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India asks Russia for more direct diamond sales

Wants better long-term arrangement for importing roughs mined there, bypassing middle tiers Russian processors protest

Dilip Kumar Jha  |  Mumbai 

The Indian government has asked its Russian counterpart for an alternative arrangement to buy diamonds mined in that country.

Currently, Indian processors (about 95 per cent of all diamonds mined in the world, known as ‘roughs’ before these are processed) import rough diamonds worth around $900 million annually through Alrosa, the Russian government agency. This is a fifth of Russia’s annual output. Alrosa also supplies a fair amount of roughs to Gokhran, the Russian government depository of and stones, for sales to local manufacturing units — these come in due course to India through traders in other regions, including those in Antwerp, Israel or Botswana.

“Every 14 out of 15 rough diamonds come to India for processing. Why not supply directly? We have been pitching for higher rough imports directly, to process the stone faster. Also, we have been seeking direct rough import opportunities the world over,” said Rajiv Jain, chairman of the Gems & Jewellery Export Promotion Council (GJEPC).

In a recent meeting in New Delhi with Russia’s minister of economic development, E Nabiullina, commerce and industry minister Anand Sharma asked her to help devise a long-term formula for importing roughs directly from Gokhran. Russia accounts for approximately 21 per cent of global diamond production, most of which is concentrated in some of the most inaccessible and inhospitable regions in the world.

Sharma asked Nabiullina to push for an early conclusion of a long-term supply agreement with Alrosa Co Ltd. The government is also interested in a mechanism enabling participation of its own Minerals and Metals Trading Corporation and for Hindustan Diamond Company, a joint venture between the ministry of commerce and industry and De Beers Centenary Mauritius Ltd. Similarly, Sharma requested that a mechanism for sale of diamonds by Gokhran be institutionalised.

However, in an open letter to GJEPC, the Association of Diamond Manufacturers of Russia expressed indignation at Sharma’s request to formalise a mechanism for the sale of diamonds to India by Gokhran. “We understand whose interests are being lobbied by minister Anand Sharma. We understand the pro-active stand of our colleagues, but, gentlemen, Russia also has its manufacturing industry and it is impossible to neglect its interests; it looks at least unethical,” says the document, signed by Maxim Shkadov, chairman of the Association’s council, who is also CEO of Smolensk-based Kristall, Russia's largest diamond manufacturer.

India was Russia’s second largest importer of roughs in 2011. The three major importers of Russian diamonds last year were Belgium with 18.85 million carats ($2.5 billion), India with 5.958 million carats ($591 million) and Israel with 3.468 million carats ($384 million).

Praveen Shankar Pandya, chairman, Diamond India Ltd, said, “The Russian association must seek a response from their own minister, instead of talking to Indian trade bodies.” Vasant Mehta, vice-president of the International Diamond Manufacturers’ Association, said the Russian indignation would have no impact on India’s diamond procurement plan and overall trade in precious stones.

Gokhran purchased approximately $924 million worth of rough diamonds from Alrosa in 2009 and is reportedly planning to buy $872 million this year.

First Published: Tue, April 10 2012. 00:02 IST