Task force recommends Tufs in diamond sector

Suggestions include global miners be allowed to bring rough diamonds to India for sale and pay tax at the prevailing rate

The highly-successful technology upgradation fund scheme (Tufs) of the textile sector may be replicated in the labour-intensive diamond processing industry. A commerce ministry task force, headed by Director General of Foreign Trade Anup K Pujari, has recommended Tufs for the diamond processing sector with a minimum budgetary corpus of Rs 200 crore.

The task force, set up to make India an 'international trading hub for rough diamonds', has made a number of suggestions to revive the diamond processing industry, which is struggling with an acute shortage of skilled labourers and a drastic fall in exports.

One suggestion is that global miners such as De Beers and Rio Tinto should be allowed to bring rough diamonds to India to sell it here and pay tax at the prevailing rate, while they should be allowed to take back the unsold quantity duty-free. (ZIG ZAG PATH)

"Currently, global miners take the entire quantity of rough diamonds directly to major hubs like Belgium, assort them and sell to global processors, including Indians, to avoid taxes. This not only raises diamond prices unnecessarily due to involvement of middlemen but also delays the supply of goods to the Indian processing centres," said Sanjay Kothari, former chairman of the Gems & Jewellery Export Promotion Council (GJEPC).

Since global miners seek tax avoidance norm by the government, they have not yet opened a full-fledged trading office in India, which claims to process 11 out of 13 rough diamonds mined across the world.

The task force has also recommended the setting up of a major convention centre to engage global diamond traders in India, apart from allowing duty-free re-import quota for cut and polished diamonds to the tune of 15 per cent of the previous three years' average exports. Currently, about 23 types of documents are required to execute orders; the task force suggests these be reduced 12.

After assessing these recommendations, the commerce ministry has forwarded these to the finance ministry for consideration. The industry feels the suggestions may be included in the Foreign Trade Policy, to be announced by the end of this month.

"Once these recommendations are accepted, both rough and polished diamonds would be available at cheaper rate for Indian processors and consumers," said Shrikant Zaveri, chairman of Tribhovandas Bhimji Zaveri Ltd.

The recommendations assume significance in the wake of falling exports of gems and jewellery from India, which added the government's concerns of burgeoning current account deficit. Average gems and jewellery exports witnessed a decline of 4.34 per cent at Rs 16,985.29 crore in 2012 from Rs 17,756.66 crore in the previous year.

Introduced first in 1999, Tufs catalysed investments worth Rs 2,08,000 crore during its 11-year life until 2010, which helped revive the ailing textile industry. According to a Crisil report, Tufs has helped increase productivity, cut costs, reduce waste and improve quality across the value chain.

"The Indian diamond processing industry is in dire straits for government support, as China has been going very aggressively to acquire stakes in mining companies globally. If the trend continues, Indian diamond processors would have to go to China for rough procurement in a few years," said Sabyasachi Ray, executive director, GJEPC.

With world-class craftsmanship supported by experienced workers, India has an advantage over any other country in diamond polishing.

According to Kothari, the industry needs a Budgetary support of around Rs 1,200 crore to prevent the business going to China.