Traders for scientific regulation of bullion market

It has been more than a year that stakeholders have been working to prepare a directive to facilitate the bullion industry of the country. The directive was aimed at expediting the growth of domestic bullion market by formulating a proper and inclusive monitoring standard.

However, stakeholders have not been able to give final shape to the draft directive due to lack of understanding among stakeholders regarding purity level of gold, profit margin and ways to monitor bullion outlets. As a part of Nepal Republic Media’s fortnightly round table on emerging market issues, a round table meet was conducted on the prospects, needs and challenges of the domestic bullion industry. Sujan Dhungana presents excerpts of the discussion.

We should come to an understanding on purity level

Conflict between traders and the government has entered its 14th month and is yet to be resolved. The conflict has to be resolved soon. Traders have wrong conception that the state is trying to suppress them and their business. During our monitoring we found some traders selling jewelries that did not meet the set standards. Traders were found mixing silver and other metals. We do not intend to discourage traders and hamper their business. We aim to make the industry more competitive. However, traders cannot cheat customers and boycott the government’s monitoring citing lack of monitoring standards and laws. Though we lack concrete laws to regulate the bullion market, we do have a Consumer Protection Act and Standard Measurement and Weight Act, which traders must follow. So the state and traders must come to a logical agreement in terms of purity of gold.

Hari Narayan Belbase
Director
Department of Commerce and Supply Management (DoCSM)

However, we are in the process of endorsing directives for minimum monitoring standard for the jewelry industry. The final draft is ready but traders have shown dissatisfaction with some of the provisions of the draft. We want to endorse the draft after getting a go-ahead from traders. Neither the state aims to hamper the business of traders, nor can traders cheat customers.  Traders repeatedly cheating customers will be directly sent to prison. We urge traders not lie to customers regarding the ingredients and purity level of the jewelries they sell.

Govt shouldn’t impose int’l standards in Nepal

Fourteen months ago, the government started monitoring bullion industry of the country. We boycotted the monitoring and shut-down our outlets for almost 11 days as the monitoring was unscientific. We then reached an understanding on setting a monitoring standard.  Accordingly, we forwarded a 12-point demand to the government.

Mani Ratna Shakya
President
Federation of Nepal Gold and Silver Dealers’ Association

But now, the government is trying to impose international standards in the domestic bullion industry. We believe that standards practiced in developed nations should not be imposed in an under-developed country like ours.  There is a vast difference in the way jewelries are made in developed countries and in Nepal. Developed nations follow fully automated process, while our jewelries are handmade.

Similarly, there is lack of understanding among government officials and customers on the technical aspects of the bullion market. Domestic traders cannot maintain cent percent purity as a certain percentage of purity is lost while making jewelries by hand.

We are ready to adopt the new monitoring standard, but what will traders do to the gold and gold jewelries that they have in stock and do not meet the new standard? Traders first need enough time to clear their old stock before implementation of the new standard.

Stakeholders lack technical understanding

Yuba Nanda Bajracharya
Secretary
Nepal Gem and Jewelry Association

The problem in the domestic bullion industry is lack of proper understanding and knowledge of technical aspects. We are often accused of overcharging customers and keeping a high profit margin while selling jewelries. But this is not true. We have been charging customers according to the quality of products. For instance, a cold drink costs Rs 25 in the local market but its costs more than Rs 100 for the same product in big hotels. Here I mean to say that cost differs according to the service. A technical team needs to finalize the actual amount of purity lost while manufacturing jewelries and the profit margin traders can keep. The government should fix the purity level of jewelries scientifically. The new standard to be set by the government should be holistic and should incorporate minute details of jewelry manufacturing, purity level to be maintained and profit margin, among other things.

Traders should not overcharge customers

Bishwo Babu Pudasaini
Director General
Nepal Bureau of Standard and Metrology (NBSM)

Traders have often been raising the issues of profit margin, purity, tolerance and monitoring. Aiming to address the same, the government has prepared a draft of the directives that will resolve all the problems. But as I was also on the committee which prepared the draft, I believe that the draft is still not clear as to whether it would merely set standards or to monitor the bullion market. We can incorporate the provisions practiced in international bullion markets.  It is also true that most of the sample tested in our lab did not meet the set standards. However, we are not saying that all the traders are cheating customers. But some of them are actually cheating customers.

We are also establishing hallmark system in domestic bullion market that will certainly solve such problems. Likewise, we also plan to set up laboratory in different cities so that sample tests can be carried out easily.

I urge traders not to overcharge customers. They should charge customers according to the quantity and quality of their product. We will collect samples from traders for test of quality and quantity if there is any suspicion regarding the quantity and quality of products they sell.

Stakeholders should seek scientific way out

We have never been able to change the traditional way of working. Traders have been following the same methods and procedures in making gold jewelries. We need to step out from traditional thinking and working style. The production process needs to be modernized gradually. Until and unless we adopt scientific approach to jewelry production, customers will continue to be cheated.

Baburam Humagain
Treasurer
Forum for Protection of Consumer’s Right

However, it is a trend in Nepal to approve anything when two parties reach an agreement. This should not be the case in terms of the bullion market. Instead of traders and government reaching an understanding on the purity level, manufacturing cost and profit margin for traders, stakeholders should seek scientific approach regarding purity, manufacturing loss and profit margin. The agreement in the draft should not only reflect the voice of traders and state, but also ensure the rights of consumers.

As customers are not aware of the quality of gold they purchase, the government as well as the traders should assure people that they are getting quality products and have not been cheated.

The new directive should encourage traders

Diyesh Ratna Shakya
Secretary General
Federation of Nepal Gold and Silver Dealers’ Association

Customers are aware of the quality and quantity of product they purchase. Manufacturing jewelry is an art and reflects the culture and tradition of a country. Because of this, the government’s draft of new policies and directives should be trader-friendly. The government should allow the traders to keep a decent profit margin on jewelries. The standard that the government is preparing should not be biased.

We want traders-friendly policy

The government should see the domestic bullion market from two aspects -- commercial and technical.

Manish Lal Pradhan
President
Nepal Gem and Jewelry Association

Commercially, the sector has 12,000 people working actively and the sector has investment of around Rs 20 billion. Similarly, we pay more than Rs 4 billion in taxes to the government annually. Acknowledging the contribution of our industry in the national economy, the government should introduce stakeholder-friendly policies.

Consumer perception should be changed

Mahesh Shrestha
Proprietor
Gahana Griha, New Road

The under standing of bullion industry among consumers is incomplete. Earlier, we sold jewelries mixing with different alloys. This practice was common before the government formally began monitoring the bullion industry. Now we make jewelries as per the demand of customers and charge them accordingly.

It is not our intent to cheat customers

Ravin Shakya
President
Gold Dealers’ Association, Kavre

We have been demanding some flexibility not because we want to cheat customers. The purity level is lost naturally in the jewelry manufacturing process. We demand as much as two percent of tolerance depending on the type of jewelries to be made. The monitoring standard that government is preparing to introduce should encourage bullion traders rather than discourage them.

Source: Republica