The recession in the diamond industry of Gujarat’s Surat, allegedly triggered by the Russia-Ukraine war, has forced several units to extend their summer vacation, people familiar with the matter said. Meanwhile, workers unions have accused the companies of resorting to massive layoffs, and they alleged that at least four labourers have died in the city in the last 10 days due to the recession- a claim refuted by the industry bodies.
Over 85-90% of the world’s roughs are processed in the Surat diamond industry. It employs close to 8 lakh people and is a major contributor to India’s gems and jewellery exports of about ₹3 lakh crore. For the period of April 2022-March 2023, the overall gross exports of cut and polished diamonds at Rs. 1.76 lakh crore declined 2.97% compared to the same period in the previous year, which was Rs. 1.82 lakh crore.
Dinesh Navadiya, a Surat based diamond baron and regional chairman of the Gem and Jewellery Export Promotion Council (GJEPC) said that apart from the overall slowdown in demand for diamond and diamond jewellery, there is a growing resistance from US and European countries to not buy Russian goods. Almost one third of the roughs processed in Surat are sources from Russia’s Alrosa, a diamond mining company.
“Past experience shows that to overcome the issue of overproduction, the supply needs to be controlled. This time the diamond companies of Surat may take a longer summer vacation. So, say, if only 15-20 companies took summer vacation in May of about two weeks last year, this year about 20% of the 7,000 odd units may go on a month’s vacation. Hopefully this will help improve things in next two to three months,” he said.
“Global challenges affected the demand for diamonds in India’s key markets, including USA and China. But certain regions in Europe and South-East Asia fared well. India encountered difficulties due to inconsistent Russian rough diamond supply and challenges with beneficiation, as countries such as Namibia, Botswana, and Angola prefer to have their rough diamonds cut in their own countries,” said Vipul Shah, chairman of GJEPC.
Hitesh Patel, managing director of Dharmanandan Diamonds, said, “Many companies have decided to go on an extended vacation. Our company has also decided to go on a vacation from May 10 till about May 20, which we do every year. We may extend it by a few days.”
Echoing a similar line, Ramesh Kikani, who runs a proprietary firm with the same name, said, “Earlier this week we announced vacation for all our employees. There is no demand. So instead of a 10-days summer vacation that we give our employees, there will be a month’s vacation this time.”
Patel said that while he was not aware of any layoffs in the industry, some workers on an ad-hoc basis may be quitting due to unavailability of work.
Nanubhai Vekariya, chairman of Surat Diamond Association, also refuted claims of layoffs and suicides of diamond workers due to recession. “There have been no layoffs. Also, the industry has only one vacation that is during Diwali. There would be a few companies that declare summer vacations on their own, but this is their individual call and not the industry’s decision. The industry in Surat is facing a slowdown due to a weak demand in US and Europe. As a result, some companies may have reduced their working hours. Overall, we feel that the production for the year will not be much impacted,” he said.
However, Bhavesh Tank, vice-president of the Diamond Workers’ Union Gujarat (DWUG), claimed that there have been 10,000 layoffs in the last couple of months due to the recession in Surat. He added, “We have reasons to believe that these deaths, including that of a woman and three men, were due to unemployment and the overall recession in the diamond industry.”
“We have sought a relief package from the state government to revive the industry and are looking forward for a positive dialogue with them in near future,” he said.
Union finance minister Nirmala Sitharaman in her Union Budget speech this year announced a five-year research grant for one of the Indian Institutes of Technology (IITs) to encourage the indigenous production of lab-grown diamonds (LGD). She also announced a reduction in customs duty on the seeds and machines used to produce these precious commodities. These diamonds are considered to be 70% cheaper as compared to mined diamonds.
In 2022-23 financial year, provisional gross export of polished lab grown diamonds at Rs. 13,466 crore grew 37.31% over the comparative figure of ₹9,808 crore for the previous year.
The success of lab grown diamonds and its demand worldwide has also impacted the prospects of mined diamonds up to certain extent, said Patel.