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26 may 2014

On April 10, 2014, a ‘MoU’ was signed by Fyodor Andreev, President of ALROSA and Vipul Shah, Chairman of GJEPC, in Moscow. ALROSA and GJEPC agreed to exchange information on the development of the Indian and Russian diamond sectors, overviews of the diamond market, Indian and Russian diamond trade statistics, findings of the Indian diamond market research, to cooperate and exchange information on Kimberley Process issues and also to jointly work in ensuring segregation in the businesses of natural diamonds and diamond jewellery and synthetics. 

ALROSA Group of Russia, the world's largest producer of diamonds in terms of carats is engaged in exploration, production and sale of diamonds and the Gem & Jewellery Export Promotion Council of India (GJEPC) is an apex body of India’s gem and jewellery industry, involved in developing and promoting exports.

With this backdrop, Vipul Shah, who considers the ‘MoU’ as a historic moment, is positive about the future ventures between the two countries. On returning to Mumbai, he spoke to ‘Rough & Polished’, touching upon related topics including the crucial one of ‘direct rough supply ‘from ALROSA.

Some excerpts:

To begin with, can you please elaborate on the intricacies of the recent MoU between GJEPC and ALROSA? Why this MoU now and how does it help in the growth of the Indian diamond industry?

The MoU signed between GJEPC and ALROSA is a significant step towards greater direct diamond trade between the two countries. With this, there is a mutual understanding to exchange information pertaining to the development of the co-operation between Indian and Russian diamond sectors, including overviews of the diamond market situation, exchange of the Indian and Russian trade figures, and information on Indian diamond market research. All this is within the framework of implementation of the Kimberley Process Certification Scheme and we jointly seek to maintain separate sales of natural and synthetic diamonds and diamond jewellery.

Direct imports would bring benefits to both ALROSA as well as the Indian cutting industry and Indian diamond dealers. Streamlining overall trade procedures could also see increased Indian exports of polished diamonds to Russia.

In which area do you see more prospects for the Indian industry to enter the Russian market? Supplying finished goods or setting up manufacturing facilities there (if possible)?

Diamonds and coloured gemstones, studded jewellery have more prospects for the Indian industry in the Russian market.

As India has one of the largest manufacturing capabilities in gems and jewellery, supplying of finished goods has great potential.

Indian entrepreneurs may not open manufacturing facilities forthwith, but after a period of supply to Russian market of finished goods, they are likely to start manufacturing facilities also in Russia.

What was the equation between the Indian diamond industry and ALROSA until today with regard to ‘rough imports’? While some companies reportedly bid on ALROSA’s tenders on their own, how did Diamond India Limited (DIL) operate with ALROSA?

ALROSA has reported that it had nine sightholders in India and 16 sightholders of Indian origin in different parts of the world. The bid on ALROSA's tender is about 10% to 20% short term contracts as compared to the long term contracts that comprise of 80% to 90% of rough imports.

Were there further discussions in Moscow on ‘direct rough supply’ to India by ALROSA? Will a ‘long term contract’ for rough supply materialize with ALROSA in the near future?

Most of the rough diamonds produced in Russia are cut and polished in India. The direct imports of rough diamonds from Russia to India are steadily growing, with the fiscal 2013 figure standing at some $767 million. More direct supplies of rough diamonds to India could easily boost the current figure by $4 and $5 billion.

There are in total 78 sightholders, out of which 32 are Indian sightholders. Direct imports would bring benefits to both ALROSA as well as the Indian cutting industry, therefore, a long term contract for rough supply will definitely be advantageous to both India and ALROSA.

If a ‘long term contract’ with Metals and Minerals Trading Corporation of India (MMTC) and ALROSA comes into being as suggested by Commerce Minister Anand Sharma, will DIL, too, continue sourcing ‘rough’? How will this be worked out?

The state-owned Minerals and Metals Trading Corporation (MMTC) made a nodal Indian agency with a long-term contract with ALROSA will definitely help in the growth of direct supply of rough diamonds into India. 

However, ALROSA being one of the largest suppliers of rough diamonds in the world, we do not think there is any conflict if both DIL and MMTC are sourcing roughs from ALROSA. In fact, it would help more Indian players source rough diamonds on identical set of arrangements.

Aruna Gaitonde, Rough&Polished, India