who is involved in Rs 11,300 crore fraud at a Punjab National Bank branch.

The CAG performance audit has revenue implication of Rs 1,003.37 crore in addition to systemic issues worth Rs 19,522.67 crore and internal control matters which could not be quantified.

The CAG report said that the gems and jewellery industry occupies an important position in the Indian economy as it is a leading foreign exchange earner and one of the fastest growing industries.    It contributed to 15 percent of the national export basket.    The major product categories of this industry are gold and diamond jewellery. Gold jewellery forms around 80 percent of the Indian jewellery market while the remaining market demand is of studded jewellery that includes diamond studded as well as gemstone studded jewellery. 

Over 65 percent of the world’s polished diamonds is manufactured in India in terms of value, 85 percent in terms of volume and 92 percent in pieces. India’s diamond manufacturing sector employs about ten lakh people across the country. Majority of the diamond manufacturing activities takes place in Surat, Gujarat. The Bharat Diamond Bourse in Mumbai, a modern trading complex which began its operations in 2010, is the largest bourse in the world, and accounts for nearly 90 percent of India’s total diamond trade.   The manufacturing of jewellery and coloured gemstones is centred at Jaipur, which is the world’s largest manufacturing centre.

The CAG report noted that rough diamond, precious coloured gemstones and gold are not produced in India.    These are imported from major source countries or trading hubs.   These are essential inputs for the sector.  

The sector in India has a unique availability of traditional skills, a huge socio‐ economic importance and a large domestic market for different kinds of plain and studded jewellery.  This sector also generates a fair amount of economic activity and contributes to the GDP of the country if value is added to the final product. Currency and asset demand of gold in India is one of the highest in the world vis‐a‐vis other currencies and investment asset categories. Given global demand for Indian design and workmanship, Cut and Polished Diamond (CPD) and jewellery has been one of the top exporting products for decades. The import of gold, jewellery et cetera increased from Rs 3,50,396 crore in 2010‐11 to Rs 3,81,515 crore (9 percent) in 2014‐15. Export of similar goods also increased to Rs 2,53,940 crore (28 percent) in 2014‐15 from Rs  1,98,886 crore in 2010‐11.

The report went on to say that the trade deficit has decreased from 43 percent (FY 11) to 34 percent (FY 15) but the duties foregone have increased from 14 percent (FY 11) to 20 percent (FY 15) of the value of imports. During this period, value of the US dollar increased by 34 percent making the imports proportionately expensive and exports cheaper.  The entire five year period saw, imports of gold as a major component of the imports but it suffered a negative Net Foreign Exchange Earnings (NFEE) vis a vis corresponding exports of jewellery. 

India barely produced diamond or gold.  It was the highest average importer of gold in the last five years.  

The sector was last audited in 2008 however most of the improvements recommended by audit were not achieved.

Lack of an impact assessment of the scheme prior to its implementation and an outcome assessment after implementation, or on exit, rendered the policies ineffective due to insufficient coordination, control and monitoring; cases of operational malfunction, non-compliance; inadequate ICT infrastructure for tax administrations, border control, facilities and certification, said the CAG report.

Read the CAG report - Union Government Department of Revenue Indirect taxes – Customs No. 6 of 2016
 

Comments

 

Other News

Maharashtra flood situation grim, rescue works on

At least 79 people were killed and 56 were missing as the flood situation in Maharashtra remained grim on Saturday. Torrential rainfall in various parts of the state, coinciding with high tides and also discharge from dams, led to inundation of many regions and floods caused landslides in some places too.

Maharashtra partners with Climate Group to promote electric vehicles

Within days of announcing its new Electric Vehicle Policy 2021, Maharashtra Friday announced its partnership with Climate Group’s EV100 network to push and promote electric vehicles and reduce CO2 emissions. The policy, meanwhile, was also notified on Friday. Climate Gro

As rains batter Maharashtra, state on red and orange alert

Severe rains battered Raigad, Thane, Ratnagiri, Kolhapur and Satara regions of Maharashtra with rains in Ratnagiri district breaking the 40-year record. As rivers in these districts crossed warning levels, the National Disaster Response Force (NDRF), the State Disaster Response Force (SDRF), Coast Guard, N

Will next wave affect children? That`s mere speculation, says expert

Dr. Praveen Kumar, director, department of pediatrics, Lady Hardinge Medical College, New Delhi, talks about various issues including impact of Covid-19 on children, the need to protect them, and vaccinating pregnant women and lactating mothers. How has the pandemic affected

A public policy bridge across the digital divide

There has been an active debate globally and in India about the digital divide. This debate has gained additional weight during the Covid-19 pandemic because the acceleration of the need for digital access to health and other social services has thrown this issue into sharper relief. A critical public poli

Connecting India faster – with satellite communications technology

The need for digital connectivity has never been more pressing. The pandemic has changed work ethos and day-to-day lives of people across the globe. The new norm is ‘Technology First’, as with people moving to digital connectivity to fulfill their requirements in daily life. India’s dream

Visionary Talk with Sanjay Jha, Political Analyst On The Current Political Scenario



Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter