Alrosa may enter into contract with Indian traders

Friday, 05 December 2014 13:45

Alrosa may enter into contract with Indian traders at Diamond Conference to be attended by PM Modi, Vladimir Putin.

If the deal goes through, it will pave the way for the Indian diamond industry to get stones directly from Russia, cutting out the middlemen. KOLKATA: The stage could be set for a transformation of the global diamond trade next week as Russia hastens to beat the imposition of sanctions over its actions in Ukraine, turning India into a key hub for the precious stones alongside dominant Antwerp and centres such as Dubai and Hong Kong. Alrosa, a group of Russian companies that leads the world in diamond production, may enter into long-term contracts with Indian traders next week at the World Diamond Conference in New Delhi that's due to be attended by Prime Minister Narendra Modi and Russian President Vladimir Putin. The event is going to be held at the Capital's Vigyan Bhawan on December 11 and 12. If the deal goes through, it will pave the way for the Indian diamond industry to get stones directly from Russia, cutting out the middlemen, which would be an unprecedented development in a trade tightly controlled by them. "It will bring a shift in market dynamics from Belgium and Dubai to India and small companies will get direct access to rough diamonds, which was not possible earlier," said Pankaj Parekh, vice-chairman, Gem & Jewellery Export Promotion Council (GJEPC), which is organising the New Delhi conference in association with the World Diamond Mark Foundation (WDMF). Currently, most of the diamonds meant for cutting reach India through trade hubs in Antwerp, Dubai, Tel Aviv, London, New York and Hong Kong. The presence of middlemen adds to costs for diamond manufacturers and jewellery makers and thereby, the end consumer. Such costs are estimated at about 7.5% in a trade valued at more than Rs 1 lakh crore in FY14. Given that India cuts and polishes 85% of the rough diamonds produced in the world, any deal with Russia would therefore make for substantial savings. With the West threatening sanctions due to incursions in Ukraine, it's not in Russia's best interests to trade 63% of its production in Europe, Parekh said. "An alternate trading centre in India can always be an option to evade difficult situations for Russia if it arises in future," he said. "In all probability, Alrosa will enter into long-term contracts with the Indian diamond trade for supply of raw materials." Ilya Ryashchin, acting CEO and first vice-president of Alrosa, will accompany Putin to the conference. If an accord is reached, the auction of rough diamonds from Alrosa's mines will be conducted in a dedicated area of the Bharat Diamond Bourse Complex in Mumbai. GJEPC has asked the commerce ministry to declare a 4,000 sq ft area at the bourse as a special notified zone to make this possible. The conference will also be attended by mining ministers from Angola and South Africa. All the big diamond companies including De Beers, Rio Tinto, Endiama and others will also participate in the conference. However, when compared with hubs such as Antwerp, where about 84% of the world's mined diamonds end up, or rapidly growing Hong Kong and Dubai, Mumbai lacks taxation benefits and simplified customs procedures for the rough and polished stones. "We have requested the government to introduce presumptive tax regime for the proposed special notified zone in Bharat Diamond Bourse. It is under consideration of the government," the GJEPC vice-chairman said. There has been global shift in the allocation of funds for diamond exploration in the past few years. From 2011 to 2013, the share of global exploration spending that went to Russia increased from 27% to 54%. The global rough diamond production in 2014 has been pegged at 135 million carats valued at $17.8 billion. The largest diamond-producing country, by volume, is Russia, which in 2013 produced 25% of total carats and 26% of overall rough diamond value. Russia exports 63% of its rough diamonds to the European Union and only 16% to India, which is a global polishing hub, where 14 out 15 roughs are processed. The import of roughs by India has been declining in the current financial year. In the April-October period, India imported 834.52 lakh carats, down 11.45% from year earlier. In October alone, the decline in imports has been to the tune of 29.65% to 89.77 lakh carats from 127.62 lakh carats in October 2013. By Sutanuka Ghosal, ET Bureau | 5 Dec, 2014, 04.00AM IST

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