US tariffs: Gem, jewellery exporters seek extension of RBI moratorium

Gem and jewellery exporters are on tenterhooks with the RBI announced moratorium on bank loans coming to an end in December. To support the industry hit by US tariffs, the RBI has allowed banks to defer term loan payments and working capital interest by converting it into a funded loan for later repayment, and extended export credit tenure to 450 days for continuity.

The move helped the industry manage cash flow by deferring payments, converting interest and increasing credit flexibility, besides preventing defaults and bring stability in the sector. Interest accrued during the moratorium was converted into a separate term loan, repayable by next March-end. Pre/ post-shipment credit period extended to 450 days for eligible credit.

Defying the US tariff of 50 per cent levied in August, exports of gem and jewellery rose about 6 per cent year-on-year to $2.9 billion in September, but fell 31 per cent to $2.17 billion in October, only to bounce back 20 per cent to $2.5 billion in November ahead of the peak Christmas and holiday season.

poor margins

The US accounts for about 30 per cent ($9-10 billion) of India’s gem and jewellery exports. At present, gem and jewellery exporters have been cutting down on their margins and marginally passing on the burden of high tariffs to their long-term customers.

Colin Shah, MD, Kama Jewellery, said continued tariff pressure will decrease exports based on profit margin compression and other factors.

“With the resilience showcased by the industry in one of the toughest phases, we foresee exports to remain competitive, irrespective of the global economic vulnerabilities,” he added.

The sustained rupee depreciation against dollar has not helped jewellery exports, as the industry is dependent on imports for its key raw material – gold and diamond.

Kirit Bhansali, Chairman, Gem and Jewellery Export Promotion Council, said as the RBI’s moratorium support comes to an end in December, the industry’s expectation is continued policy stability and targeted government support to ensure a smooth transition.

While the recent RBI trade relief measures have provided critical breathing space, global demand conditions remain uneven and financing costs are still elevated, he said.

Going forward, sustained availability of affordable export credit, faster duty refunds and continued interest subvention support will be important to preserve liquidity and competitiveness, especially for MSME exporters, said Bhansali.

Suvankar Sen, MD & CEO, Senco Gold, said the US tariff uncertainty continues to remain and will be a major challenge going ahead for the industry.

uncertain times

The RBI moratorium was a good support to the industry to survive in the global uncertain times, and it should be extended further for the industry to withstand the current tariff crisis.

Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions, said many of the exporters, particularly micro, small and medium-sized enterprises, are experiencing inventory overhang and delayed payments and, therefore, a sudden removal of assistance could contribute to increased financial strain and credit risk.

The RBI should consider extending the moratorium it has provided for jewellery exporters, as the sector continues to face pressure from other sources such as high tariffs imposed by the US, fluctuating levels of international demand and limited amounts of working capital available, he said.

N Anantha Padmanaban, Chairman, NAC Jewellers, said there has been a sharp fall in gems and jewellery exports to the US due to the tariff. “The rupee depreciation is also not helping either,” he said.