By Biman Mukherji/Reuters
New Delhi: India, the world’s largest diamond importer, has started buying diamonds directly from Russia and wants to source from other producing nations as well to secure long-term supplies and save on purchase costs.
Following a relaxation in Russian export rules earlier this year, Indian importers have been ordering about $10-12 million of diamonds each month directly from Russia.
India buys around $8 billion worth of diamonds annually, almost all of which are exported after polishing and cutting. Most of the diamonds are bought directly from companies such as De Beers and Rio Tinto.
“Imports of diamond have started from Russia. There are two to three importers who are buying,” Praveen Shankar Pandya, convenor for rough sourcing at the Gems and Jewellery Export Promotion Council (GJEPC), told Reuters.
“We are ready to buy up to $1 billion worth of diamonds annually from Russia,” he said, adding the purchases were being made from state-owned Russian firms such as Alrosa and Gokhran.
Russia accounts for more than 20 percent of global diamond production, most of which is mined in Siberia.
Developing direct sales from Russia was important to the industry as De Beers, the main supplier of diamonds to India, has agreed that it will phase out purchases from Alrosa by 2009.
In January, Russia allowed unlimited exports of platinum group metals, uncut diamonds and other precious metals and ores, subject to a licence from the economy ministry, replacing a system of long-term export quotas that had made trade difficult.
India also abolished a 5 percent duty on imports of rough and polished diamonds in the government budget in February.
“The contracts with Russia are our first. We are also trying with African countries like Botswana, Angola and South Africa,” Sanjay Kothari, chairman of GJEPC, said.
He said that the Indian industry had formed a company called Diamonds India Limited a year ago with the aim of buying directly from producing countries. Industry officials said buying directly was cheaper by 4 to 5 percent than buying from a trading house.
Bakul R. Mehta, a convenor of the GJEPC, said buying from producers would also help secure long-term supplies.
An Indian government decision to allow advance payment for buying of diamonds had helped the purchases from Russia.
“That is how it has taken off. We have to now make it grow.” One hurdle confronting the Indian industry is that South Africa is considering a tax on diamond exports to encourage the local processing industry, although the GJEPC thought that would not be too disruptive.
“It is not only the cost, but the marketing ability is also important. It has taken us 30 to 40 years to develop the market,” Kothari said.
Mehta said the move to direct sourcing and the scrapping of the import duty would help India realise its goal of becoming a global trading centre for jewellery and gems.
“It will start happening in a year or so. I am hopeful that India will become a gem and jewellery hub,” he said.