Mumbai: A confluence of negative factors in the Indian diamond industry has led to a massive decline in imports of rough diamonds into the country, which is expected to continue to decline, according to The Times of India. The Gem & Jewellery Export Promotion Council (GJEPC) data show a 24 percent decline in value terms, 13 percent in volume terms, for April – May 2015, compared with the same period in 2014.
Part of the reason for the decline could be the conscious decision by many diamond manufacturers in India to limit their rough purchases, or stop buying altogether, in protest at what is seen by many in the industry as unreasonably high rough prices. At a recent meeting of industry leaders to discuss the crisis and debate whether to implement a voluntary embargo on rough imports, the decision was taken to defer that option for the time being, though the industry umbrella organizations did encourage their members to practise “self-discipline in import and purchase of rough diamonds based on their inventory and demand for polished diamonds.”
Vipul Shah, Chairman of the GJEPC, says, “It has been decided not to stop imports completely, but leave it to individual companies. Each unit would follow a strict production discipline and as such imports would come down automatically,” he said, adding “the diamond polishing units have already cut down on production by about 30 per cent in the past few months,” as quoted by Business Standard.
The news source reports that Surat diamantaires claim demand for diamonds is down globally, and there is a liquidity crunch in the market. Kirti Shah, a Surat-based diamond merchant, is quoted by the news source as saying, “At least 50 units in Surat have shut down temporarily, and about 300-400 units have cut production partially. The situation is grim with retail demand down by at least 40 per cent in the last few months.” Most of the Surat production units have reportedly curtailed their daily production hours and are closing down for two or three days each week.
Alongside the high price of rough and the shrinking or non-existent profit margins on the resultant polished, the Indian diamond industry is also being hit by a series of large and frequent defaults.
The Surat Diamond Association (SDA) has reportedly said that at least 82 diamond firms had defaulted on payments worth Rs2,500 crore (US$394.4 million) over the last two and a half years, with most of the defaults being on payments for rough diamond stock purchased on credit, according to a report by The Times of India.
SDA president Dinesh Navadia says, “These were genuine defaults of Rs 2,500 crore in two-and-and-a-half-years. However, rumours of Rs 1,500 crore default in the last three months have taken diamantaires by surprise. Most of the merchants and manufacturers have stopped doing deals in the markets fearing more defaults,” he added, as quoted by the news source.
A large portion of the defaults have reportedly been settled with the mutual consent of defaulters and credits. Navadia explained that in many instances the defaulters have been offering their lands in payment to settle their debts to creditors, reports The Times of India.
