India seeks to secure direct supplies of rough diamonds

MUMBAI — India is trying to convince mining nations to sell it rough diamonds direct to ensure smooth supplies to its processing industry, which dominates the global market.

By (Reuters)

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Published: Sun 17 Jul 2005, 10:33 AM

Last updated: Thu 2 Apr 2015, 4:41 PM

The world’s top cutting and polishing centre — 11 out of every 12 diamonds in jewellery worldwide are processed in India — buys most of its rough diamonds from global trading firms and dealers in centres such as Antwerp in Belgium.

Bakul Mehta, chairman of India’s Gem and Jewellery Export Promotion Council said smaller processing units face problems in sourcing uncut diamonds as demand grows faster than output.

“It’s not a situation of willing buyers and willing sellers. There are only willing buyers,” Mehta said.

Global demand for raw diamonds is growing by 3 per cent a year, while production is rising by just 0.8 per cent, Mehta said. These are routed through other countries before reaching India and are therefore more expensive as well as taking time.

India’s gem and jewellery sector employs 1.3 million people and accounts for 14 per cent of India’s $80 billion of annual exports. Its share in the world polished diamond market is 92 per cent by pieces, and 55 per cent by value.

India bought rough diamonds worth $7.6 billion in the year to March 2005, while exports stood at $11.2 billion.

The Diamond Trading Company (DTC), the marketing arm of South African giant De Beers, controls 55 per cent of the global rough diamond market and dominates supply in India.

India has only 32 “sight holders” — dealers allowed to buy direct from the DTC — forcing thousands of smaller players to look for other sources.

“The Indian market is really booming. Obviously, every company is trying to cope with the demand,” said Cherie Tandon Saldanha, marketing director (India) of the DTC.

SUPPLY CONSTRAINTS

The pressure on Indian buyers is set to grow partly because output is nearing an end at Rio Tinto’s Argyle open pit.

The Australian mine produces between a third and a half of all the world’s small diamonds, some the size of a grain of sand, and India’s industry has flourished partly on its output.

Rio Tinto, a major global producers, said in May it would decide by the end of the year whether to build an underground extension at Argyle, once production was exhausted in 2008.

Even if the mine remained open, output would fall, it said.

This is a concern for the industry as India’s domestic production is negligible. Some companies have shown interest in exploration, but it would take years to yield results.

“We need to set up a distribution pattern so that small and medium enterprises get consistent supply,” an official with a diamond processing and trading company said.

The industry is sending a delegation to Russia this month to explore a link with miners as part of efforts to establish direct supplies of rough stones. India is looking at sourcing raw diamonds worth about $50 million a year from Russia.

The Gem and Jewellery Export Promotion Council has sent similar delegations in the past to Africa and Australia, and the country gets small amounts of rough diamonds from miners in Ghana, officials said. The council has invited foreign miners to open offices in India, but they are hesitant.

“It’s easier for miners to go to Antwerp and Dubai to sell. The perception is that there are hassles in coming to India,” said Sanjay Kothari, a veteran in the industry, referring to cumbersome customs procedures, poor facilities and local duties.

“Ultimately everything is coming here but they don’t want to come directly. Middlemen are there. That’s what we are trying to remove but there has been little success so far,” said Kothari, who owns a diamond processing company and exports jewellery.

GLOBAL TRADING HUB

Industry officials said India should emerge as a global trading hub by facilitating free trade of raw and finished diamonds, offering sound financing facilities, creating the right infrastructure and simplifying procedures.

They say the industry should also spread to other parts of the country from Surat in the western state of Gujarat and Bombay, India’s financial capital.

Some reports say China is hiring Indian artisans to boost its diamond processing industry, which they say could create a shortage of skilled people in the local market in future.



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