The Hindu Business Line : Direct procurement of rough diamonds gathers pace

Consequences
The gem and jewellery sector can now get rough diamonds sourced directly from miners than from intermediaries.
Sector ready to import on everything that comes of the mine in any proportion.

Mumbai May 3 Diamond India Ltd, a company formed by 60 polished diamond exporters, has started importing roughs directly from mining companies.

This is to trim down dependence on De Beers, world's major supplier of rough diamonds.

Diamond India Ltd imported rough diamonds worth over $15 million directly from Alrosa, the Russian mining major, in the last two months.

De Beers and the purchases it makes from Alrosa account for nearly 45 per cent of the global rough diamond production.

Roughs from De Beers are sorted and valued by the Diamond Trading Company, its sales and marketing arm headquartered in London.

No direct flow

Despite India being a leading manufacturer of cut and polished diamonds, rough diamonds do not flow in directly. International trading firms produce diamonds from mining companies and although these diamonds land up in India ultimately, the prices are jacked up, said Mr Praveen Shankar Pandya, Chairman of Diamond India.

This created an unsustainable environment for Indian manufacturers making it imperative to source diamonds directly from mining companies. As it would be difficult to take up the task individually Diamond India was established.

Direct procurement from mines will ensure sustainable price, as the profit of the middlemen would get divided between the mining company and the importer, he said.

Diamond India aims to import rough diamonds worth over $250 million during the 2007-08 fiscal. "Eventually we are ready to procure $1 billion worth of roughs annually," said Mr Praveen Shankar Pandya, Chairman.

Negotiations

The consignment from Alrosa is amongst the several deals being negotiated with mining companies — two African, one Canadian and one in Africa but not of African origin.

The company's objective is to procure roughs directly from mining companies in Russia, Canada, Angola and Ghana.

After direct procurement, Diamond India distributes the raw materials among its 60 members and other manufacturers based on their requirements.

`Run of mine' basis

India is ready to import diamonds on "run of mine" basis, that is everything that comes out of the mine in any proportion, said Mr Pandya. The country, a traditional cutting and polishing centre, has skills to work with all varieties and grades of roughs. Hence, it is exploring avenues for long-term contracts with mining countries to directly source rough diamonds, raw material for the gem and jewellery industry.

Transferring skills

Though African diamond mining countries are seeking transfer of Indian cutting and polishing skills to generate local employment in Africa, there has not been any proposal for the negotiations conducted by Diamond India, Mr Pandya said.

During the previous fiscal, the country imported roughs worth $8.77 billion.