Diamond workers hit by US slowdown

"Small and medium-sized diamond units have reduced the workers' wages by 25-30 per cent in the last three months. The main reason is reduced exports to the US, which have gone down substantially during the last one year," said C P Vanani, president, Surat Diamond Association.

"The processors have been forced to reduce the prices as US sub-primemortgage crisis has affected Surat diamond exports badly. Many of the processor-exporters are not getting paid by their US clients following a cash crunch there," said Govind Dholakiya, chairman, Ramakrishna Exports, a Surat-based diamond processing and export firm.

Rising cost of rough diamonds is also one of the reasons behind the wage cut.

"Diamond Trading Co has dropped six Surat-based diamond companies from its sight holders' list this year. This has resulted in high prices of rough diamonds and the production cost has gone up," Vanani said.

Moreover, demand from the US, which used to be the largest importer of Indian cut and polished diamonds, is shrinking every day following a recession there, Dholakiya said.

Out of India's total finished diamond exports, 50 per cent go to the US, but in 2007-08 this market shrunk to 24 per cent. As per The Gem & Jewellery Export Promotion Council, in 2007-08 (Apr-Mar), Hong Kong accounted for 35 per cent of total Indian exports of finished diamonds.

The US stood second with 24 per cent and the UAE held the third position. India's total cut and polished diamond exports in 2007-08 stood at $14.2 billion, against $10.9 billion in 2006-07.

The country's gem and jewellery industry's estimated annual turnover is around Rs 700 billion.

Agitations and negotiations

A meeting was held recently between SDA officials and diamond processors where the latter agreed to increase the wages of workers by 20 per cent. However, most of the processors did not comply with this decision, Vanani said. The diamond processors may also go for job cuts soon.

"It is likely that around 100,000-150,000 workers may lose their jobs in the coming two-three months if the situation remains unchanged," a Surat-based diamond processor and exporter said.

However, SDA officials are hopeful that they will be able to work out some solution through negotiations.

"The industry is passing through a tough time. We are in negotiations with diamond unit owners and workers and hope that the processors comply with the association's decision to revise the wages," Vanani said.