Diamond city in distress

The Russia-Ukraine war that has triggered global sanctions has upset the trade in Surat, affecting both demand and supply. It has resulted in factories reducing working hours and wages to craftsmen, taking the shine off a job that once guaranteed a steady income

Updated - June 30, 2023 08:13 pm IST

Published - June 30, 2023 02:48 am IST

A scene from a factory in Surat where raw diamonds are cut and polished. 

A scene from a factory in Surat where raw diamonds are cut and polished.  | Photo Credit: VIJAY SONEJI

For Ramesh Bhadani, 36, and his peers working as craftsmen — and it is mostly men — in Surat’s diamond processing factories, vacation meant Deepavali, when workers went back to their villages in Saurashtra every year. However, this year, in May, he and many others were forced to take a two-week summer ‘vacation’, really a euphemism for unpaid leave.

Surat, an industrial and trading centre, where the East Indian Company set up its first factory in the early 17th century, is today the hub of the diamond processing industry. “Now, we have Saturday-Sunday holidays, which never happened earlier, when only Sunday was off,” says Mr. Bhadani, standing outside the factory that employs him in Varachha, an 8 sq. km area where most processing units are. He adds, “Reduced hours of working means reduced salary.”

Over the last three months, 10 diamond workers have taken their lives in the city. The Surat Diamond Workers’ Union says it was economic stress that pushed them to the drastic measure, a claim rejected by factory owners and trade bodies like the Surat Diamond Association.The union responds saying they have a list of names.

Since November 2022, factories have implemented staggered and reduced working hours, even days, to deal with the crisis in both the supply and demand of diamonds, triggered by the Russia-Ukraine war.

It is in Surat that nine in 10 of the world’s raw diamonds are cut and polished. But now, many craftsmen have begun to look for jobs in bigger companies — those that employ as many as 5,000 and have working conditions akin to a large factory with uniforms and hot meals. Their second choice is the textile industry, another sector the city is known for. Those in the smallest workshops that may engage as few as 15 people, are looking at a future as construction labourers.

Employing about a million people across approximately 5,000 factories with 7.5 lakh diamond workers, these units are now in distress. In what was a USD 2.43 billion global diamond market in 2022, it is poised to grow to USD 3.41 billion by 2027, according to The Business Research Company that offers market research services. Yet, exact numbers of manpower and units in Surat are difficult to come by, because much of the sector is unorganised.

As per Gems and Jewellery Export Promotion Council (GJEPC), a trade body in Surat, May 2023 saw the overall gross export of cut and polished diamonds at USD 1,723.17 million (₹14,190.28 crore). This is a decline of 17.52% from the same period last year. Just the cut-and-polish industry is worth ₹1.73 lakh crore, out of which nearly 80% is based in Surat.

Locked from both ends

Surat’s diamond processing units source one-third of their raw material (rough diamonds) from Russia, a major diamond producer. Craftsmen, traders, and factory owners in this bustling town talk of the Russia-Ukraine war and the geopolitical developments, including sanctions by countries, triggered by it. Its impact has severely disrupted the industry and its ecosystem.

“I have been dealing with diamonds for six decades, the first six years as a worker and almost 55 years as a factory owner and trader. I have never seen such a protracted recession in this sector,” says a leading diamond tycoon and founder of Shree Ram Krishna Exports, a known name that supplies cut and polished diamonds to global jewellery giants in America and Europe, like Cartier and Louis Vuitton. The 59-year-old business, now housed in a building that looks more corporate office than factory, invests in precision instruments that cost up to ₹80 crore.

According to industry insiders, Surat imports its rough diamonds from Russia, Canada, Australia, South Africa, Botswana, and other countries.After cutting and polishing in the processing units, more than 50% of the finished product is exported to the U.S., the world’s largest diamond consumer. The remaining go to geographies like China, Europe, and the Middle East.

“Besides war, the crisis has been aggravated by the recession in the U.S., where luxury shopping has declined. Secondly, in the last few months, U.S. and European countries have become so particular that they ask about the origin of the finished (cut and polished) diamonds and decline diamonds that have originated in Russia,” said diamond industry veteran Dinesh Navadia, in his early 60s, who formerly helmed the Surat Diamond Association and the Gujarat region of the GJEPC. The gap in the supply chain is being passed on to the workers who toil to bring out the shine in the single-element carbon form.

In May this year, at the G-7 Summit in Japan, leaders of the member countries vowed to restrict trade in “diamonds mined, processed, or produced in Russia” to cut off a crucial financial source for Russia. A joint statement stated that efforts would be made to curb the Russian diamond trade, worth US$4.5 billion a year, including by using high-tech methods of tracing the origin of diamonds.No one in Surat is certain of what these high-tech methods are.

After the summit, British Prime Minister Rishi Sunak announced a ban on Russian diamond imports. After the war began, countries led by the U.S., New Zealand, and Bahamas cut off trade with the State-owned Russian diamond miner Alrosa, a firm that supplies the bulk of raw material to Surat’s processing factories.

Traders in Surat worry that even if the Indian government intervenes and facilitates the import of rough diamonds, restoring the supply chain, “There are no buyers for the finished or processed products from the West, and the crisis will continue,” says Mr. Navadia.

Industry insiders say not much payment has been processed to Russia in the last several months for the diamond trade, despite the Indian government in November last year allowing nine banks here to operate Special Rupee Vostro Accounts(accounts that domestic banks hold for foreign banks to facilitate business). The sanctions imposed by the West have removed Russia’s central bank and two major banks from the global SWIFT payment system that facilitates smooth, rapid money transactions across the world.

According to local payers and the GJEPC, trade settlement has become difficult, and this has led to supply disruptions. Not many companies are making use of the Vostro accounts.

“Yes, there is a decline in exports of finished products and that will continue until the war and sanctions continue,” Mr. Navadia said, bluntly.The worst effect is the workforce, whose livelihood depends on the factories in Surat.

A diamond sourced from South Africa at ShreeRam Krishna Exports. 

A diamond sourced from South Africa at ShreeRam Krishna Exports.  | Photo Credit: VIJAY SONEJI

Workers of Surat unite

“I blame the greed of diamond tycoons and the apathy of the administration,” Bhavesh Tank, 32, vice president of the Surat Diamond Workers’ Union, says. Mr. Tank, a loan consultant, working out of a 200 sq. ft office in Katargam, another locality known for its diamond processing units.

Labour, mostly from the Patel community in south Gujarat, but also from the Jain sect in the northern part of the State, is trained, and then subject to strict security measures through their working hours. They are the unseen, unheard force behind the industry.

“The war began in 2022, but more than 50% of the factories have not hiked wages for the last several years. During the COVID-19 pandemic, factories were abruptly shut for months and workers were not paid anything,” he says, adding that because all work happens in the ‘informal’ space, workers don’t get benefits like Provident Fund (PF), gratuity, or insurance. “Last week, more than 500 workers of Laxmi Diamonds owned by Gajera brothers were on strike demanding a hike in wages. The management gave the commitment, but nothing has been done so far,” he says, adding that it’s the same in most factories.

Many owners of small facilities are not financially strong enough to withstand the onslaught of loss, first triggered by COVID-19. “Thousands of workers have been fired from such units, which are mostly invisible,” Mr. Tank says.

June 17 is a day Sohanlal Dave (name changed to protect identity),68, will always remember. It was the day his 25-year-old son allegedly took his life. Sitting in their one-bedroom rented house in Amroli, Mr. Dave says that his son was troubled by a debt. The family refuses to talk about the factory he was working at or about his salary because their other son also works in the same unit. His mother says, “He’s gone. What’s the point of talking about it now?” Her voice chokes as she wipes the tears from his eyes.

If you are distressed, please call the suicide helpline Aasra at 9820466726

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