The Hindu Business Line : India bets on direct sourcing of diamonds

Issues
Rough diamond producing countries no long want to be source of raw material supply.
Indian trade trying to promote country as a diamond trading hub.
Investment in mines seen as a way out but industry is seeking transparency in policies.

Mumbai April 27 Rough diamond producers want to develop cutting polishing skills in order to enjoy the benefits of value-addition, but traditional diamond jewellery manufacturers such as India want rough diamonds to be sourced directly from the mines, and cut out intermediaries.

The difficulty, however, is that rough diamond producing countries no longer want to be mere sources of raw material supplies. They are looking at establishing institutions for value-addition through cutting and polishing.

Creating employment

Towards this end, Indian skills are much sought after. India is the largest traditional diamond processing centre. The activity helps create huge employment opportunities too, something that African mining countries are seriously seeking.

The bargain for India still remains in the direct sourcing of rough diamonds from these mining countries to bypass trading centres like Antwerp.

Eventually, the Indian diamond fraternity seeks to promote India as a diamond trading hub.

"While we are open to investment in mining and exploration of diamonds (currently there is a moratorium on grant of licence for three years), we seek to achieve employment, local skill transfer and insight into the downstream dynamics of the diamond industry," said Mr P.H.K. Kedikilwe, Minister of Minerals, Energy and Water Resources of Botswana, speaking at a conference.

Trade apprehensive

But the trade fraternity here is apprehensive of the transparency of the scheme expounded by the representatives of various African Governments.

"We need to be assured of our share if Indian companies invest in mining and exploration activities," said Mr Vasant Mehta, Vice-Chairman of the Gem and Jewellery Export Promotion Council (GJEPC).

The long-term objective of direct sourcing of diamonds is both strategic and economic, according to Mr Jairam Ramesh, Minister of State for Commerce.

The Minister is scheduled to visit African countries to negotiate an agreement.

The Reserve Bank of India has permitted advance payment without any bank guarantee for procurement of rough diamonds from five mining companies - Rio Tinto, DHP, Endiama, Alrosa and Goharan.

In the case of Alrosa, Russia's largest diamond company, there has been an agreement for direct procurement. The company has agreed to provide diamonds worth $15 million to Indian companies, the Minister said.

Active exploration

"If we do not offer to share our skills and knowhow, other countries like China will do so," said Mr Sanjay Kothari, Chairman of the GJEPC.

Botswana produces 26 per cent of the world's diamonds, with Namibia (15 per cent) and South Africa (12 per cent) following next.

Mining giants like Rio Tinto and DTC have been active in exploring for gold and diamonds in the country.

"However, we must not expect to discover a Golconda and must focus on African countries for resources," said Mr Ramesh. (Golconda, a city west of Hyderabad, was once known for the diamonds found nearby.)

The Government is also planning to explore gold mining opportunities in Azerbaijan and Uzbekistan.MMTC and MMDC are to submit proposals by mid-May to the respective Governments. The projects are assured priority in exploration, said Mr Ramesh.