India may cut agents from diamond trade
India is all set to wipe-off the middlemen from the diamond trade as the Centre is sending a team comprising of officials from the Finance & Commerce Ministry to Dubai and Antwerp. The team will understand how diamond trading and auctions takes place at these centres to set-up similar process in India.
The government is expected to announce special notified zones (SNZ) for diamond miners in the Union Budget, officials said, adding that the first such SNZ is likely to come up at Bharat Diamond Bourse in Mumbai. Hit by dwindling margins, the diamond industry has been lobbying with Prime Minister Narendra Modi to cut out the middlemen in the trade by setting up the SNZ.
Although India polishes 85 per cent of rough diamonds in the world, only 15 per cent of them are imported directly while the rest are bought by middlemen. “The government officials will study the tax structure and other related things at Dubai Multi Commodity Centre. They will also visit the Antwerp diamond trading centre in Belgium and study their taxation structure as well. If the SNZ comes up, it will bring a shift in market dynamics from Belgium and Dubai to India,” said Pankaj Parekh, Vice-Chairman of Gem & Jewellery Export Promotion Council.
In 2014, the global production of rough diamonds has been pegged at 135 million carats valued at $17.8 billion, up from 129.7 million carats in 2013. India imports only 5 per cent of rough diamonds from Russia, which is a major diamond exploration country, whereas it imports 58 per cent from the European Union, which is a diamond trading centre. Industry executives say the major constraint for the gems and jewellery sector in India is the absence of a conducive taxation regime that helps trade flourish in other centres such as Belgium, Israel, UAE, Thailand and China.
The other major factors, according to a diamond trader, are high cost of finance and inadequate insurance on incremental increase of whole turnover credit. “There is a need for ensuring steady supply of gold, rough diamonds and other raw materials on a sustained basis. The special notified zone will ensure this,” said Parekh. Mavjibhai S Patel, director of Kiran Gems, said, “If the middlemen are cut down, the cost of production can come down by 5 per cent. That will have a significant impact on our margins. It will improve both exports and imports.”
Courtesy: Economic Times