Tem­po­rary pain, re­gains its shine

Mint Asia ST - - Cover - BMY AUL IK PAT HAK

The coun­try’s di­a­mond cap­i­tal Su­rat con­tin­ues to sparkle a year af­ter the gov­ern­ment’s de­ci­sion to ban high­value ban­knotes.

De­mon­e­ti­za­tion did deal a tem­po­rary set­back to some small and medium units in the city, where more than 85% of the world’s rough di­a­monds are pro­cessed. How­ever, in­dus­try ex­perts say Su­rat quickly re­gained lost ground. Im­port of rough di­a­monds in 2016-17 was at $17.08 bil­lion, against $14.04 bil­lion in 2015-16, shows data from the Gems and Jew­ellery Ex­port Pro­mo­tion Coun­cil (GJEPC), sup­ported by the Union com­merce min­istry. In fact, the im­ports in terms of value have been the high­est in the last 10 years, ac­cord­ing GJEPC. Ex­ports of cut and pol­ished di­a­monds in 2016-17 have also been higher— at $22.78 bil­lion—against $20.66 bil­lion a year ago.

One of the main rea­sons Su­rat’s di­a­mond in­dus­try sur­vived the dis­rup­tion is that about 95% of its clients are in­ter­na­tional; hence, cash­less trans­ac­tions made things much eas­ier for them, said Laljib­hai Pa­tel, chair­man of Dhar­manan­dan Di­a­monds Pvt. Ltd. The com­pany, with a turnover of about Rs6,000 crore, em­ploys close to 7,000 peo­ple.

Pa­tel, who shot to fame af­ter he bought a mono­grammed suit which Prime Min­is­ter Naren­dra Modi wore dur­ing his meet­ing with US Pres­i­dent Barack Obama in 2015 at an auc­tion, said his com­pany’s in­come in­creased af­ter de­mon­e­ti­za­tion as many il­le­gal businesses were forced to close down and their work was passed on to re­puted firms like his.

About 35-40% of the rough di­a­monds pro­cessed and pol­ished in Su­rat are im­ported by clients and sighthold­ers of global di­a­mond min­ers in­clud­ing De Beers, Al­rosa and Rio Tinto. The rest of the roughs are im­ported di­rectly from An­twerp, Dubai and African na­tions.

The 8 Novem­ber 2016 an­nounce­ment by Prime Min­is­ter Modi came at a time when the Su­rat di­a­mond in­dus­try was closed for Di­wali. The in­dus­try, which was fac­ing a slow­down at that time due to sub­dued over­seas de­mand, ex­tended the hol­i­days by about 15 days due to an acute cash crunch. Su­rat is home to about 4,500 di­a­mond pro­cess­ing units that em­ploy about 500,000 work­ers.

“The small units faced is­sues of pay­ments to work­ers due to cash crunch. This was also due to the fact that there was no proper in­fra­struc­ture backup for cash­less trans­ac­tions and the worst af­fected were the di­a­mond units in ru­ral ar­eas of Saurash­tra,” ac­cord­ing to Di­nesh Nava­dia, regional chair­man, GJEPC.

While about a hun­dred-odd firms hold over 50% of the mar­ket share and their businesses re­mained largely un­af­fected, small units deal­ing in cash for pay­ment to work­ers had run i nt o trou­ble.

Ac­cord­ing to Nava­dia, while many small units could not make timely pay­ments to di­a­mond work­ers (also called rat­nakalakars), there was no pro­duc­tion loss. On the brighter side, he said that many small firms that were ear­lier tak­ing or­ders on oth­ers’ books now started their own com­pa­nies.

He said the di­a­mond in­dus­try has since been af­fected by the Goods and Ser­vices Tax (GST). The main is­sue was the 3% GST on busi­ness to busi­ness trade.

Di­a­mond baron Savjib­hai Dho­lakia, known for giv­ing out cars and flats to em­ploy­ees as Di­wali bonuses, said there was some ini­tial im­pact in the over­all di­a­mond mar­ket due to de­mon­e­ti­za­tion.

“For about a cou­ple of months, there was some im­pact in the mar­ket, but over­all busi­ness has been very good. Our com­pany’s busi­ness has gone up since de­mon­e­ti­za­tion as dig­i­tal trans­ac­tions have made things smoother for us,” said Dho­lakia, chair­man of Hare Kr­ishna Ex­ports.

A di­a­mond worker earns Rs10,000-50,000 a month, and at least 80% of this work­force is em­ployed by the big com­pa­nies.

“About three thou­sand to four thou­sand work­ers did get af­fected by de­mon­e­ti­za­tion in the first two or three months. Some of them, who wanted to be paid in cash, even turned to other pro­fes­sions. But that is all a thing of the past now. The good thing is that all rat­nakalakars to­day get PF (prov­i­dent fund) and other benefits like a reg­u­lar em­ployee which many were not get­ting ear­lier,” said Jay­sukh Ga­jera, pres­i­dent of Rat­nakalakar Sangh, a union of di­a­mond work­ers in Su­rat.

Mean­while, Su­rat’s scat­tered and un­or­ga­nized di­a­mond in­dus­try is plan­ning to move into a com­mon ad­dress, as con­struc­tion work on the Su­rat Di­a­mond Bourse (SDB), an in­ter­na­tional di­a­mond ex­change, is un­der­way.

SDB is a com­pany floated by di­a­mond barons who plan to in­vest Rs1.25 tril­lion to es­tab­lish it in the next four years, ac­cord­ing to the SDB web­site. Af­ter com­mis­sion­ing, SDB would gen­er­ate ad­di­tional busi­ness worth Rs90,000 crore an­nu­ally, it claims.

To be spread across 100 acres with 15 mil­lion square feet (sq. ft) of built-up area, SDB will house 10,000 of­fices for na­tional and in­ter­na­tional traders. The pur­pose of the project is to draw buy­ers from across the world to Su­rat to plan and ex­e­cute busi­ness trans­ac­tions at one place. SDB is set to ri­val Bharat Di­a­mond Bourse, lo­cated in the Ban­dra-kurla Com­plex, Mum­bai, spread over 20 acres with a to­tal con­structed area of 2 mil­lion square feet and 2,500 of­fices of var­i­ous sizes.

ANIRUDDHA CHOWDHURY/MINT

Scrap­ing through: One of the main rea­sons Su­rat’s di­a­mond in­dus­try sur­vived the dis­rup­tion is that about 95% of its clients are in­ter­na­tional.

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