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India’s diamond manufacturing sector surges on…

23 november 2020

Image credit: Kapu Gems

It’s almost business as usual here in India’s diamond cutting and polishing hub of Surat. The manufacturing sector is likely to buzz with activity after Diwali as nearly 200,000 migrant workers are expected to return to work. With orders reportedly pouring in from across the world, including the key markets of the United States of America and China, the manufacturers are hell-bent on completing the orders much before Christmas and New Year. This year, the Diwali holiday at Surat diamond units was cut down to fewer days, from a fortnight to a month traditionally, so that the trade can recover its business that has been lost due to the COVID-19-induced lockdown.

Surat itself houses about 7,000 rough diamond cutting and polishing units that employs nearly 650,000 people. Nearly 90% of the diamonds manufactured in the world are cut and polished in Surat. Of late, the industry performance is picking up despite being under lockdown due to the pandemic. India’s cut and polished diamond exports declined 19.60 per cent registering $ 1564 mn during Sept 2020 as against $ 1946 mn exported in Sept 2019. However, rough imports during Sept 2020 increased 16.18 per cent to $ 1347.30 mn as compared to $ 1159.63 mn imported during Sept 2019.

Colin Shah, chairman, Gem & Jewellery Export Promotion Council (GJEPC) expressed optimism saying: “Demand has revived, and the trade is getting good orders from the US, China, Gulf countries and some parts of Europe. There is good demand in India too. The worst is behind us hopefully. The workers are also returning to join their work as well.” However, the lockdown in Belgium, the world’s largest diamond trading centre battling the world's worst coronavirus outbreak by some measures is the major problem faced by the Indian industry.

Dinesh Navadiya, regional chairman (Gujarat), GJEPC, who is Surat-based said: “The units have some stocks of rough diamonds till Diwali. Hopefully, the Covid-19 situation in Belgium will improve, and post-Diwali we will be able to procure rough diamonds from the country to create enough stock to meet the holiday season demand. The industry needs rough diamonds as consumer demand in China and the US has already shown an upswing.”

The diamond manufacturing sector is facing certain issues that need rectification, especially in these challenging times. The diamond industry has on the whole been reeling with the effects of the implementation of GST and demonetization with several diamond polishers losing their jobs.

Though India does not have its diamond mines and therefore a natural advantage of rough diamonds, it has achieved the position of the largest manufacturer because of its proficiency in cutting and polishing rough diamonds. The Indian diamond trade has been asking the Government for an amendment in taxation provisions to allow the sale of rough diamonds in the Special Notified Zone (SNZ) in Mumbai; and exemption of two-per cent equalization levy on rough diamond sales. If the Central government takes a positive step, the cutting & polishing sector will benefit to a great extent. Miners could pay a ‘turnover tax’ not exceeding 0.16% which is the prevailing rate in Belgium. In 2019, India imported rough diamonds of around 157 mn carats for processing. India can sustain this position and further scale new heights.

Meanwhile, Diamond units in Surat are facing labour problems in that the diamond polishers recently are demanding factories to follow Labour Laws. The protesting workers claim that the polishers were being harassed by factory owners; and threatened to go on an indefinite strike after Diwali if their demands were not met.

The Gujarat Diamond Workers Union (GDWU) staged a ‘protest’ in Varachha area of Surat demanding implementation of labour laws and Factory Acts in the diamond factories of the state. Claiming that around 10 polishers across the state had committed suicide in the last few months, due to joblessness, leaders of the GDWU demanded that the state government also provide compensation to their families. The Union has also warned: “We have submitted a memorandum to the Surat district Collector with our demands. We are not going on a strike right now because Diwali vacations will start soon, and the polishers will go to their native villages. Once they return, we will continue our protest”.

On the other hand, the Government of India has been organizing awareness programmes for the diamond industry. The Ministry of Micro, Small and Medium Enterprises of the Government of India organised an awareness programme on Lean Manufacturing Competitiveness scheme at the Surat Diamond Association last week. Surat Diamond Association (SDA) president Rohit Mehta said the diamond manufacturing sector in Surat is well equipped with the latest technology. With technology changing rapidly, people associated with the industry should also upgrade their knowledge through continuous training.

For many years now, the cutting & polishing manufacturing sector in Surat has been luring the Mumbai diamond businessmen to relocate into Surat as it had all facilities required for business as well as the labour force. The Surat Special Economic Zone (SurSEZ) in Surat is especially tempting the Indian diamond exporters in Mumbai, as local laws and taxes do not apply in the SurSEZ. Besides, the well-equipped upcoming Surat Diamond Bourse is almost in the completion stage now.

With the markets opening worldwide after the COVID-19 lockdown, the gems and jewellery industry seems to be in recovery mode and exports have begun shipped to markets in the United States, China, Hong Kong, Europe and other countries.

And, it seems the lure of Surat is for real…as Jewellery manufacturers from Mumbai have been making a beeline to SurSEZ in Sachin area of the diamond city to set up shop or expand their business, thanks to the availability of labour and the diamond bourse coming up at Khajod area.

It is reported that Four diamond jewellery manufacturers have shifted to SurSEZ, Sachin, from Mumbai since February, despite the COVID -19 outbreak. According to officials, since April 2019, 22 new units started operations in the SurSEZ, of which 18 are diamond jewellery firms of Mumbai, the rest being from Surat. Local laws and taxes do not apply in the SEZ, favouring businesses. Sources at the SEZ said the unit owners get exemption on import duty on raw materials and other taxes on the condition that the final product is exported and cannot be sold locally. SurSEZ, spread on 150 acres of land at Sachin, has around 160 licenced units at present, and construction has been done on 85 per cent of the land.

According to reports, a diamond manufacturing businessman who has a unit at Mumbai Santacruz Electronics Export Processing Zone (SEEPZ), with a labour strength of around 300 skilled artisans working in a 7,000 square-feet factory, expanded the business to SurSEZ. The reason being low-cost labour is easily available in Surat and the cost of leasing land is also around 25 per cent less compared to his space in Mumbai. Another businessman from Mumbai, also expanded his business to Surat in February this year and manufactures gold and silver jewels studded with diamonds in SurSEZ, with many others getting ready to follow suit.

The under-construction diamond bourse at Khajod area in Surat is likely to be operational by next year and could offload some business from the Bharat Diamond Bourse in Mumbai’s Bandra Kurla Complex frequented by international buyers. Sources in the diamond industry said that many merchants from Surat and Mumbai have already booked offices at the upcoming diamond bourse.

With the markets opening worldwide after the COVID-19 lockdown, the gems and jewellery industry seems to be in recovery mode and exports have begun to markets in the United States, China, Hong Kong, Europe and other countries. This augurs well for the diamond manufacturing sector as demand for polished stones will increase.

The Indian diamond industry is optimistic about exports picking up after lockdown, as there are initial signs of recovery from markets in the US, China and Europe… and export orders have seen a steady rise over the past 4-5 months. The gems and jewellery export units are working in full swing and trade is getting back to normal recovery of exports. The industry is hopeful of restricting the downside of exports to over 20-25 per cent at the closure of the fiscal year, as compared to the previous year.

The Surat manufacturing sector is set to gain more importance in the coming years as the diamond industry leaders are elected to SGCCI (The Southern Gujarat Chamber Of Commerce and Industry). Dinesh Navadiya, who was the vice-president of SGCCI for 2019-20, and presently the Gujarat Region Chairman of Gems and Jewellery Export Promotion Council, has become president of SGCCI for 2020-21. In a first, leaders of diamond industry bodies were elected as the president and vice-president of the SGCCI.

An unconfirmed report says that about 70 diamond companies from Mumbai have shifted to Surat during this coronavirus pandemic. The Surat Diamond Bourse will be ready by the year 2022 and till then most of the Diamond companies will shift to Surat from Mumbai. This will change the position of the city across the world. Once the Diamond bourse is ready and the Diamond businesses shift totally to Surat then the city is going to progress by leaps and bounds. Right now, 8 out of 10 diamonds are manufactured in Surat, but all of the dealings and exports happen only from Mumbai. Moreover, the corporate offices of most of the Diamond companies are in Mumbai’s Bandra Kurla Complex and small units are set up in Borivali, Malad, Goregaon, Dahisar etc. and all the operations happen from there. But things are fast-changing and all of these big Diamond units and offices are being shifted to Surat. According to the Dinesh Navadiya about 4,500 offices have already been booked in the bourse.

In fact, this shifting was to happen about 2 years later, but due to the coronavirus pandemic, migration has already started. It is going to take two more years for the Surat diamond bourse to get completely ready and about 70 companies from Mumbai will completely shift to Surat. Some of them have already started to shift to the city. Mumbai traders eye greener pastures in Surat Diamond Bourse.’

"Over 100 small and medium traders have expressed their intention to shift to Surat. Many of them have already moved their operations here due to the coronavirus situation in Mumbai," said Dinesh Navadiya. According to reports, Surat Diamond Bourse will begin operations in Khajod from 2021. According to Navadiya, it will be a big relief for diamond traders who are struggling to pay huge rents in Mumbai's expensive complexes because of the lockdown-induced losses. "Many traders are shifting their base to Surat because rent, travel and other expenses are difficult to manage in Mumbai. Our profit margin isn't very high and the COVID-19 situation made it a lot worse," said diamond trader Shivam Navadiya who hails from Surat. "It made sense to return home to avoid extra expenses," he added. Again, there was recent unconfirmed news last week about the Surat Diamond Bourse that it will start by as soon as December 2020 and exports will increase multifold.  

A big supporting gesture by both the biggest miners in the diamond trade, ALROSA and De Beers have been more than helpful to the Indian rough diamond importers; and thereby supporting the diamond manufacturing sector in Surat as well as other smaller sectors in the country. Both miners extended the existing long term rough supply contracts by a quarter, thus easing the financial pressure on the importers and helping in the industry diluting the stocked up inventory in the Indian industry… in both rough and polished stones.

De Beers too is positive and has seen demand for rough diamonds continue to improve, with cutters and polishers increasing their purchases as retail orders came through ahead of the key holiday season, and in the eighth sales cycle of 2020, the miner saw provisional rough diamond sales value reach $467 mn. With the De Beers Group reporting steady demand for rough diamonds during its ninth sales cycle this year, the Surat cutting & polishing sector is set to grow further in the coming months.

During the pandemic, many have come forward to help in running the business more efficiently. Four engineers from Surat whose families have been in the business of diamond manufacturing and trading have developed a mobile application for small and medium scale businessmen dealing in diamonds and jewellery to sell their wares in India and abroad.

Currently, with many units already into cutting and polishing lab-grown diamonds as well, at Surat, diamonds manufacturing of both natural and LGDs will go on forever…

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished