The Hindu Business Line : Diamond industry fears cancellation of orders

Production troubles
80 to 90 per cent of diamond cutters-and-polishers have left for their native Saurashtra region during the last few days
They are expected to return only after Navratri in October or Diwali in November

A FILE PHOTO of labourers working in a diamond factory.

Surat , Aug. 16

The diamond industry in flood-ravaged Surat may resume normal activity in a month's time but the latest worry among those in this business is the possible cancellation of at least some of the orders from abroad for non-delivery of the product. This is particularly at a time when the local units were already running about 30 per cent below their capacity for the last three months due to the ongoing, worldwide slowdown in diamond trade.

Cascading effect

The exact losses suffered by diamond industry are yet to be assessed. For now, the worst fears of the industry are not the last week's flood from the Tapi waters, but cancellation of orders due to the cascading effect that begins to unfold now, even after the diamond units put their machinery in running condition this week.

As Mr Rajesh Jain, a leading diamond broker, told Business Line, 80 to 90 per cent of diamond cutters-and-polishers have left for their native Saurashtra region during the last few days. They are unlikely to return before the conclusion of Navratri next month or even Diwali in October. Once these workers leave for home, they do not normally return before two to three months. Thus, the extended impact of flood as a calamity may result in the cancellation of orders because the Surat industry would be unable to make deliveries in time, particularly to the West.

Heavy losses

The diamond industry in Surat, which began in 1965 with exports worth Rs 60 crore, has now swollen to about Rs 50,000 crore as on March 31, 2006, according to Mr Pravin Nanavati, leading diamond merchant and President of Surat Chamber of Commerce and Industry. He told Business Line that Surat accounted for more than 80 per cent of India's total diamond exports worth Rs 73,000 crore per annum. Surat's daily exports of diamond is worth Rs 150 crore and, since the August 7 floods, it has already lost Rs 1,500 crore worth of production. This excludes the losses to trading, the plant and machinery in many of the units that are assessing these losses now, and exports.

Fifth of it uninsured

The city is now coming back on rails but its diamond business has to wait till the workers return and resume work. Ninty-five per cent of gems and jewellery work in Surat is related to diamond in which the Saurashtrian workers are predominantly employed. Diamond business is based mainly on cash transactions and trust. Thus, nearly a fifth of it is still uninsured, without any documentation, which is a pre-requisite for insurance.

Diamond, as a raw material, may not have suffered losses due to submergence in water for any length of time, another diamond trader, Mr Ummaid Jain, said. Even its plants and machineries may have suffered an immediate loss of only about Rs 200 crore, according to Mr Nanavati. But it is the "failure" to deliver on time that may be the real worry.

Demand slump

Surat's areas like Varachha, Ved Road, Mahidarpura, Katargam and Nanpara are studded with diamond cutting and polishing units, which are mainly located on ground and first floors of buildings that have remained under up to 20 feet of flood water for five to six days last week. These factories work shifts round-the-clock, particularly after July when the units receive orders from abroad for the Christmas gift season. They normally deliver the product by November. But it will not be so this year. Mr Shah said the flood and its aftermath might see the demand slump by 60 to 70 per cent. On account of trading alone, he said, the business may have lost Rs 1,000 crore already. Mr Nanavati put the immediate assessed losses to the tune of Rs 4,000 crore, saying the exact figures are yet to emerge.

But he hopes the glitter would return. Diamonds are, after all, forever!

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