Responding to the demands of the diamond sector, Union Finance Minister Nirmala Sitharaman abolished the customs duty on imports of seeds used for rough lab-grown diamonds (LGDs) manufacturing.

Also, she assured a research and development grant to one of the Indian Institute of Technologies (IITs) for a period of five years to encourage indigenous production of LGD seeds and machines and to reduce import dependency. The custom duty rate on LGD seeds is revised to nil from 5 per cent.

The gems and jewellery sector termed it as a move “to take on the global challenges as well as for stimulating exports.”

Colin Shah, MD, Kama Jewelry and former chairman of Gems and Jewellery Export Promotion Council (GJEPC), said, “It will ensure India’s end-to-end world leadership in rough to finished lab-grown diamond and jewellery manufacturing.”

The support for the relatively nascent LGD sector came at a time when conventional natural diamond business faced headwinds due to recessions in the West, escalating costs of rough diamonds due to depleting reserves and the rising cost of production.

Dinesh Navadia, diamantaire and former chairman of Gems and Jewellery Promotion Council (GJEPC) — Gujarat region, stated that the latest support for LGD will help build a much-needed ecosystem. “There is a saturation of growth in traditional natural diamond consumption. The latest trend is for the lab-grown diamonds. Already several companies are operating in this space. This will boost value-addition and employment generation,” said Navadia.

LGD is a technology-and innovation-driven emerging sector with high employment potential. These environment-friendly diamonds have optically and chemically the same properties as natural diamonds. LGDs are made using two methods — high pressure high temperature method (HPHT) and chemical vapour deposition (CVD) method. Most of Indian LGDs are made through CVD, while China commands leadership in HPHT diamonds.

“The US is the biggest market for LGDs. Recently we are also seeing domestic demand coming up. So, this is a timely decision,” Navadia added.

Surat-based diamantaire and exporter Ravi Dholakia of Radhe Shyam Diamonds said, “LGD is the future. Currently, it has only 2-3 per cent share in overall diamond market. But the challenge lies in the process to manufacture and getting the chemical compound right.” Surat alone houses some 1,000 LGD machines.

Power consumption

Besides sourcing the seeds, which is imported mainly from Singapore, Switzerland and China, the electricity consumption is another heavy cost component in the production process.

Notably, in Gujarat, where a large number of LGD units are coming up, the government had recently abolished the electricity duty on the production process of lab-grown diamonds from 15 per cent for high tension (HT) connections and 10 per cent for low tension (LT) connections. The move was aimed at improving competitiveness of India-made LGDs against Chinese LGDs.

The way India has mastered the art of cutting and polishing of natural diamonds with contribution of about three-fourths of the global turnover by value, the latest move is seen as new impetus to the sector with a futuristic goal.

GJEPC data show polished LGD exports from India in December 2022 stood at ₹844 crore, up 8 per cent from ₹779 crore in December 2021. Same for the April-December period stood at ₹10,587 crore, up 54 per cent from ₹6,865 crore a year ago. On the other hand the import of rough LGD was recorded at ₹919 crore in December 2022, and ₹7,656 crore for April-December 2022 period.

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