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Bagging Prime Minister Narendra Modi's controversial pinstriped suit for a whopping Rs 4.31 crore at an auction last month is a smart investment made by Surat's diamond industry that could lead to future support from the Centre in matters of trade, especially as the race heats up in shifting the trading centre from Mumbai to Surat.
Mumbai accounts for nearly 90 per cent of the country's polished diamond export. With the Surat Diamond Bourse coming up, most of the trading is likely to shift to Surat. The local industry is also seeking an enabling environment to ensure processors can buy rough diamonds in India itself, instead of having to travel to Belgium, Russia, and West Asia. Processors have already sought help from the Centre in this regard. At a time when the overall export of cut and polished diamonds has slipped five per cent between April 2014 to January 2015 period this financial year (Rs 1.16 lakh crore from Rs 1.22 lakh crore) compared to the same period last year (according to data from the Gems and Jewellery Export Promotion Council), these are indeed considerations.
Self-interest was also coupled with charity. According to sociologist Vidyut Joshi, former director, Centre for Social Studies, South Gujarat University, "The first generation of diamond cutters had come from famine-hit Saurashtra in the 1970s and taken up work under the Jain merchants in Surat. Some of them managed to draw a monthly salary of Rs 10,000 in those days and this nouveau riche character was eulogised in several ways."
The current crop of diamond merchants in Surat are the third generation of these Saurashtrians, and they have not only remitted to their villages to fund education and health care but played a crucial role in making Surat what it is. Surat, which flourished in the earlier ages as a port city, and is today's diamond capital of India, is one of the cleanest cities in Gujarat. The wide concrete roads hardly have any littering (people say Surtis learnt the value of cleanliness after the 1994 plague). Many of these civic initiatives, including several subsidised hospitals, are a result of free-flowing funds donated by the city's merchants. P N Makwana, additional collector of Surat says, "When we decided to raise food packets for the flood-hit Kashmir victims, once plans were firmed up in the morning, by the afternoon, two flights carrying food packets had flown from the airport."
One cannot miss the glint of pride in the eyes of the now famous Laljibhai Patel, the new owner of the PM's pinstripe suit, when he says that soon after Modi assumed office in Delhi, he sent a team of policemen to study the Surat CCTV model. "We have already installed 600 cameras across traffic signals for a meagre Rs 30 crore, and this has brought down the crime rate in the city by about 27 per cent in one year," Patel claims. Sitting in his swanky office in the diamond neighbourhood of Katargam, Patel flaunts a video in his mobile phone where he is seen exchanging pleasantries with the PM.
Patel himself is a first generation businessman, starting 35 years earlier as a diamond polisher, and now has an empire of Rs 6,000 crore in his own words. He is part of the Saurashtra Patidar community, which have helped each other to climb the social ladder, and have turned the diamond polishing business into a community business.
The community has not only played a crucial role in building Surat but are a driving force in the political scene of Gujarat. Modi had personally visited the houses of several diamond merchants in Surat (including Laljibhai, who claims he has known the PM for 12 years), after he became chief minister of Gujarat. It was important for a new CM, who had just taken over from a powerful veteran, Keshubhai Patel (who hails from Saurashtra), to maintain strong ties with a community which is known to have funded many a politician's electoral battles.
Given this bond, it is hardly a surprise that Modi's much hyped bandhgala managed to fetch Rs 4.31 crore in the Surat auction. Patel has placed the mannequin wearing the suit (which bears the name of Narendra Damodardas Modi again and again as flowing golden lines, very much visible to the naked eye ) right at the entrance of the corporate office of Dharmanandan Diamonds, where visitors are busy taking 'selfies' with the mannequin. The Rs 4.31 crore isn't a high amount for Patel, who spent Rs 12 crore last year in water projects for his native village Ugamedi in Saurashtra.
According to sources in the district collector's office, the previous auction of Modi's gifts in 2014 had fetched Rs 2.18 crore, an auction of about 900 items of the then CM. At least two small-scale diamond merchants in the city claim the PM chose Surat over Delhi for the auction for the same reason. "He knew he would be able to draw the maximum funds from the diamond merchants here, who are astute businessmen themselves. They have made a strategic investment to ensure future support from Modi's government," said a trader in his office at Nandu Doshi in the Vaadi area of Katargam.
The industry does have important issues to handle. "Why go to Belgium to buy rough diamonds, when the sellers can come here? The government only needs to ensure the two per cent customs duty on taking diamonds out of this country isn't imposed when they ship out unsold diamonds," says Ganesh N Ghevariya, secretary of the SDA. Patel seems confident the modalities would soon work out and diamantaires wouldn't need to fly to Russia and Belgium to source raw material. Also, after initial setbacks, the proposed Surat Diamond Bourse is on track, with land being allotted by the state government and a foundation stone-laying ceremony earlier this month.
Increasing margins is an imperative for the diamantaires in Surat, which currently operate on three-four per cent. Kirti Shah, a Surat-based diamond polisher and trader, said dollar fluctuations and the global meltdown had hit the industry hard since 2008. "Of the 6,000 units in Surat, nearly 70 per cent are small-scale units with annual turnover in the range of Rs 2-15 crore. Many have been operating with reduced work, as they hardly have the capital to invest in raw material," he said.
SDA president Dinesh Navadia claimed one cannot get raw material on credit and it takes around 150 days for the certification on the polished diamond to come from the US. "Hence, polishers have no option but to take debt from banks, as the turn-around time in this business is at times high," he said. Shifting the epicentre of diamond trading to Surat can be a shot in the arm for many in this Rs 1.85 lakh crore industry in the diamond capital.
