On 16 June 2021, the Government of India formally introduced the ‘mandatory’ hallmarking of gold jewellery and gold artefacts in the country. This law applies to the entire country; however, only 256 districts are currently covered by this system. These 256 districts effectively cover all the major manufacturing hubs; thereby, ensuring that the majority of gold jewellery consumed in the country is hallmarked. Furthermore, any Bureau of Indian Standards (BIS) registered jeweller can sell hallmarked gold jewellery anywhere in the country.
Discussions on introducing a hallmarking system were started way back in 1999, as an initiative by the BIS and the World Gold Council (WGC). The duo also roped in the Birmingham Assay Office (BOA) in England for the technical assistance to formulate the scheme. The BOA trained BIS officials on setting up rules, regulations and practices of hallmarking. The scheme was formally launched on 11 April 2000 in New Delhi with five BIS-recognised hallmarking centres and 1 BIS licensed jeweller.1
The scheme was started on a voluntary basis. Jewellers slowly started registering for the BIS licence, with new assaying and hallmarking centres also coming on board gradually. In a 2015 report, the WGC estimated that hallmarking helped reduce the leakage in caratage from between 20% and 40% to between 10% and 15%.
It also observed that there was an inadequate number of hallmarking centres, while numerous centres were underutilised. At the same time, WGC found that small jewellers were reluctant to take the formal hallmarking route as they benefited from undocumented sales and consumer interest in buying hallmarked jewellery was relatively weak at that point in time.2
Regulatory constraint was a big problem in implementing the mandatory hallmarking. The BIS did not have the legislative power to enforce the Indian Standard. With the enactment of the BIS Act 2016, the BIS is now empowered to enforce the Indian Standard, having the power to ‘penalise’ non-compliance.
Since the introduction of mandatory hallmarking, it is observed that jewellers are rushing to register for the BIS licence. According to the latest data released by the Indian Association of Hallmarking Centres, 73,784 jewellers are now registered with the BIS as of 30 July 2021. This means that the number has doubled in the 45 days since the implementation of the mandatory system. The number of assaying and hallmarking centres currently stands at 933, hallmarking between 300,000 and 400,000 pieces of jewellery every day. The average weight of each piece of jewellery is estimated to be between 8 gms and 10 gms. If we take the lower estimates of 8 gms and 300,000 pieces every day, then currently 2.5 tonnes of gold jewellery are being hallmarked every day.
According to the monthly report of business volumes submitted by the hallmarking centres to the BIS, the total volume of hallmarked jewellery has increased from 35 million ounces in 2015 to 50 million ounces in 2020. Considering that there are 250 working days in a year, this translates into 200,000 pieces of jewellery per day.3 It will be interesting to see how the volume continues after all the backlog of older jewellery has been hallmarked and only new jewellery is getting hallmarked.
It is to be remembered that under the mandatory hallmarking provision, any jewellery under 2 gms is exempt from having to be ‘marked’.
Regulatory constraint was a big problem in implementing the mandatory hallmarking
Source: Refinitiv Metals, An LSEG Business
Chart 1: India’s Gold Jewellery Consumption
However, all old non-hallmarked jewellery in jewellers’ possession must be hallmarked before being sold. Demand for jewellery currently is subdued due to the pandemic and the seasonal factor. Hallmarking at the volume mentioned above means that the majority of articles now being hallmarked must be old non-hallmarked jewellery.
The BIS has changed the marking system under the mandatory regime. Earlier, there were four marks, but these have now been replaced with three marks – the BIS logo, purity logo and a six-digit HUID (Hallmark Unique Identification Digit) to indicate the jewellery’s authenticity. The HUID alpha-numeric code confirms the identity of the jewellery seller and the hallmarking centre. It has been introduced to provide traceability and to prevent fake or fraudulent hallmarking.3
It is worth discussing here how HUID works. The HUID is implemented at the ‘first point of sale’. This means that a piece of jewellery can change hands multiple times (from manufacturer to wholesaler to retailer) in a supply chain, but the hallmarking must be done at the first point of sale. Here, the jeweller is considered to be anyone in the supply chain who sells a piece of jewellery for the first time. When a jeweller submits an article for hallmarking for the first time, he must log in on the BIS portal and activate his User ID. The hallmarking centre will then upload the details of the article submitted for hallmarking using the same User ID. This means that once the details of the article are captured in digital form, the record cannot be altered. Hallmarking done at the first point of sale also ensures that this process is non-transferrable, which means that the jeweller and the hallmarking centre involved in the hallmarking process would be held responsible (irrespective of whether the jewellery has changed hands in the supply chain) if the end customer lodges a complaint to the BIS.
The BIS has also asked all registered jewellers to submit the ‘stock ledger’ of already hallmarked gold in the old system to the BIS by 15 September 2021. This will help the BIS to make a critical assessment of how much old stock is currently held by jewellers.
The purity of jewellery has always been a cause for concern in India due to the unorganised nature of the business. Our continuous interaction with industry participants reveals that a certain sector of jewellers is always reluctant to do business in a formal way.
Currently 2.5 tonnes of gold jewellery are being hallmarked every day
Things become even more challenging when fake hallmarked gold jewellery is sold. Conditions have certainly improved in last 20 years, but arguably not to the desired level.
The BIS has certainly put in place a robust mechanism this time under the mandatory hallmarking system. At the same time, it has been flexible and accommodating to stakeholders. Jewellers do not have to pay registration charges to the BIS and it has kept the hallmarking charges at a ridiculously low level of less than half a dollar per piece of jewellery. The BIS has also incorporated additional caratages of 20, 23 and 24, to the mandatory system, in response to industry requests. Previously, only 14, 18 and 22 carats were accepted for hallmarking.
It is required that the large jewellery community in India come out from its ‘shop keeper’ mindset and look to build a hallmarked brand of its own, by adhering to all the required compliance. A brand can be a local brand with a single store retail. Consumers on the other hand must understand the BIS scheme before buying any piece of jewellery. Hard bargaining in a jewellery shop only elevates the risk of getting duped on the purity. They must routinely check the purity of the jewellery after their purchase and report immediately to the BIS if there is any issue.
Precious metals adopt a greener sheen
The mining industry’s focus on Environmental, Social and Governance (ESG) credentials has been several years in the making, but it has certainly taken centre stage during the pandemic. Environmental supervisors now are the first to arrive, and usually the last to leave, an exploration drilling platform. Increasing budgets aimed at tackling some of the biggest issues, such as waste disposal or reducing dust pollution, carbon emissions and high freshwater use, are shaping the gold mining industry in a positive way. The race to achieve mining fleet electrification is probably the flagship project for several major companies.
Increasing investor scrutiny on ESG results has had a domino effect on company reporting, which is increasing in detail every year, and usually announced with great enthusiasm. It may well be that Sustainability Reports now act as a company’s business card. While the ‘net zero’ goal that several companies have signed up to is a very challenging target, undeniably, the trend is for improving results in most areas, supporting the notion of real commitment from mining companies to encourage a long-term relationship with both investors and local communities. Precious metals (PM) miners have somewhat of an advantage over base or bulk metals miners. A sizable amount of gold, primary silver and platinum group metals (PGM) production is sourced from underground operations, which are less emission-intensive and generally consume less water.
The BIS has also incorporated additional caratages of 20, 23 and 24, to the mandatory system, in response to industry requests.
- Interview, James Jose, President, Federation of Hallmarking India
- Developing Indian Hallmarking – A Roadmap for Future Growth, WGC
- Interview, James Jose, President, Hallmarking Federation of India
Source: Refinitiv Metals, An LSEG Business
Chart 2: Energy Consumption In Top Precious Metals Mines
It is worth noting that an increasingly important percentage of the water these dams hold is recycled every year
Data gathered from the top 50 gold miners, 12 biggest primary silver producers and the seven largest PGM producers shed some light on these topics. During the last five years, for example, energy consumption in PM operations has increased at an average rate of 1.2% year-on-year, while in the same period, the amount of renewable energy used in the same operations has almost doubled, currently representing around 10% of the total energy matrix.
Several companies have recently signed long-term deals with energy-producing companies to ensure this percentage will steadily increase over time, with primary silver producers currently taking the lead. Peru’s Morococha mine, for example, has confirmed that it was supplied with 100% renewable energy during 2020.
Water withdrawal is one of the most critical difficulties the industry faces. Geological complexities and decreasing grades have a direct impact on water demand, which has increased by around 60%, from 1 billion cubic metres, since 2010. Water is used mainly for processing ore, and most of it ends up in tailing dams, which are under special scrutiny following the Samarco and Brumadinho disasters in iron ore mining. It is worth noting that an increasingly important percentage of the water these dams hold is recycled every year, reducing the need for freshwater, which in 2020 represented around three-quarters of the total water withdrawn, down from 81% in 2010.
Without doubt, carbon emissions are in the spotlight and usually are seen as the key metric that determines real success on the environmental front. Scope 1 emissions, or direct emissions, linked to mining equipment and mine operations represent around 40% of the total emissions generated from PM mining.
Total emissions have remained relatively constant since 2014, as an increase in scope 1 CO2 emissions has offset a drop in emissions from scope 2, linked mainly to the purchase of electricity. This probably is the result of greater dependence on renewable energy. Considering precious metals production has increased during the last years, a stagnant emission rate shows a real commitment from companies to the journey towards net zero.
Peru’s Morococha mine confirmed that it was supplied with 100% renewable energy during 2020
Mining in Peru
Turning to the social pillar, the latest reports clearly highlight the ways in which mining can be viewed as benefiting the neighbouring communities, by giving opportunities to the local workforce and investing in training. They also detail how much tax is being paid to the country’s government.
On safety, the number of accidents in global PM mining has decreased considerably, from 10,100 in 2011 to 6,900 last year, although the reduced workforce due to the pandemic might have had some effect. The Loss Time Injury Frequency Rate (LTIFR) has decreased by an average 3% year-on-year during the last decade, while fatal accidents have also decreased considerably.
Diversity is also being closely monitored, with many companies aiming to increase the number of female workers in the industry. Currently, females represent 15% of the total workforce, up from 11% in 2010.
Companies are aiming to change the perception of mining as a merely extractive industry, by focusing on how it can add value to the communities and stakeholders, and in doing so meeting the ever-increasing standards from investors. Sustainability Reports are becoming a must-read for key stakeholders in the industry.
The latest reports clearly highlight the ways in which mining can be viewed as benefiting the neighbouring communities
Source: Refinitiv Metals, An LSEG Business
Chart 3: Carbon Emissions From Precious Metals Main Producers
In January 2021, the London Stock Exchange Group (LSEG) completed the all-share acquisition of Refinitiv to create a leading global financial markets infrastructure and data provider.