Diamonds lose their Indian polish

World’s diamond polishing hub loses its shine as demand plummets

Hindustan Times

13 August 2019

The world’s diamond polishing hub, Surat, is staring at a potential crisis
as demand is lowest since 2008 and around 100,000 people have lost work
since December 2018, according to Surat Diamond Association.

Several industry leaders and a senior government functionary said the
current slowdown began in November 2018 when demand for diamond jewellery
went down, has gone from bad to worse on account of global factors, the
high price of rough diamonds, and a liquidity crunch on account of banks
not lending for a prolonged period.

The Surat diamond industry accounts for 80% of the world’s polished stones
with an annual turnover of about Rs 1 lakh crore and employees around
700,000 people, according to the association and Gujarat Diamond Workers
Union. “Ten years back, if the polished diamonds prices were down by 25%,
then that of rough stones was down by 50%. So the availability of raw
material at cheaper rates allowed Surat traders to make a comeback in some
time,” says Savji Dholakia, promoter of one of Surat’s biggest diamond
manufacturing and exporting units, Hari Krishna Exports.

“For the first time in the over five-decade history of this industry, the
prices of rough diamonds have remained inflated for almost a year. My
sense is that if there is no correction in the prices soon, the Surat
diamond industry may have to go through its toughest patch in which
factories having strong finances will survive,” Dholakia added.

Dinesh Navadia, chairman of the Gems and Jewellery Export Promotion
Council (GJEPC) said the United States-China trade war, and devaluation of
Yuan has further fuelled the crisis in recent weeks. “China exports over
42% diamonds polished by Surat, and it further exports jewellery to US. In
turn, the US accounts for 40% Chinese diamond jewellery. But prevailing
trade war between two superpowers has disturbed this equation, leading to
sluggish demand,’’ he said.

According to the GJEPC’s April-July report, the rough diamond import
compared to last year in the same period was down 28%. “From ~42,247 crore
in April-July 2018, import of rough diamond is down to ~31,266 crore this
year. Similarly, export of polished diamond has declined by 17%
year-on-year for the April-July period,” the report said.

Nitin Patel, deputy chief minister of Gujarat, admitted that the industry
was going through a rough patch and the government was trying to provide
all possible help. “We have several round of talks with the industry and
are providing whatever assistance we can,” he said. A Gujarat government
official privy with the discussions said that diamond traders want
exemption from import duty on gold and capital gains tax in addition to
easy mode of finance to tide over the current. “Most of the issues are
related to Central government,” he said.

The diamond traders say they are also suffering as banks have cut down on
lending in the current financial year because of rising non-performing
assets (NPAs). While the big factories have managed to stay afloat by
decreasing their production well below the capacity, the smaller players
have been hit hard, Navadia said.

“Nearly 30 % of the 4,000-odd small and medium factories operating in
Surat have gradually downed the shutters after the Diwali vacation last
year,” Bhavesh Tank, vice-president of the Gujarat Diamond Workers’ Union.
Workers, a majority of whom are from parched rural areas of Saurashtra,
have been finding it difficult to sustain their livelihoods. “Joblessness
so far has affected average performer. The big firms have been trying to
retain only highly skilled workers,’’ said Babu Gujarati, president of the
Surat Diamond Association (SDA).

Govind Adhiya, a 30-year-old diamond polisher, is ready to pack his bags
and go back to his hometown of Rajula in Saurashtra. The resident of
Varachha, a neighbourhood of small lanes and cramped bylanes for
polishers, has been without work for nearly two months and his future
doesn’t look any brighter.

“In 2008, during the time of global recession, I had just finished my
training in diamond polishing and found myself jobless. I had to go back
to my native home. This time it is a double whammy as now I also have a
family to support,” said Adhiya.

He was among 250 others employees of small diamond polishing factories,
who were first asked to go home on summer vacation and were never called
back to work. “Unexpectedly, they [factory owners] announced summer
vacation. And since I have not heard from by employer’’, said Rakesh
Patel, another worker at the diamond polishing unit in Surat.

Jignesh Chotai and several others who worked in two-shifts are now doing
only one shift. “In one shift also, there is not too much of work. I do
not know how I would pay school fees of my two kids if things don’t
improve,’’ Chotai said.

“About one lakh [100,000 of total 700,000 workers] have been rendered
jobless since last Diwali,’’ Tank said. “Most of them [who have lost jobs]
used to take up polishing work from small factories on contract basis.
Most of these factories have also closed down.” To prevent a repeat of the
2008 meltdown, Navadia said this time the big firms are trying to
distribute work among workers and are trying to minimise layoffs. “Firms
have also lowered the salaries to minimise job losses,” he said.