Nearly 35-40 per cent units incur losses due to high cost and low demand.
In a bid to reduce losses amid high cost of imported diamonds and lower demand of polished diamonds, the diamond players in Surat are likely to extend their Diwali vacation by an additional one month from a usual 20 days.
Depreciation of Indian Rupee against US Dollar has pushed up the cost of rough diamond imports. Meanwhile, global economic fluctuations and weakness in domestic financial markets has brought down the demand for diamonds, thereby prompting the diamontaires to reduce prices of polished diamonds.
According to sources in the diamond making industry, as many as 35-40 per cent units in Surat may adopt an extended Diwali vacation this year.
"There is extreme pressure on cost side, additionally the demand for polished diamond is also weak. Therefore it is better to shut shop for some more time, rather than incurring losses," said a diamond unit owner at Varachha diamond market in Surat.
Diwali vacation starts about a week before Diwali and ends on the fifteenth day after Diwali.
But this year as the diamontaires are forced to sell diamonds at lower prices due to lack of demand, they are likely to go for an extended vacation of an additional month.
"Not all the diamond units have holding capacity to bear the fluctuations in the international prices of rough diamonds. The extended vacation would not only hamper the revenues for the diamond makers but also affect workers," said the industry source.
"There has been an increase in the cost of imports of rough diamonds, also there are concerns of a fall in demand in major export markets including the US, Europe and Middle East. There is a dullness in the market, which may hamper diamond sales by at least 10 per cent this year," said Champak Mehta, managing director of C Mahendra Exports Ltd, a diamond jewellery maker and exporter.
However, experts see some hope in the coming days for markets to stabilise and sales to increase during Diwali and later during Christmas in December.
"These are the implications of currency fluctuations. There is no base price fixed for imports of rough diamonds. Therefore as soon as US dollar gets stronger against rupee, the imports get costly. But this seems to be a short-term phenomenon and market will stabilise in about 15 days," said Dinesh Navadia, president, Surat Diamond Association (SDA).
Surat-based diamond industry employs about 400,000 workers. Most of them are migrants from different parts of Gujarat as well as from other states including Orissa, Uttar Pradesh and partly from Bihar.
