Saurashtra loses diamond polish

Three thousand-odd diamond polishing units of the Rs 5,000 crore diamond industry in Saurashtra "� located in Amreli, Bhavnagar, Junagadh and Rajkot districts "� are on the verge of extinction.

"The diamond trade in the region is passing through a recession," said Ashok Gajera of Laxmi Diamonds, sightholder of Diamond Trading Company (DTC). Laxmi Diamonds has a strong presence in branded jewellery through its Cygnus Galaxy brand.

The current recession, in line with the international business trend, was likely to continue for another two months, he added.

The diamond trade in India is usually dominated by uneducated yet skilled labour.

A total of 7,000 such units, spread in the region, largely bank on the work contracts from big daddies in Mumbai and Surat.

"With the majority of finance from the trade being shifted to real estate and the stock markets, specifically from the units located at Mumbai and Surat, the entire trade pattern of the diamond polishing industry has been affected severely," said Lalit Thummar, president, Amreli District Diamond Polishers' Association.

Since a majority of orders, which come from large players based in Surat and Mumbai, were suddenly seized, the international buying from majors like DTC has also come to a halt, Thummar adds.

Pointing out the factors responsible for the plight of the diamond industry, Thummar said, "A majority of big diamond companies operate by way of purchasing raw material and extending it as job works to small units, which then sort, polish and finally come up with a finished good. The entire process takes five-six months. In other words, large players make huge investments in sourcing raw material and then sell it back as a finished good. Now, this cycle has suddenly been disturbed."

The total cost of transforming a raw product into a finished good is somewhere between Rs 20 and Rs 30. But given the downturn and the consequent lower market demand, companies are expecting small units to accomplish the same work at a tag of Rs 18-20, as they are resorting to a cost-cutting (labour cost) measure.

"This is not affordable for small firms - job workers or diamond polishers," Thummar said.

Sharing a similar view, Gajera said, "This has led to a situation where the inventory of finished goods for sale is dumped. Raw material suppliers (Diamond Trading Corporation) saw an opportunity here and hiked prices 7-8 per cent in the last few days, which has made the situation worse for diamond polishing units of the region."

"After all who would go in for such huge investments," asked Thummar.

"Rather than risking their returns for a time horizon of five-six months, taking into account the interest of investments, the stock market or probably the real estate market - given the infrastructure boom - seems a far better option for intermediate players, who largely serve as the middle channel of the entire trade. And, when they shift, naturally the trade is going to be affected," Thummar said.

Monthly payments to be paid to the entire workforce engaged in Saurashtra's diamond trade, which were about Rs 95-100 crore a month, plunged almost 60-65 per cent in the last three months to the Rs 35-40 crore level on the back of the partial closure of the 3,000-odd units, points out an accountant of a Gariadhar (Bhavnagar) diamond polishing firm.

"Gariadhar, which had 200-odd units, was considered the Surat of Bhavnagar district or the diamond polishing capital of Saurashtra. But, at present, barely 50 units are managing to survive, with as many as 150 units having shut down their operations," said Mohammadkhan Pathan, a Gariadhar resident associated engaged in diamond trade.

The Gariadhar crisis has badly hit the business of even smaller units sustaining on the maintenance and supply of spare for diamond polishing units.

"It's almost hard to garner even 25 per cent of the earnings we were achieving sometime back, because a majority of diamond polishing units are either sitting idle or shutting down their operations completely," said Hitesh Joshi, an inhabitant of Damnagar (Amreli district) who owns a workshop to provide maintenance, spare supplies and service support for diamond polishing units.