Diamantaires here are now looking forward to Zimbabwe, Angola, Tanzania, South Africa and other African countries for procuring goods by taking advance remittance from the banks.
Previously, only a handful of global miners of rough diamonds like Diamond Trading Company (DTC), Alrosa, Rio Tinto, BHP Billiton, Endiama, Gokhran, Harry Wintson, etc. were notified to whom the Indian importer was permitted to make advance remittance without any limit and without a bank guarantee or standby letter of credit for import of roughs.
A circular issued by the RBI stipulates that banks are now allowed to decide on the foreign mining companies to which an importer can make advance payments, without any limit or bank guarantee or standby letter of credit. However, the concerned mining company must have recommendations from India’s Gem & Jewellery Export Promotion Council (GJEPC) certifying good records of the importer.
RBI measure would help small sized manufacturers
Earlier, small and medium sized diamantiares here were dependent on the secondary market in Mumbai and Surat to buy rough diamonds by paying premium rates between 10 and 20%. So, many diamantaires were frequently travelling to Antwerp to purchase rough diamonds from the traders who used to charge extra 3 to 8% on the carat value of the diamonds.
The move has been vastly welcomed in the industry circles here in India. Chairman of Shrenuj & Co. Mr. Shreyas Doshi says, “RBI’s measure would help India’s diamond industry, as manufacturers and traders here would be able to buy rough diamonds from anywhere. Our hands will be free now.”
On the other hand, the industry leaders here are persuading the government to withdraw the existing 2% import duty on cut and polished diamonds. Israel’s decision to reduce import duty on polished diamond from 0.135% to 0.1% would boost its local diamond industry. But this could affect the Indian diamond industry as the import duty on polished diamonds in India remains still unchanged at 2%.
Deputy Prime Minister of Belgium Mr. Didier Reynders also had requested India’s Commerce Minister Mr. Anand Sharma to reconsider the issue of 2% import duty during his official visit here.
The duty on cut and polished diamonds in India was levied in January 2012 after more than five years of duty free imports. The move was aimed at controlling the widespread menace of round-tripping, whereby diamond companies here seek to enhance turnover to get extra bank finance. However, India’s polished diamond exports declined by 37% at $16 billion in 2012 and imports of polished diamond also came down to 72% to 5.5 billion during that year.
"Israel is the second largest diamond cutting and polishing centre in the world after India and it specializes in small and big stones. India also is a big centre for big-sized diamonds. Our transaction cost always goes higher than manufacturers in Israel because of this 2% import duty," says a source from India’s DTC Sightholder.
Mr. Pankaj Parekh, Vice-chairman of GJEPC says, "Although the import duty on cut and polished diamonds in India was a good move by the government but the genuine exporters here are facing problems because of the lower trading activity. So we have requested the government to permit duty free import quotas for cut and polished diamonds to the tune of 15% of the preceding year's exports."
"If country like Israel can take positive steps for the growth of its diamond industry, why can’t we? We decisively believe that the Indian government also should contemplate our demand to allow 15% duty free import of cut and polished diamonds," Mr. Parekh added.