DTC supplier cut in India to hit SMEs

Already reeling under the pressure of rupee appreciation on margins and the withdrawal of generalised system of preferences (GSP) by the US, the removal of eleven Indian sightholders from the DTC list of suppliers is expected to wipe out a majority of small and medium enterprises from business.

Sourcing rough diamonds is likely to get dearer by 10 per cent this year, resulting into further pressure on margins - a good reason to get out of the diamond processing business.

Depending on the source of supply and demand, prices of low carat rough diamonds have gone up by 5-10 per cent while the premium ones have gotten dearer by upto 40 per cent.

Under GSP, Indian players would sell diamond jewellery at 6 per cent discount. During the last one year, the rupee appreciated by 15 per cent. The latest blow is set to eliminate at least half of the existing 7,500 SMEs.

More than 25 per cent of India's overall diamond business is likely to be hit with the decision as well.

Experts believe that the industry's total job losses would go up to half a million in addition to the huge investment made for infrastructure by players over the last 40 years.

"It took 40 years to bring the diamond cutting and polishing industry to this level where the world has started recognising Indian cuts and designs. But the efforts are being ruined by decisions which are not purely of the industry," said Sanjay Kothari, chairman, Gems & Jewellery Export Promotion Council (GJEPC).

"As roughs would become costlier with fewer sightholders, a majority of small and medium enterprises (SMEs) will be driven out of the market as their margins will reduce dramatically," he said.

The Diamond Trading Corporation (DTC) - the marketing arm of De Beers, the global diamond mining giant - has removed 25 established siteholders including eight from India and three India-owned firms in Belgium from its list. Surprisingly, the company has added six new ones which include three from India.

SMEs consume more than 50 per cent of the total roughs in India every year.