LOSING SHEEN: Diamond units reel under eco slowdown

"This was the worst Diwali after a severe slowdown of 2008. Even now we get very less orders. Generally, the Diwali vacation for the sector is 20 days. But this year the vacation began in October end and continued till first week of December during which close to 30 per cent units did not commence their operations. Those who had resumed are on the verge of shutting down," said Jitu Moradiya, a diamond polisher based out of Ahmedabad.

Ahmedabad is a smaller centre for polishing diamonds. The scenario is similar at larger centres like Surat and Mumbai, said industry players. Several key players also fear that the industry might face large-scale shut down of units if things do not improve this month.

Close to 95 per cent of polished diamonds is exported. The slowdown began gripping the sector from around July. Unable to withstand the pressure, close to 30 per cent units (smaller units) had shut down between Janmashtami and Diwali and close to four lakh workers lost jobs, said Moradiya.

The sector, with Rs two lakh crore worth of import and exports, employs close to 46 lakh people.

Severe volatility in Rupee in the international market is a major contributor to the slow down.

"Rough diamonds were bought when rupee was weak. Price of raw materials was also high. Now, rupee has strengthened and so the price of finished diamonds has fallen. Moreover, there is hardly any demand for polished diamonds in global market now," said Moradiya.

Hasmukh Tejani, a diamond polisher in Surat, said there was a hope that after Diwali there would be an uptick in demand in the global market as a result of upcoming Christmas festivities. However, the hope has turned futile. "There is a severe dip in demand. Moreover, the cost of rough diamonds had risen. By the time these are polished and returned, Rupee strengthened. So our margins shrank," said Tejani.

He estimates that close to 30 per cent of units in Surat that went on Diwali vacation did not reopen till about the first week of December, as there is no fresh demand.

"Viability of business shrunk because of market forces. Many have reopened factories to ensure that workers are not rendered jobless. It is very difficult to retain a worker once you lay him off a," said Mahesh Vanani, a Surat-based diamond broker.

HARD-HIT BY SLOW DOWN

• Rough diamonds are imported in Mumbai and Surat and are then sent to Ahmedabad, Surat or other smaller centres for polishing.
   
• The polished items are sent back to Surat and Mumbai. 
   
• The sector, with Rs two lakh crore worth of import and exports, employs close to 46 lakh people.
   
• Severe volatility in Rupee in the international market is a major contributor to the slow down.
   
• The industry leaders said that roll out of Goods and Services Tax (GST) has aggravated problems for the diamond sector.