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Sparkle and fade

The payment for labour on a piece of diamond has been reduced from Rs 30 a few years ago to just Rs 20 now, writes Rathin Das.
By Rathin Das | Hindustan Times
UPDATED ON JUL 16, 2008 08:50 PM IST

Kanjibhai Sagar, a migrant from Jamnagar district in Gujarat is facing difficult times. He has seen his earnings decline from Rs 7,000 a month in 2005 to Rs 5,000 today. He works in India’s most thriving spot for the diamond trade: Surat. But things are hardly sparkling these days. The slump has forced more than 100,000 workers to return to Saurashtra in the last two years. Kanjibhai may no longer be able to afford to live with his family in Surat either.

The present crisis in the industry is likely to deepen, with a global decline in the mining of rough diamonds, says Pravin Nanavati, former President of the South Gujarat Chamber of Commerce and Industry, a diamond trader himself. He reckons that there won’t be enough roughs (uncut, unpolished diamonds) for Gujarat’s one million-odd workers in the next few years.

Gujarat boasts of handling seven out of every ten diamonds traded globally. The recent diamond workers’ agitation that spilled over on to the streets of Surat is just one of the manifestations of the state’s troubled diamond trade. India’s diamond industry broadly relies on procuring rough diamonds from abroad, which are exported back after cutting and polishing. Trouble for the industry began a few years ago when the supply of roughs was restricted by the Diamond Trading Corporation (DTC) — popularly known by the brandname De Beers. The DTC has a near monopoly on the global trade in diamonds. In 2006-07, India imported $8.8 billion worth of rough diamonds and exported $10.9 billion of polished gems worldwide. But according to consultancy firm KMPG, India’s share of diamond polishing will go down from 57 per cent today to 49 per cent by 2015. Though the restriction in roughs has led to a spiralling increase in their price (by 5-10 per cent per month), finished diamond exports from India have failed to fetch a corresponding higher price in the international markets.

The cost of rough diamonds is 80 per cent of the price of the finished product. Increased raw material costs, coupled with a languishing selling price of finished diamonds, have led to shrinking profit margins for traders long used to extravagant lifestyles afforded by a roaring business.

Then there’s the extremely low-cost labour hired for cutting and polishing. In the face of rising cost prices, unit owners are choosing the easier option of reducing the wage rates of workers who cut and polish the diamonds in 12-hour shifts with an hour’s lunch break. The payment for labour on a piece of diamond has been reduced from Rs 30 a few years ago to just Rs 20 now. Workers are no longer willing to carry the burden of rising costs while their bosses continue to squeeze out rising profits.

Those in the diamond business see no future in continuing to export finished diamonds at low margins. They suggest value addition instead: jewellery for export, as “only Indian craftsmen can do such intricate designs with small pieces”. Since currently jewellery comprises only 2 per cent of India’s Rs 80,000 crore gem and diamond exports, an increase in this sector can create jobs for the troubled diamond workers. Till then, however, the lustre will continue to fade.

Rathin Das is Hindustan Times’ Gujarat correspondent.

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