Indian gem, jewellery exports have potential to reach $30b

Question: Gem and jewellery exports have been stagnating over the past few years. As my firm in Dubai imports these products from different parts of the world, I am wondering whether the Indian government is serious about boosting export of these items.

Answer: One of the main centres for export of gems and jewellery is the Santacruz Electronic Export Processing Zone (SEEPZ) in Mumbai which is spread over 105 acres of land located near the international airport. There are 149 gem and jewellery manufacturing units having a current annual export turnover of $3 billion. According to the Commerce Minister, units in SEEPZ have a potential to reach a turnover of $30 billion. Manufacturers are now being incentivised to renovate their existing units in SEEPZ. If they do so, the government may consider waiving the lease rent for seven to eight years. Currently, the rent charged is INR30 per square foot per month which is much less than the prevailing market rent in that area. In other centres like Surat, gem and jewellery manufacturers have set up world class infrastructure at their own cost without government funding.

Q: Some good companies are being delisted from Indian stock exchanges. This puts minority and retail shareholders at a disadvantage. Are any rules being made to protect their interest?

A: Delisting from a recognised stock exchange is possible only if the majority shareholder has acquired 75 per cent or more of the share capital in a public company. The Securities & Exchange Board of India has announced a revised framework keeping in view the interests of both the majority and minority shareholders. If a company has to be delisted, the majority shareholder has to offer a higher price than the price at which he acquired the shares and undertake a reverse book-building process. The response from the minority shareholders to the open offer must lead to the delisting threshold of 90 per cent of the capital. In such an event, all shareholders who tender their shares in the open offer are required to be paid the same delisting price. On the other hand, if the response to the offer is less than 90 per cent of the capital, those who tender their shares will be required to be paid the original open offer price. Hence, better price is ensured for minority and retail shareholders at the time of delisting.

Q: Electronic gold receipts are quite common in developed financial markets of the world. No such facility is currently available in India. This is my information. Please let me know if this is correct.

A: In February this year, the government announced that it would set up a regulatory framework for electronic gold trading. Pursuant to this, a gold trading platform can now be set up by bourses where electronic gold receipts can be traded. These receipts can also be exchanged for physical gold by the holder of the receipts. This would lead to a better discovery of spot price of gold in India. It may also lead to the launch of derivative products. A regulatory framework has also been announced for vaults which would play an important role in storing of physical gold. If a stock exchange wishes to trade in electronic gold receipts, it must be done in a separate segment. The denomination for trading and conversion of gold receipts into physical gold has to be decided by the exchange after obtaining approval from the Securities & Exchange Board of India. Incidentally, exchange traded funds for silver have also been approved by the regulatory authorities.

H. P. Ranina is a practicing lawyer, specialising in tax and exchange management laws of India.