Gujarat elections: Diamond traders angry with BJP over GST but wary of backing Congress

In the run-up to the Gujarat elections, Surat’s diamond traders say their Rs 1.5 lakh crore business had already been derailed by what they describe as the twin blows of demonetisation and the GST.

assembly elections Updated: Nov 16, 2017 08:03 IST
Shailesh Gaikwad
Shailesh Gaikwad
Surat, Hindustan Times
Gujarat elections,Gujarat elections 2017,Assembly elections
Congress vice-president Rahul Gandhi during his visit to a textiles factory in Surat.(PTI FILE)

When Prime Minister Narendra Modi launched the ambitious Mumbai-Ahmedabad bullet train project in September, it was supposed to usher in a boom for Surat’s diamond traders. The train, which will halve journey time between the two cities, was expected to be a great help for the hundreds of traders in Gujarat who travel regularly between Surat and Mumbai.

But if diamond traders are to be believed, their Rs 1.5 lakh crore business had already been derailed by what they describe as the twin blows of demonetisation and teething issues with the Goods and Services Tax (GST). Many say they are far more concerned about taxes and related problems than the reduced travel time.

“We process the diamonds here while trading happens in Mumbai. If we are sending diamonds to Mumbai – even within the company – we have to pay 3% GST. Then there is the tedious process of filing returns. This has become a headache for us,” said Dinesh Navadiya, diamond merchant and state chairman of the Gem and Jewellery Export Promotion Council.

This discontent has put them on the radar of both the Bharatiya Janata Party (BJP), which has traditionally been popular among traders, and the Congress, which plans to milk the discontent for electoral success after being out of power for 22 years.

Surat’s diamond processing industry handles about 90% of the nationwide business in the sector and employs 2.5 million people across the state. The industry is divided between 75-80 major firms on the one hand and small and medium businessmen on the other. Smaller traders say they suffered more than the bigger houses, whose businesses are export-oriented where cash is not a big factor.

“Notebandi (demonetisation) did affect small traders like me. Since we were dealing mostly in cash — whether buying rough diamonds or paying our workers — we faced trouble. We were just coming out of it when GST happened,” said a trader who runs a small processing unit in Surat and didn’t want to be named.

Diamond traders protested, though on a smaller scale than their counterparts in the textile industry.

Many of the 4,500 diamond processing units as well as about 10,000 merchants and brokers in Surat’s Varachha, Mahidarpura and Katargram shut shops on June 17, objecting to the levying of 3% tax on polished diamond, 5% on labour and 0.25% on rough diamonds.

  • Gujarati diamond cuttersemigrating from east Africa established the industry in 1901 and by 1970s Surat diamond cutters began exporting the material. Three quarters of the world’s diamonds are cut and polished in Surat, according to the district collectorate.
  • According to the Gems and Jewellery Export Promotion Council (GJEPC), theindustry in Gujarat imported diamonds worth Rs1 lakh crore last year and exported processed ones worth Rs 1,48,000 crore.
  • Across the state, some 2.5 million people are directly or indirectly dependent on the diamond industry
  • Post-GST, the business has gone down by 18% to 20%, says the GJEPC
  • Now, Mumbai is the trading hub and Surat is the processing hub for diamond merchants. The industry is building adiamond bourse in Surat to start the trade there as well.

This discontentment has spread from Surat to adjoining Navasari city as well as Bhavnagar, Palanpur and Amreli – where thousands depend on the trade. “About 30% traders are badly affected. The effect is more seen in Saurashtra where it is more like a small scale industry,” said Pravin Nanvati, a trader and former president of Surat Diamond Association.

The business has gone down by 18% to 20%, claimed Navadiya. For example, Diwali incentives given out this time were modest compared to the lavish presents such as apartments, cars and scooters that made headlines in previous years.

Congress sensed an opportunity

Party vice president Rahul Gandhi visited diamond traders on November 8 — on the first anniversary of note ban — and later wooed them at a public meeting in Varachha, considered a stronghold of Patidars who comprise a majority of traders and can influence the outcome in some 60 of 182 assembly seats.

Not to be outdone, BJP, too, deputed railway minister Piyush Goyal and other top leaders to talk to the textile and diamond traders. Party chief Amit Shah too met them.

While the traders are angry with the BJP, they are wary of shifting their support, trusting it for fostering “a friendly business environment”.

“The BJP government created a secured atmosphere here. There have been no criminal elements troubling the diamond traders, Even the infrastructure in Surat is developed to cater to our needs,” said Hitesh Mehta of P.Hitesh and Co, a diamond firm.

Other businessmen say they have been on cordial terms with local BJP leaders for many years, a relationship that paved the way for the diamond industry to flourish in the city. They don’t want to risk any disruption.

But resentment with the BJP is still simmering. Navadiya admitted to being a Vishwa Hindu Parishad supporter but found the GST arrangement to be unjust.

“For Tata’s plant, the Gujarat government spent Rs 35,000 crore and got jobs for 2000. Our diamond industry is giving jobs to 25 lakh people without any government support. Why the government needs to impose GST at 3% in an unjust way on us?” he asked.

First Published: Nov 16, 2017 07:52 IST