Kolkata: The 5,000 diamond-cutting and polishing units in Surat that employ more than a million workers have slashed work hours from 12 hours to 8 hours and increased weekly holidays to three from one, thereby reducing wages, as demand from overseas markets is still very low after muted response from Chinese buyers at the recently concluded Hong Kong Jewellery Show. Hong Kong is the main diamond hub from where Chinese buyers purchase diamonds.
This move comes after 10 days of holidays that the units had declared in August to reduce production and inventory. “We had expected that China will buy natural diamonds in the recently concluded Hong Kong Show. But unfortunately, it did not happen. There is still a lot of inventory in the pipeline,” said Vipul Shah, chairman of The Gem & Jewellery Export Promotion Council.
The Surat diamond workers are expecting that the units will declare a Diwali holiday at least 10 days in advance due to poor demand in the global markets.
“The worst is that we are not being paid on the days when we do not have any work,” said Ramesh Zilariya, president of Diamond Workers Union, Gujarat.
India is the world’s largest exporter of polished diamonds, processing about 90% of the world’s rough diamonds by volume and accounting for 33% of the global diamond exports by value.
While shrinking Chinese demand is tough for Indian diamond exporters, Shah said the demand from Europe is likely to go up as the European Central Bank has cut rates. “It is expected that economic activities will pick up in the EU following the rate cut. This is expected to give a fillip to natural diamond offtake.”
Meanwhile, a report released by the think tank Global Research Trade Initiative on Tuesday said many units have large unsold inventories of polished diamonds, which discourages them from importing fresh rough diamonds as they cannot afford to take on more stock without selling the existing inventory.
The industry also depends heavily on financing, but tighter credit conditions and reduced lending from banks have made it difficult for companies to purchase rough diamonds, further stalling production. Additionally, a significant portion of cut and polished diamonds exported from India are being returned due to quality issues, overstocking by buyers, mismatches in specifications, and price fluctuations. Handling these returns is costly and time-consuming due to complex customs procedures, putting further strain on exporters.
