Diamond players diversify business

Falling exports, labour woes force margin-hit units to explore other opportunities.

As the rising rupee takes the glint off their bottom lines, diamond players are seeking refuge in other businesses. Piqued by the appreciating currency, which has lead to a decline in exports, small diamond units are looking to diversify their business.

From textiles to machinery to realty, these units have begun exploring other business opportunities, with an added blow of losing 1-1.5 lakh employees.

The industry in Gujarat recently saw migration of labour to farming and other occupations, following slow exports.

"Loss of employees, along with weak exports, is forcing many small diamond units and a few big diamond companies to either get into other segments or set up side businesses," said Chandrakant Sanghvi, regional chairman, Gems and Jewellery Export Promotion Council (GJEPC) and chairman, Indian Diamond Institute (IDI).

Inflated labour costs have also help trigger the move. Labour forms 30-35 per cent of the total costs.

"While exports and imports take place in dollars, labourers are paid in rupees. With dollar costs rising, the units are ending up with less Indian currency. Moreover, although people feel the exports haven't been hit all that much, it is actually the trading that has remained stable, while finished exports have gone down by 15-20 per cent," Sanghvi said.

"To make up for the loss, these units have been taking up businesses like embroidery, yarn, chemicals, machinery, construction, commodities, and are also dabbling into realty and stock markets," said C P Vhanani, president, Surat Diamond Association (SDA).

The diamond industry in Gujarat, which employs close to 6,00,000 workers, has been expecting incentives from the government.

"Although diversification is just one way out, we hope to receive some incentives from the government which hasn't happened so far," said Jivraj Dharukawala, CMD, J B Diamonds, whose company is exploring sectors.

However, it is not just the small units that have been exploring the idea of diversification, some big diamond players have also begun setting up side businesses.

Rosy Blue (India), known for its Orra brand of diamonds, is looking at setting up a castor seed processing plant or an isabgul plant near Palanpur in Banaskantha, Gujarat.