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De Beers, the world’ premier diamond explorer and supplier, says it might set up a trading office in this country — if the Government of India (GOI) adds to recent incentives for foreign investment in the segment with a tax-free move.
Well over 90 per cent of all rough diamonds (‘roughs’ in trade parlance) in the world are cut and polished in India.
Currently, De Beers serves Indian customers through trading offices in Dubai and Antwerp. Goods sold in a specially notified zone come in the form of consignments. In transporting unsold quantities back to Dubai, Antwerp or London, the value of goods is added to the turnover, on which income tax is levied in India. Therefore, global rough diamond miners have been apprehensive on opening offices in India.
“There are several positive developments by the new Indian government directly benefiting the diamond sector,” said Philippe Mellier, chief executive, De Beers Group, on the heels of the GOI announcement of a new Foreign Trade Policy, with measures for the sector. “So, we are hopeful that the government would come out with a tax-free business initiative, similar to Dubai and Hong Kong, where we can bring rough diamonds for trading and the unsold quantity back. Once that happens, we will open our trading office in India.”
The FTP announced the setting up a Special Notified Zone where global miners, graders and testing laboratories can bring in roughs for trading and polished ones for grading, inscription and certification.
“This is a major policy shift by the government, where the Gems and Jewellery Export Promotion Council (GJEPC) will become a nodal agency to compile data from global miners and laboratories. Now, small and medium size diamond processors would not require to travel to Dubai and Antwerp for participating in tenders. They will get roughs locally. The FTP will drive service exports to India from other processing centres like Dubai and Antwerp,” said Sabyasachi Roy, executive director of the Council.
Recently, De Beers chose Surat, the centre of India’s own diamond processing trade, to set up an International Institute of Diamond Grading and Research. This is the second such laboratory, after the first was set up years ago in Antwerp. The investment would be $10 million (about Rs 63 crore).
GJEPC had been pressing the central government to declare a large office at the Bharat Diamond Bourse in the Bandra-Kurla Complex of this city as a ‘Special Notified Zone’, to enable global miners such as De Beers to bring roughs, tax-free, for auctioning in India. Import and export into such a zone would be duty-free.
When asked about setting up a facility in the upcoming GIFT City, close to Gandhinagar in Gujarat, Millier said, “Wherever tax-free trade is allowed, we will set up a trading office.”
Major global trading centres such as in Dubai, Singapore and Belgium have already extended such a facility, to grab opportunities in services exports. De Beers contributes around 42 per cent of India’s supply of roughs. GJEPC had urged the government to make taxation conducive for diamond mining companies abroad, to make India a global hub.
The import of roughs into India was 11.5 per cent lower in the first 11 months of the just-concluded financial year, 2014-15, at 134.19 million carats, as against 151.67 million carats in the corresponding period a year before.
Miller said the diamond jewellery market had slowed in the first quarter (January–March) of calendar year 2015. “We hope the market will recover in the second quarter (April–June), with revival in wedding season demand in India and recovery in US retail sales,” he said.
