Monday, April 02, 2012

Compulsory Hallmarking of Gold

India is the largest gold consuming economy as per World Gold Council, accounting for nearly 20 percent of world’s gold demand. Gold is not merely a product and commodity in India, but is integrated with our culture as a precious metal. Though adulteration of gold has been rampant for centuries, recent instances involving presence of metals like ruthenium and iridium within gold has created panic, mostly because they are radioactive and being similar to gold cannot be identified by simple apparatus available in local laboratories.

Hallmark is an official mark, granted by Bureau of Indian Standards (BIS) certified representatives, which act as a third party assurance and certification that the customer gets the right purity of gold(or silver) for the given price(value for money). As on today, hallmarking of gold is not compulsory, but only a voluntary process for gold merchants. Currently, only 81 items are to compulsorily certified in India. It is surprising to note that items like steel, milk powder and cement are to mandatorily certified to be sold in India, but a product as important as gold is left out from the list.

In practical terms, to include gold as a mandatorily certified item, only a policy decision is required, as understood from Sec.14 of Bureau of Indian Standards Act, 1986 (reproduced below).

Sec.14 reads as follows:

14. If the Central Government, after consulting the Bureau(read as BIS), is of the opinion that it is necessary or expedient so to do, in the public interest, it may, by order published in the Official Gazette, -

  1. notify any article or process of any scheduled industry which shall conform to the Indian Standard; and
  2. direct the use of the Standard Mark under a licence as compulsory on such article or process.

Further, it is worrying to understand that supportive legal provisions are also not in the best interests of consumers like:

Ø Even if gold is to be compulsorily certified, punishment for violating the above provision, as mentioned in Sec.33 of the Act is only an imprisonment for a term which may extend to one year or with fine which may extend to fifty thousand rupees, or with both.

Ø As per Clause 5.1 of Scheme for Certification of Gold, Bureau of Indian Standards is not responsible for the adulterated gold even though they are certified by BIS approved assaying centres. Clause 5.1 is reproduced below

5.1 In the event of any claim being filed by the consumer / purchaser / importer against the above Mark and not “conforming to” the declared fineness as per the relevant Indian Standard, BIS shall not in any way be liable.

Ø As per Clause 7 of the Scheme(reproduced below), even in cases wherein the hall marking procedure is not complied, there is no provision for strict enforcement and the only remedy is a replacement of the jewellery.


7.1 Any consumer who purchases hallmarked jewellery can get the same tested from any BIS recognized Assaying & Hallmarking Centre.

7.2 In case Hallmarked jewellery sample brought by the consumer is found to be of lesser purity than that marked on jewellery, the testing charges would be refunded to the consumer by the centre who had hallmarked the jewellery. The jeweller shall be obliged to satisfy the customer through replacement.

7.3 In case sample fails first time, the jeweller would be issued warning for taking corrective actions. However in case of second failure within a period of 6 months, the licence would be processed for cancellation.

7.4 The licence may be granted afresh based on fresh application and fees as applicable subject to satisfactory settlement of the earlier complaint.

In the case of Akhil Bharathiya Upbhokta Congress v. Agarwal Jewellers (2006), National Consumer Disputes Redressal Commission, observed that it is a basic consumer right as per Consumer Protection Act,1986 to be informed about the quality, quantity, potency, purity, standard and price of goods to protect the consumer against unfair trade practice. Hence, it was concluded that Hallmarking of Gold needs to be compulsory, in the interest of consumers.

It is commonly known that reforms have been pending for so long owing to the heavy lobbying by affected parties. However, Union Cabinet on Jan 3rd, 2012 has approved the proposal for amending the Bureau of Indian Standards Act,1986 to the extent of mandating that gold is to be compulsorily hall marked.(more details are not available). But is it clear that a mere amendment to the Act will only make implementation illusory, as a comprehensive amendment to the Act and supporting rules are required.

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