rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Diamond dream shatters in Surat

Diamond dream shatters in Surat

Last updated on: January 21, 2013 14:27 IST

Diamond dream shatters in Surat

     Next

Next
Rutam Vora

Taking a cue from Amul, the hugely-successful milk collection and distribution co-operative, 1,500 diamond polishers of Surat had got together in August 2010 to form Surat Rough Diamond Sourcing (India) Ltd.

The objective of this company was to source rough diamonds for its members directly from miners. That would cut out the traders and help the polishers improve their profit margins.

The trade in diamonds was dominated by multinational corporations like DTC, De Beers, BHP Billiton and Rio Tinto.

Click NEXT to read more...



Image: Employees work inside the polishing department of a diamond processing unit at Surat, in Gujarat.
Photographs: Amit Dave/Reuters.

     Next

Diamond dream shatters in Surat

Prev     Next
Prev

Next

They supplied almost all the rough diamonds to Surat for polishing. More than two years later, the monopoly of these multinational corporations remains intact because Surat Rough Diamond Sourcing (India) Ltd hasn't delivered the desired results.

According to industry estimates, 60 to 70 per cent of the rough diamonds mined across the world come to Surat for polishing. Out of every 10 diamonds sold in the world, as many as seven are polished in Surat.

With an annual turnover in excess to Rs 80,000 crore, the diamond industry in this city of Gujarat houses over 2,500 units which generate direct employment for about 400,000 people. Most of these units are small or medium in size. These have limited funds to source rough diamonds.

As a result, their bargaining strength vis-a-vis the multinationals is very weak. Hence, it was believed that a consortium of such units would provide stronger financial capacity and negotiation power.

Click NEXT to read more...


Image: A supervisor checks the shape of a polished diamond inside the diamond processing unit at Surat, in Gujarat.
Photographs: Amit Dave/Reuters.

Prev     Next

Diamond dream shatters in Surat

Prev     Next
Prev

Next

"The supply of rough diamonds is about 20 per cent less than the demand. Also, global diamond production is slowing down, leading to a situation of scarcity. Suppliers take advantage of this (situation) and raise prices of rough diamonds. This proves to be a deterrent for the growth of small and medium units in the diamond polishing business," says Pravin Nanavati, former president of the Surat Diamond Association and a diamond expert.

This is where Surat Rough Diamond Sourcing (India) Ltd was meant to fit in. The company would secure rough diamonds from authorised mining companies and also directly from mines. Distribution to the local traders would happen through tenders or auctions. Though the company was free to sell rough diamonds to any company, registered members in Surat and other parts of India were to get preference.

"The successful operation of this company would have benefited in securing the supply of rough diamonds. Small traders could've directly had access to raw material without going to Dubai, Belgium or Africa," says CP Vanani, diamond merchant and a member of the Surat Diamond Association.

Click NEXT to read more...



Image: Employees work inside the polishing department of a diamond processing unit at Surat, in Gujarat.
Photographs: Amit Dave/Reuters.

Prev     Next

Diamond dream shatters in Surat

Prev     Next
Prev

Next

But the company could not make much headway, putting a question mark on this unique initiative. Initially, efforts were made to secure rough diamonds from mines in Zimbabwe and Russia.

A delegation of representatives from Surat had visited the two countries to discuss the price, quality and quantity of diamonds and also the terms and conditions for payments. The first auction was conducted in July 2011, in which rough diamonds worth Rs 86 crore were sold.

A second auction was held in February 2012, but this time the sale was still lower — just Rs 15 crore. In between, on January 21, 2012, Surat Rough Diamond Sourcing (India) Ltd conducted its first online auction of rough diamonds.

The company put about 38 rough diamonds in lots of various size and quality on auction. However, this too did not attract much participation as many traders were unaware of the e-auction. 

Click NEXT to read more...


Image: An employee checks the shape of a diamond through a magnifying glass, inside the polishing department of a diamond processing unit at Surat.
Photographs: Amit Dave/Reuters.

Prev     Next

Diamond dream shatters in Surat

Prev     Next
Prev

Next

"For the past two years, hardly any trade has taken place under this company. We heard of small auctions by Surat Rough Diamond Sourcing (India) Ltd about a year back. But nothing significant has come up from this much talked about initiative," says a diamond trader at the Varachha diamond market in Surat.

The quantum of rough diamonds sourced and sold by Surat Rough Diamond Sourcing (India) Ltd in the two auctions is negligible compared to the industry's imports of rough diamonds.

To put it in perspective, in March 2012 alone, India's rough diamond imports stood at around Rs 7,340 crore for 14.9 million carats. For 2011-12, rough diamond imports were recorded at Rs 72,160 crore for 131.4 million carats, data compiled by the Gems and Jewellery Export Promotion Council shows.

A lackluster management coupled with legal hurdles abroad is what industry sources attribute Surat Rough Diamond Sourcing (India) Ltd's slack performance to.

Click NEXT to read more...


Image: Model Gauhar Khan displays hand-crafted diamond jewellery.
Photographs: Punit Paranjpe/Reuters

Prev     Next

Diamond dream shatters in Surat

Prev     Next
Prev

Next

"The management seems to be slow in taking decisions on securing rough diamonds. Also, Surat Rough Diamond Sourcing (India) Ltd has not served its purpose mainly because of the legal hurdles it had to face in Zimbabwe. Otherwise, in the two years of its existence, the industry would have benefited a lot by cheaper imports of rough diamonds," says Nanavati.

There were other issues also. In November 2012, Surat Rough Diamond Sourcing (India) Ltd came under criticism for its alleged sourcing of rough diamonds from the Marange fields in Zimbabwe.

Partnership Africa Canada, a Canadian non-profit organisation, had alleged that the deal for exclusive access to the Marange diamonds in 2010 was signed despite the Kimberley Process (it certifies that these aren't blood diamonds) ban being in force.



Image: An employee sifts diamonds at a diamond cutting and polishing factory in Surat.
Photographs: Arko Datta/Reuters.

Prev     Next

Diamond dream shatters in Surat

Prev     Next
Prev

Next

There were also allegations of conflict of interest: a senior functionary of Surat Rough Diamond Sourcing (India) Ltd was also a "sight holder" (some kind of an agent) in Schupstraat, Belgium, for a large multinational trader of rough diamonds. Ashit Mehta, the founder chairman of SRDSIL could not be reached for comment despite repeated attempts.

As a result, Surat Rough Diamond Sourcing (India) Ltd has not been successful in conducting further auctions. When asked if the company is still operational and would source rough diamonds again in the days to come, the spokesperson informed there are no auctions planned at present.

"Currently, there is not much role to play for the company. We operate mainly when there is a shortage of rough diamonds. At present, we believe there is ample availability of rough diamonds, diamantaires from Surat can secure their goods on their own," says Nirav Jogani, the spokesperson of Surat Rough Diamond Sourcing (India) Ltd.

Click NEXT to read more...


Image: Employees work at a diamond cutting and polishing factory in Surat.
Photographs: Arko Datta/Reuters.

Prev     Next

Diamond dream shatters in Surat

Prev     Next
Prev

Next

"There has been a delay in large-scale imports of rough diamonds by the company. It was inspired by Amul's co-operative model; hence it could have benefited a large number of small traders. But somehow that doesn't seem to have happened," says Nanu Vanani, a member of the Gujarat cabinet and veteran diamond leader.

Surat Rough Diamond Sourcing (India) Ltd's indifferent performance couldn't have come at a worse time. Though Jogani says supply is ample, others say the global production of rough diamonds has almost come to a halt.

"Many multinational corporations are taking advantage of this situation and are unduly raising prices. This has started hurting the profitability of diamond units in Surat," an industry source says. Estimates suggest that since 2010 rough diamond prices have increased 30-40 per cent, while availability has become a huge concern for the polishing units.

Click NEXT to read more...



Image: An employee inspects diamonds while grading them.
Photographs: Reuters.

Prev     Next

Diamond dream shatters in Surat

Prev     Next
Prev

Next

This has escalated the cost for the small players who cannot pass on the increase in cost to their customers (largely on account of the global economic slowdown) and are forced to survive on the shrinking profit margins.

In such a situation, Surat Rough Diamond Sourcing (India) Ltd's inability to secure rough diamonds has proved to be a disappointment for the units in the world's largest diamond polishing hub.

Surat Rough Diamond Sourcing (India) Ltd's inactivity has begun to hurt. Vanani says it has become more and more difficult for small units to access the dwindling global reserves. There are (only) about 30 diamond mines operating around the world today.

Click NEXT to read more...


Image: Rough diamonds are seen on the desk of a trader in his office in Santa Elena de Uairen in the south of Venezuela.
Photographs: Jorge Silva/Reuters.

Prev     Next

Diamond dream shatters in Surat

Prev     More
Prev

More

The most important discoveries are located in three regions: Southern Africa, Siberia and western Canada. (In fact, taking note of Gujarat's prominence in the diamond trade globally, Jason Kenney, the Canadian minister for citizenship, immigration and multiculturalism, expressed his nation's readiness to extend trade relations with Gujarat to rough diamonds at the recent Vibrant Gujarat Summit at Gandhinagar.)

According to industry estimate, the global demand for rough diamonds is expected to grow at an average annual rate of 6.6 per cent to nearly $23 billion (approximately Rs 124,200) crore by 2020.

Unfortunately, Surat Rough Diamond Sourcing (India) Ltd is an incomplete dream of the diamond polishing units in Surat.


Image: A diamond cutter inspects a rough stone in his work place in Santa Elena de Uairen in the south of Venezuela.
Photographs: Jorge Silva/Reuters.

Prev     More
Source: