Jewellers increase import of cut and polished diamonds

The industry has started losing luster due to restrictions imposed by the government on gold imports

The gems and jewellery processing industry in India, which claims to be the largest of its kind in the world with   90 per cent of global rough diamond production being cut and polished here, has started losing its lustre due to restrictions imposed by the government on gold imports.

Instead of purchasing rough diamonds for processing in India, jewellery manufacturers and retailers now focus more on direct import of cut and polished diamonds. Consequently, the focus has gradually been shifted from core manufacturing with skilled artisans earlier to trading raw materials to making studded jewellery.

Data compiled by the apex trade body, Gems and Jewellery Export Promotion Council (GJEPC), under the aegis of the ministry of commerce, prove just that. After a  55 per cent decline in the last financial year, import of cut and polished diamond doubled in the first four months of the current financial year. Against that, import of rough diamond jumped just 34.9 per cent in the period under consideration.

“Miners have to cut rough diamond prices as Indian processors are currently incurring losses as demand for processing rough diamond in domestic and global markets remains very poor,” said Vipul Shah, chairman, GJEPC.

Supporting that was the restrictions on import of gold as announced by the Reserve Bank of India (RBI)—first on July 22 and then on August 14—making thereby the import of raw material complex. The customs department has not issued any follow-up notification resulting in creating more confusion than clarity. Consequently, gold import into India has virtually come to a standstill resulting in a shortage of raw material. “This is posing a threat of cancellation in jewellery export orders,” said Pankaj Parekh, vice-chairman, GJEPC. Data compiled by GJEPC showed import of cut and polished diamonds jumped 104 per cent in rupee term to Rs 12,473 crore in April-July, compared with Rs 6,118 crore in the corresponding period last year.

Import of rough diamonds has increased just 34.9 per cent to Rs 37,514 crore in the first four months of the current financial year, compared with Rs 57,807 crore in the corresponding period last year.

Strict measures taken by RBI to restrict gold import has yielded desired result with the precious metal’s arrivals in the country having declined by 50 per cent to Rs 9,674 crore between April and July 2013 versus Rs 19,304 crore in the corresponding period last year.

Until last year, import was strictly in favour of rough diamond through both sight-holding and participating in open auctions. Rough diamond import shot up 11.9 per cent to Rs 80,810 crore in 2012-13 against Rs 72,222 crore in the year-ago period. In contrast, import of cut and polished diamonds declined 55.7 per cent to Rs 30,309 crore in 2012-13 against Rs 68,356 crore the year before. “Involvement of many agencies with the absence of clear thought process and policy in place, has made import of gold cumbersome,” said Mehul Choksi, chairman and managing director of Gitanjali Gems.

Jewellery exports, meanwhile, continued to decline. In the April-July period this year, exports of gems and jewellery fell 11.28 per cent to Rs 62,311.7 crore from Rs 70,231.9 crore a year earlier.

The lack of raw materials has rendered may processing units reduce their cutting and polishing activities leaving thereby thousands of skilled workers jobless. If the trend continues, jewellery processing units would feel shifting of Malaysia and Hong Kong as safe haven where no such restrictions are currently in place.