‘Irrational’ value addition: Gold industry urges NA panel to step in for revision

ISLAMABAD: Pakistan’s gold industry has sought the intervention of the National Assembly Standing Committee on Commerce for an immediate revision of what it termed irrational value-addition norms for gold jewellery, urging alignment with international best practices to promote exports.

In a letter addressed to Jawed Hanif Khan, the Chairman of the National Assembly Standing Committee on Commerce, a key representative of the gold industry, Arif Patail, stated that SRO 760(I)/2013 serves as the legal framework governing the gold jewellery export sector.

However, he said several provisions—particularly Clause 10—are counter-productive, as they prescribe unrealistic value-addition norms linked to international gold prices.

Under SRO 760, value-addition requirements are fixed at: (i) 8 percent of the prevailing international gold price for plain bangles and chains; (ii) 12 percent for other plain jewellery; and (iii) 13 percent for studded or embedded jewellery.

According to the industry, these percentages do not accurately reflect the actual international market realities for high-karat jewellery and are inconsistent with World Trade Organization (WTO) customs valuation principles. It argued that value addition should reflect actual transformation costs plus normal profit margins, rather than arbitrary percentages.

The industry contended that the existing framework makes compliance practically impossible for legitimate exporters and exceeds the statutory authority of the Ministry of Commerce (MoC). It pointed out that Schedule-IV of the Export Policy Order (EPO) prescribes minimum export prices only for surgical instruments; therefore, fixing value-addition norms for jewellery is ultra vires and beyond the MoC’s mandate. Moreover, no country — except Pakistan and India — imposes minimum export price or similar restrictions on gold jewellery exports.

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Comparing regional practices, the industry noted that India’s value-addition norms stand at 3 percent for plain jewellery and 6 percent for studded or embedded jewellery, whereas Pakistan’s corresponding rates are 6 percent, 8 percent, and 13 percent. As a result, Pakistan’s rates are higher by 37.5 percent and 46 percent, respectively, severely undermining the competitiveness of Pakistani exporters in international markets.

Globally, jewellery is sold on the basis of making charges per gram rather than as a percentage of gold prices, making Pakistan’s approach irrational and unjust, the letter stated. When SRO 760 was issued in 2013, the international gold price was around USD1,380 per ounce (USD44 per gram). Currently, gold prices have surged to over USD4,100 per ounce (USD132 per gram) — an increase of nearly 300 percent — while value-addition norms remain unchanged.

At current prices, a 13 percent value-addition requirement translates into making charges of about USD17 per gram, whereas exporters can fetch only USD4–5 per gram in international markets. This forces exporters to remit an additional USD13 per gram, which is commercially unviable.

“Due to the unfriendly business provisions of the SRO, jewellery exports are hovering around USD30–40 million, which is negligible compared to India’s exports. The already dismal export performance will further deteriorate as exporters are unable to sustain such high value-addition requirements,” Arif Patail said, urging immediate remedial measures to make the sector sustainable and growth-oriented.

The industry has called on the Ministry of Commerce to regulate exports without imposing conditions that render lawful business unviable. It emphasized that value-added requirements must be evidence-based and consistent with Pakistan’s commitments under the WTO and the Trade Facilitation Agreement, noting that arbitrary benchmarks violate the principles of proportionality and reasonableness under Pakistani administrative law.

The industry also raised multiple legal and policy concerns, including: (i) violation of provisions related to minimum export price under the Export Policy Order; (ii) breach of WTO principles of non-discrimination, transparency, and trade facilitation; (iii) infringement of constitutional rights under Articles 18 (freedom of trade), 25 (equality before law), and 4 (right to be dealt with in accordance with law); (iv) excessive use of delegated legislation beyond statutory mandate; and (v) encouragement of informal financial activity, contrary to FATF/AML/ATA compliance objectives.

The gold industry has requested the National Assembly Standing Committee on Commerce to hold a formal hearing on the issue, involving all relevant public and private stakeholders. It has proposed fixing value-addition norms on a per-gram basis as follows: (i) USD1.50 per gram for plain bangles and chains; (ii) USD2.00 per gram for other plain jewellery; and (iii) USD4.00 per gram for studded or embedded jewellery.

The Committee has also been urged to direct the Ministry of Commerce to conduct a fact-based review of SRO 760, amend it with realistic and internationally aligned value-addition norms, consult the jewellery industry, and remove all structural bottlenecks to make the policy business-friendly.

Copyright Business Recorder, 2025