The Hindu Business Line : Rising rupee makes no major impact on diamond sector

Mumbai, Oct. 24 The diamond industry appears to have weathered the phenomenon of rupee appreciation if the average realisation on exports in the first half of the current fiscal is anything to go by.

The industry earned Rs 13,333 per carat in the first half of fiscal 2007-08 against Rs 13,424 per carat in the corresponding period last year.

This is revealed by data on industry exports furnished by the Gem and Jewellery Export Promotion Council.

The EPC data also showed that the average exchange rate was of Rs 41.09 to $1 during April-September 2007 reflecting an appreciation of 10 per cent from Rs 45.63 that prevailed in the corresponding period last year.

In rupee value terms, cut and polished diamond exports were Rs 27,173.35 crore during the first half of 2007 (Rs 24,156.03 crore). In dollar terms, it was $6,613.1 million ($5,293.8 million), according to the EPC.

However Mr Sanjay Kothari, Chairman of the Council, would not read too much into this.

“The comparison (per carat) is not correct as there may have been higher value goods exports during the first half of this year,” he said.

“The effect may be due to the scaling up of the invoice of cut and polished diamonds as the rough prices (input costs) have gone up in dollar,” explained another industry person who did not wish to be named.

One company executive claimed that ‘top line’ companies hedge their dollar receivable with forward contracts which might explain the constant rupee realisation. But such hedging, if any, would only improve the realisation as the industry numbers reflect customs declarations, claimed another source.

Import costs

However, the import cost of rough diamond has not changed per carat in both rupee and dollar terms. ‘Roughs’ to the tune of 847.4335 lakh carats (800.5577 lakh carats), costing Rs 20,751.27 crore (Rs 18,532.88 crore) translated into a per carat cost of Rs 2,449 in the current fiscal against Rs 2,315 last year.

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