Diamonds lose glitter

In his small but well-lit office, Pravin Nanavati, a diamond merchant and president of the Surat Diamond Association, is plunged in despair.

He didn't have the money to pay the wages of more than 1,000 workers at his diamond cutting and polishing units at Surat's Mahidarpura area. So Nanavati withdrew money from a bank against his deposits and paid his employees.

Why was he short of cash? That's because his clients in the US hadn't paid him the few million dollars he's owed (only now is the money starting to trickle in), ever the Iraq war began. "Now I want to close my business, at least for another month or so, and ask the employees to go on a vacation as there is little work nowadays.

We are not getting fresh orders from our bulk clients in the US and the Gulf." Nanavati says that though the war in Iraq is over, his US clients haven't placed new orders. Nor are clients in Hong Kong, Bangkok and other cities in Thailand buying diamonds, thanks to SARS.

Like Nanvati, scores of diamond men here have piled up stocks of raw diamonds. At last count, the industry had some Rs 200 crore (Rs 2 billion) worth of inventory.

And like Nanavati's unit, thousands of other diamond cutting and polishing units in this city, which accounts for 90 per cent of India's total gem and jewellery exports, are not functioning. Diamond men are dipping into their own pockets to pay employees.

Confirms Kirit P Sanghani, owner of Sanghani Diamonds: "Though the war is over, we are yet to get our payments regularly from clients in the US. Meanwhile, we paid wages from our own pockets."

Diamond men have also laid off part-time diamond cutters. "We used to keep a good number of part-time cutters also. We haven't employed them for the last 15-20 days. So at least 3,000-4,000 people have lost their jobs.

We even are not in a position to tell them when we can take them back," rues Hansmukhbhai Patel, a diamond merchant at Ahmedabad's Bapunagar area.

Indeed, the thousands of diamond workers and their bicycles found on the usually busy roads of Bapunagar and Naroda are conspicuous by their absence these days.

The industry's problems are taking a toll downstream, on the hundreds of courier agencies in Gujarat and Mumbai. "Even the couriers in Surat and Mumbai are having a bad time because no diamond consignments are being sent abroad.

We used to earn at least Rs 800,000-1 million  sending diamonds to the US during the first two months of the fiscal year. We are now paying our employees (angadias) from our pockets and not from the business and we don't know how long we will be able to continue doing so," says the owner of an 'angadia' business.

Once cut and polished, diamonds are - illegally - sent through human couriers or 'angadias' to Mumbai. From there they are to the UAE and then on to the US and other countries. The angadias work for a monthly salary and are paid an extra commission if the consignment of diamonds is very expensive.

What has made matters more acute for the diamond industry is the position in Hong Kong and Bangkok. Says an official of J B Diamonds, a diamond merchant here: "Our last resort was the diamond jewellery market in Hong Kong and Bangkok.

Because of the Sars scare, the entire diamond market there has asked us to stop polishing raw diamonds. Mind you, we bought the raw diamonds from South Africa and Belgium for crores of rupees. They are lying in our stock rooms gathering dust."

The last time Surat's diamond units faced a similar problem was when the Gulf War broke out in the early 1990s. But then, unlike now, they could turn to buyers in Thailand and other countries.

One outcome of the Surat diamond industry's plight is that it may not hit its turnover target this year. Last financial year, it notched up a total turnover of Rs 32,000 crore (Rs 320 billion) and had hoped to jack this up to Rs 40,000 crore (Rs 400 billion).

But that target now seems elusive. "The indications from our clients in the UAE and Kuwait are anything but favourable," notes Patel gloomily.