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 in order 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 (Rs40-48 crore) of diamonds each month directly from Russia.
India buys around $8 billion worth of diamonds annually, almost all of which are exported after the dual process of polishing and cutting.
Most of the diamonds are bought directly from companies such as De Beers and Rio Tinto. Recently, De Beers said the outlook for the global economy is “encouraging” and will support demand for gems.
“Imports of diamond have started from Russia. There are two to three importers who are buying,” said Praveen Shankar Pandya, convenor for rough sourcing at the Gems and Jewellery Export Promotion Council (GJEPC).
“We are ready to buy up to $1 billion worth of diamonds annually from Russia,” he said, adding that the purchases were being made from state-owned Russian firms such as Alrosa and Gokhran.
Russia accounts for more than 20% 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.
This replaces a system of long-term export quotas that had made trade difficult.
India also abolished a 5% duty on imports of rough and polished diamonds in the 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.
Kothari also said that the Indian industry had formed a company called Diamonds India Ltd a year ago with the aim of buying directly from producing countries.
Industry officials said buying directly was cheaper by 4 to 5% 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.” Mehta said.
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. REUTERS