Diamond processors cry foul over SEZs

Urge revoking of trading licences for units in these zones after data show steep rise in import of finished products

Originally promoted as manufacturing hubs, dedicated jewellery special economic zones (SEZs) across the country have turned out to be major trading centres for cutting and polishing diamonds, posing a threat to the traditional diamond processing industry. Contending there are undue incentives enjoyed by factory owners in the SEZs, the Gems & Jewellery Export Promotion Council (GJEPC) has urged state governments to withdraw trading licences from the SEZs.

Data compiled by the GJEPC show trading activities in India’s two large SEZs in this regard, at Mumbai (SEEPZ) and Surat, have increased significantly in the first 10 months of the current financial year. Import of cut and polished diamonds has risen 38 per cent in rupee terms in the Mumbai SEZ and in dollar terms by 32.3 per cent.

Import of cut and polished diamonds in the Mumbai SEZ has increased since the state government withdrew two per cent octroi last October. There are currently 10-12 SEZs dedicated to the jewellery sector across the country, of which Mumbai and Surat are the large ones.

Rising import of polished diamonds is a threat to the domestic cutting and polishing industry, employing  a million people directly and indirectly. Since polished diamonds require no further value addition, the purpose of promoting SEZs as a manufacturing hubs is often misused, is the argument. The government has promoted these SEZs by offering a number of sops such as on octroi, sales tax and value added tax, to promote the region in question as manufacturing hubs.

Over the years, India has emerged as a major processing region, cutting 11 of every 13 rough diamonds produced across the world. Now, however, many large corporations based in the Mumbai and Surat SEZs have started importing cut and polished diamonds, especially from Antwerp and Dubai. “Hence, we urge the government to revoke trading licences from manufacturing units in the SEZs,” said Sanjay Kothari, vice-chairman, GJEPC.

Meanwhile, import of rough diamonds, a barometer of decline in manufacturing activity, plunged in the April 2011–January 2012 period to 103.8 million carats from 129.9 million carats in the corresponding period of the previous year. In January 2012, too, overall import of rough diamonds fell to 11.6 million carats as against 12.4 million carats in the corresponding period.

“This indicates that jewellery manufacturers are inclined towards polished diamonds. This poses a threat for the domestic processing industry,” Kothari added.

A majority of large Indian jewellers have set up processing units in other countries. They import rough diamonds for direct use.
 

BLINDING SHEEN Value of imports of polished diamonds
	April 2010-January 2011		April 2011-January 2012
	Rs crore	$mn	Rs crore	$mn
SEEPZ – SEZ (Mum)	738.73	162.13	1021.76	214.49
Surat (SEZ + DTA)	48086.75	10536.46	21522.46	4607.70
Total	48824.73	10698.59	21544.22	4822.19
Rough imports*	71793.70	15743.99	99739.44	21059.47
* Import of rough diamond and other raw materials Source : Gems & Jewellery Export Promotion Council

Meanwhile, GJEPC has also urged the government to allow import of rough diamonds on consignment basis instead of  value basis. Additionally, global mining majors like De Beers, Rio Tinto and Al Rosa should be allowed to take back unsold rough diamonds duty-free, and to also conduct auctions in India so that buyers need not go abroad for procuring roughs, it has said.

Currently, Indian buyers import rough diamonds by participating in auctions and purchases from the open market. Once, import of roughs through a consignment basis is allowed, Indian processors would get big relief from existing hassles, Kothari added.