Looking for a brighter spot

The industry feels a big impediment to its growth could be the requirement of a PAN card for any transaction exceeding Rs.1 lakh.

India has created a niche for itself and occupies a pride of place as being the centre for ‘cut and polished’ diamonds in the world with nine out of every ten diamonds in the world being ‘cut and polished’ in India. File photo

India’s diamond processing industry is in a way among the pioneers of the ‘Make in India’ theme, having embraced it decades ago. Despite a slowdown in the global diamond industry, India has the potential to increase its consumption. And, global diamond giants are not only eyeing India for its processing capability but its huge market.

India has created a niche for itself and occupies a pride of place as being the centre for ‘cut and polished’ diamonds in the world with nine out of every ten diamonds in the world being ‘cut and polished’ in India.

Global diamond giants are not only eyeing India for its processing capability but its huge market.
Nine out of every ten diamonds in the world being ‘cut and polished’ in India.
A dozen leading Indian diamond processors tied up with the world’s largest supplier of rough diamond, Alrosa of Russia, in December 2014.

Speaking at a recent event, Philippe Millier, CEO of leading miner, De Beers, said that while the U.S. had a 42 per cent share of the global diamond market and China around 16 per cent, India, at a mere eight per cent, was the size of the Middle East market. “It has the potential to be 10-12 per cent soon given the government support and initiatives.”

According to Anoop Mehta, President, Bharat Diamond Bourse, “with lower margins, inventories are down and some de-stocking is taking place. There is also some consolidation at the retail end in the U.S. In India, too, there could be some consolidation setting in at some point. Anyway, the April-July season is slack.”

Mr. Millier felt that despite the continuing slowdown in global demand in the first quarter of the calendar, there were hopes of a demand revival in the second-half of the year with the Indian wedding season and a revival in the U.S. sales.

“ The introduction of a presumptive or turnover tax will bring India on par with peer manufacturing centres such as Thailand, Israel and Belgium. - Pankaj Parikh, Vice-Chairman, Gem & Jewellery Export Promotion Council ”

In the backdrop of a difficult environment for the industry, there have been positive developments for the Indian industry. A dozen leading Indian diamond processors tied up with the world’s largest supplier of rough diamond, Alrosa of Russia, in December 2014.  Accordingly, Alrosa would supply Indian companies around $700 million worth of roughs per annum for a period of three years.

Besides, De Beers, which is serving its Indian customers through its trading office in Dubai and Antwerp, has decided to set up a rough diamond trading office in India. It already invested $10 million to set up a grading facility in Surat.

On the policy front though, some niggling issues remain. “The introduction of a presumptive or turnover tax will bring India on par with peer manufacturing centres such as Thailand, Israel and Belgium,” said Pankaj Parikh, Vice-Chairman, Gem & Jewellery Export Promotion Council (GJEPC).

The industry, however, feels a big impediment to its growth could be the requirement of a PAN card for any transaction exceeding Rs.1 lakh. “It would impact most industries but the diamond and jewellery industry in particular is being significantly impacted,” Ashok Minawala, a director and former chairman, All India Gem & Jewellery Traders Federation (AIGJF), said.

Special notified zone at Bharat Diamond Bourse:

In response to the industry’s need to set up Special Notified Zones (SNZ) for trading of rough diamonds, the government had earlier accepted the proposal. India’s first SNZ for diamonds will come up in Bharat Diamond Bourse (BDB) in Mumbai. Set up as a joint venture between BDB and GJEPC, it proposes to conduct weekly auctions of roughs. Goods sold in a SNZ come in consignments, and miners can take back unsold quantity without any levy of tax.Hitherto, when sending unsold consignments back to Dubai or Antwerp, the value of the goods was added to the turnover on which income tax was levied. “Based on our discussions with the government, we hope it will come up with a tax-free environment similar to Dubai or Hong Kong so we can bring in roughs for trading and take the unsold quantity back,” Mr. Mellier, CEO, De Beers, said.BDB has already earmarked 4,000 square feet for the zone which will include 12 viewing rooms and a strong room to store the diamonds. “The SNZ will come up by end-June or early July,” said Mr. Mehta. “All the leading miners have evinced keen interest, and we have sorted out most of the procedures and details,” he added.