Alternative Investment
Gold Buyers Beware
Indians are the world's biggest gold lovers. We account for one-fifth of world gold sales and nearly 70% of this goes into gold jewellery. But the gold jewellery market is so fraught with unfair trade practices that even a sympathetic National Consumer Disputes Redressal Forum could do little beyond questioning if consumers "should be left at the mercy of the traders"?
What should be frightening for ordinary consumers is that the National Forum did not find an answer on a recent case despite its best efforts. Instead, it ended up ruling in favour of the jeweller.

Here is how it began. B S Sharma bought a 23-carat gold ring for Rs 2700 on 16 December 1997. His cash memo said that only 80% of the price would be refunded if the ornament was returned. This suggested that the ring was only 18.4 carats (80% of 23 carat) and it amounted to an unfair trade practice, said the consumer.
Aggarwal Jewellers, who sold the ring, claimed that the value reduction was due to alloys used in making jewellery. The consumer approached the District Consumer Forum through the Akhil Bhartiya Upbhokta Congress, a Bhopal based consumer group. They won the case. The commission directed the jeweller to supply a 23-carat new ring to B S Sharma and pay Rs.5000 as compensation. It also directed the jeweller to ensure that his cash memo claims were accurate. The jeweller appealed to the State Commission (No.1630/2001) which accepted his contention that repurchase of the ring at 80% of its value did not suggest lower purity but covered alloys used in its making.
The consumer challenged the order by filing a revision petition (No.3020 of 2003) before the National Commission. The Akhil Bhartiya Upbhokta Congress said consumers have the "right to be informed about the quality, quantity, potency, purity standard and price of goods to protect the consumer against unfair trade practice." It also pointed out that there is large scale exploitation of consumers in the gold trade and this would continue unless there is proper trade direction to declare the purity or quality of the ornaments.
The national commission agreed that "the amount involved in the dispute is very small, but the matter raises a vital question with regard to purity of ornaments of a precious metal (gold)." It considered the issue important enough to issue notices to the government, the Reserve Bank of India (RBI) and the Bureau of Indian Standards (BIS), to figure out how to protect jewellery buyers. It also appointed an amicus curiae (friend of the court or expert) to help it figure out various issues and arrive at its conclusions. The process onlyexposed how unfair the jewellery business was for ordinary consumers.
The RBI affidavit said that the Bureau of Indian Standards (BIS) was designated by the Government to evolve and operate a hallmarking scheme for gold jewellery, which was launched on 11 April 2000. While this would protect consumers by 'certifying' the purity and caratage of gold, the central bank agreed that consumer awareness about hall marking had to be increased.
The BIS was astonishingly forthright in its affidavit. It explained the international convention that led to the adoption of Common Control Marks (CCM) and later hall marking, mainly to facilitate international jewellery trade. It said that although hallmarking of jewellery was introduced in India, it was mainly voluntary or optional. The Bureau has so far established more than 17,000 Indian Standards, out of which only 100 were mandatory under various government orders and enactments. It also pointed out that its role and powers were extremely limited. It neither has the powers to formulate regulation nor the enforcement machinery or infrastructure to carry out any search and seizure operations, investigations, arrests, recording of statements of witnesses etc. as are conferred on law enforcing machinery of the State such as the Police force. Although it can "carry out inspections and seizures" under the Act, it relies heavily on police assistance.
However, in the last four years, the BIS has recognised 17 Hallmarking centres in 10 cities and certified 750 jewellers. It went a step ahead in 2001-2002 and conducted a survey of eight major cities along with a reputed consumer organisation. Posing as consumers, it purchased jewellery from 15 jewellers in each city and had it tested at the MMTC Assaying Centre in New Delhi.
The findings were shocking. Of the 120 samples, only 14 confirmed to the purity declared by the jeweller in the bill or cash memos. As the National Commission noted, this means that 90% of the jewellery sold in India is not in accordance with claimed purity. The BIS filed complaints against 31 jewellers where the purity was at least 15 % below declared caratage. In September 2003, the Ministry of Consumer Affairs constituted a commission to "contain and control the alarming situation" in sale of jewellery and introduce hall marking, especially in rural areas.
The BIS's affidavit dated 13 April 2004 makes some interesting points too. It says Indians culturally have a 'great fascination for gold', so much so that it is seen as a commodity and not a product. To them, gold in any form is "homogenous and indistinguishable" with “no brand or expiry date”. Hence, gold demand is not “price-elastic” but “prosperity elastic” - that is, increments in household income are generally matched by purchases of more gold.
But the consumer is victimised over quality. A person buying 22 carat gold will discover it is only 18 carats when he tries to sell it, but since Indians emphasise on 'high carat' jewellery (which is also seen as an investment), hall marking was a solution but its roll out was difficult. Having heard all sides, the National Commission concluded that hallmarking gold jewellery is a necessity, but there are several difficulties. It also noted that the trade was fraught with "large scale unfair trade practices" and consumers are at the mercy of the jewellers. One of the main objectives of the Consumer Protection Act, 1986, is to see that consumer gets information with regard to quality, quantity, potency, purity, standard and price of the goods. This object of the Act is apparently frustrated.
On the specific case however, the Commission accepted the jeweller's contention that the 20% reduction in value covered "inputs like labour charges, sales tax, cost of unrecoverable linkage used to make ornament, labour required to be paid for refining and reclaiming gold, wastage or impurity developed due to use and exposure of the metal". Meanwhile the consumer had another test report which showed that the ring contained 21 carat gold, which weakened its case.
Consequently, the National Commission presided by M B Shah and Rajyalakshmi Rao (Member) only directed the jeweller to emboss a marking on his jewellery indicating its quality/purity. Further, it said that until hallmarking is made mandatory, government should issue "appropriate directions" under various statutes to see that jewellers have their identification marks clarifying quality and purity of gold. This protects the consumer in case of discrepancies when he tries to sell the jewellery. The Commission appreciated the consumer’s zeal in fighting this issue which helped highlight the unfair trade practices in the jewellery business. It must however be mentioned that top Indian jewellers do emboss their jewellery and do not quibble about purity when it is re-sold. It is up to the consumers to help clean up the trade by sticking to established jewellery brands that guarantee purity and caratage.


The Art of Giving

Sucheta Dalal on GIVE Foundation which has brought professionalism into charity

One of the biggest travails even of simple charity in India is the nagging worry about whether one's money will be correctly spent. Another is the effort involved in reaching aid to those NGOs that pursue your special concerns. Give Foundation ( is an NGO that aims to answer both these concerns through efficient and effective 'giving'.

Give Foundation in India was conceptualised by N.Venkat Krishnan, an IIM Ahmedabad graduate, who was always certain that the regular corporate rat race is not for him. After a brief stint at the Times of India, he took off to promote an unusual school in Gujarat and later 'Giving' in India with corporate support.  He aims to ensure that efficient and effective NGOs find resources to pursue their cause through a variety of platforms that encourage easy 'giving'.

In 2000 GIVE created an Internet platform to promote online donations. This has already channelled Rs two crore to various NGOs. A second platform is 'Payroll Giving' where all employees of a company donate a small part of their monthly salary to causes of their choice. Already, it has a list of 20 odd companies (such as Star TV, ICICI, IMRB, Hewlett-Packard, H &R Johnson and WPP Media) whose employees contribute Rs 100-500 a month to help educate a child, donate eyes or wheelchairs. Sometimes the employers match the employees' contribution.
Another strategy is to be part of high-profile events. The Standard Chartered international marathon, which has become a significant event on Mumbai's social calendar, is probably its most successful effort. This single event allows Give Foundation to help raise a big chunk of money for scores of genuine causes and provides a social dimension to the event.

GIVE's strength is its two-way support system. On the one hand, it helps NGOs professionalise their accounting and reporting systems to meet donor requirements and improve transparency (this includes cash-flow planning, fund management, internal control processes, document design and systems implementation). On the other hand it helps donors with Grant Management services so that every rupee donated is correctly spent.

It has screened over 1000 NGOs in the last couple of years, helping disburse funds for the Gujarat earthquake and Orissa flood relief, having apparently helped channel Rs 220 crore of grants and services for government departments, individuals and companies.

It has a Give2India scheme for donations of $10,000 and above. This allows donors to route funds through an ICICI Bank escrow account, a deposit or specially designed structures that transfer funds through ICICI Bank to a chosen NGO in milestone-based installments. This has allowed a venture capitalist to donate a hefty $100,000 for "livelihoods in Rural Karnataka"; a banker in Singapore to donate $60,000 to "electrify villages in Orissa using Biodiesel technology of project SuTRa"; a Swiss business owner to donate $60,000 to set up an Orphanage near Mumbai; a doctor in Manchester to donate 50,000 Pounds to support the mentally ill and an old-age home in Tamil Nadu; and a senior executive to provide $20,000 to promote 'entrepreneurship in Assam".
The foundation has even helped large corporates (Godrej, the Taj Group, the Bombay Stock Exchange) develop a comprehensive philanthropy strategy. According to Give India's website, its uniqueness is that it treats the donor as an 'investor', who is looking for a return of some kind - most often just the satisfaction of knowing how his/her money is well spent. All donors get a report on their donations.

GIVE makes a stretched comparison between financial intermediaries and various kinds of Non-profit structures operating in social development efforts. It is involved in helping the evolution of some of these, such as a credit or performance rating of NGOs and an informal self-regulatory alliance.

According to GIVE, "If Indians gave back to society in the same proportion as Americans do, we could be donating Rs 60,000 crore a year to help those in need". This would exceed the government's allocation for healthcare and education. As against this, Indians apparently donate anywhere between Rs 1000-5000 crore. Clearly, we have a long way to go.


From B School to Microfinance

B-schools report that an increasing number of students are opting for microfinance as a subject....

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