Diamontaires go slow on imports as Re weakens

Imports get costly as rupee touches lowest level against US dollar

Surat-based diamontaires are going slow on fresh purchases of rough diamonds as rupee has touched lowest level ever at Rs 54.56 a dollar on Thursday making the imports of the stone costlier.

Industry insiders maintained that uncertain currency movements has prompted diamond polishing units to stop making inventories of rough diamonds for their future consumption.

"Diamontaires operating in domestic market are the most affected due to sharp fall in rupee. Those who bought rough diamonds in January this year, have their payments due now after the 120-days credit cycle. This means they would have to shell out about Rs 3 per dollar more for their purchases made in January," said Dinesh Navadia, president, Surat Diamond Association (SDA).

On January 17, 2012 rupee quoted at Rs 51.71 a dollar, which has increased to Rs 54.57 a dollar on Thursday, May 17, 2012. The rupee has fallen by over 6 per cent in a quarter, making it the worst performing currency in the Asian region.

"Things are difficult for small diamond units, while for the large ones the impact will be set off between export and import. However, we do not see much impact on prices of diamonds due to weak rupee," said Agam Sanghvi, director at Sanghvi Exports, one of the leading diamond exporting companies.

According to industry insiders, such situation has led to costly imports thereby leading to curtail fresh buying of rough diamonds amid uncertain currency situation.

"Things are uncertain for rupee movement over the next 2-3 months. Hence, most of the diamond players have stopped fresh purchases of imported rough diamonds. They are clearing their stocks first, to avoid further loss on currency side," said Kishor Ranpari, owner of a diamond polishing unit at Surat.

Costly dollar would make polished diamonds costly thereby affecting the sales. "Sales could be affected by about 10 per cent if sold in rupee. So most of the diamontaires are in a wait-and-watch mode," said Navadia.

Surat has about 3,500 cutting and polishing units employing more than 400,000 workers.

According to data provided by Gem and Jewellery Export Promotion Council (GJEPC) data, in the current financial year till January, India imported cut and polished diamonds worth US $ 12.9 billion (approx. Rs 70,298 crore).

Meanwhile, the price of rough diamonds are likely to shoot up further in the second half of the current year as a report from the Kimberly Process Certification Scheme (KPCS), estimated about 20 per cent fall in the global diamond output.

Last year, the production of rough diamonds worldwide has fallen by approximately 20 per cent at 120 million carats, the report stated.