Heeding frantic calls of the diamond industry, the Indian government has announced it will allow the export of small sized cut and polished diamonds for certification and for their re-import completely duty free.
The new ruling applies to small sized cut and polished diamonds. The earlier exemption used to only apply to stones weighing 0.25 carats and above. However, now it will apply to all stones weighing a minimum of 0.10 carats.
Acceding to a major demand of the domestic industry, in a notification, the Directorate General of Foreign Trade said cut and polished diamonds of 0.10 carat or above can be exported and thereafter re-imported duty free after certification by authorised laboratories.
The diamond industry has been beseeching the government to exempt the small carat stones, given the huge demand from the watch industry.
Vipul Shah, chairman of the Gems and Jewellery Export Promotion Council said the step would help boost exports of small sized diamonds.
``Several international players from the watch industry have regularly been asking for certified small sized diamonds. This was not allowed earlier. Now, Indian small sized diamonds will get space in the international market,'' he said.
The action assumes greater importance in the light of the fact that in June, a survey conducted by the Council noted that for the first time in a decade, India's polished diamond exports were expected to fall by around 37% to $17 billion in 2012-13.
However, Indian consumers are not biting, and diamonds encased in gold have no consumers, though gold has slid in the local market. As bullion retailer Jetha Mangat said, ``If gold is added to the mix, sales become unappetising for local consumers too.''
Mangat added that the precious metal has dropped 23% this quarter, but the gain for Indian consumers has been limited as the rupee fell about 10% during the same period. Both diamonds and gold are quoted in dollar rates in the local market.
For instance, a 3-carat polished diamond valued at $400 per carat was available for less than $1,079 (Rs 65,000) early June, when the rupee was at Rs 55 against the dollar. Currently, the same piece commands a price of $1,179 (Rs 71,000) in jewellery stores.
Added Mahesh Solanki, of Diamond House in Mumbai's Zaveri Bazaar said, ``If the diamonds are studded in gold jewellery, they tend to cost even more these days due to the 8% import duty on gold''.
Though the strengthening of the US dollar against the Indian rupee has come to the aid of exporters, with exports in value terms rising 44% during April, imports of rough diamonds have become costlier, reducing margins for diamond polishing units.
The government's recent action is meant to stem this tide, say traders.
With India poised to become the leading international trading hub for rough diamonds, the government set up a task group in May this year, to make recommendations to help India retain its primacy as a trading hub.
"With the Indian gems and jewellery sector expected to grow at a compound annual growth rate of around 16.26% during 2013-14 to 2016-17, the government is keen to incentivise the private sector,'' said an official of the ministry of commerce and industry.
Shipments of gems and jewellery make up about 14% of India's total exports, and the sector employs about 3.4 million workers.
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