The Indian diamond industry
may soon get rough diamonds directly from African
countries. Many African countries have sounded
out the government on selling roughs directly
to India. The country has already emerged as a
big player in the finished product category -
cutting and polishing imported roughs and re-exporting
it as solitaires and jewelleries. As part of a
deal between the Indian government and African
countries, a few Indian companies may set up manufacturing
facilities in countries like South Africa, Congo
and Botswana. While Indian companies will provide
employments to African nationals, rough diamonds
from the mines in those countries will be routed
directly to Indian ports as part of a proposed
agreement.
If the deals take place, local
diamond traders are bound to benefit from the
move. The diamonds will become cheaper after value
addition in India. This will dilute the role of
intermediaries like Diamond Trading Corporation
(DTC), if not eliminate their presence in the
market. DTC controls 80% of global trade in rough
diamonds.
Apart from the possibility that the value will
shrink, a large public limited company is also
on the anvil. Currently, the diamond industry
is disintegrated and absence of a large conglomerate
is standing in the way of India gaining a hold
over the global market.
The other major initiative
of the government, Bharat Diamonds, a diamond
exchange, is expected to commence trading in May
‘06.
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role of intermediaries in the diamond
trade will reduce, once the proposed
structure comes through. Not only
Indian companies, but a few foreign
companies are also expected to pick
up equity stakes. The intended large
public limited company will purchase
rough diamonds from various small
mines across the globe and sell them
to Indian manufacturers. Earlier,
these small mines used to sell to
the manufacturers through a host of
intermediaries. The mines will gain,
as the marketing process will be simplified.
The company will also emerge as a
central selling point for diamonds,
thus helping the manufacturers.
The
government of India is encouraging
the Gems and Jewellery Export Promotion
Council to get the process going in
the current fiscal year. Significantly,
a large capital base of the company
will enable it to invest in foreign
mines.
This
move comes as no surprise since the
government is eyeing the gems and
jewellery sector as a dominant foreign
exchange earner for the country. The
international trade is growing at
more than 10% a year. In April ’05,
India imported 645mn carets of rough
diamond - a growth of 3% over the
same period last year. Export of value
added roughs, cut and polished, registered
a growth of 15.5% in Apr ’05.
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