The war in Ukraine has affected Gujarat’s diamond industry, especially in rural parts of Saurashtra region where many units import small-size diamonds from Russia for processing and polishing
The ongoing war in Ukraine after Russia’s invasion has had a far reaching impact on people in Gujarat as the livelihood of lakhs of workers of the diamond industry have directly been affected.
According to a report by news agency PTI, the diamond industry in Gujarat has been affected, especially in rural parts of Saurashtra region where many units import small-size diamonds from Russia for processing and polishing.
Gujarat’s diamond industry
There are roughly five lakh people in rural Gujarat and about 12 lakh in different cities who are engaged in cutting and polishing of diamonds, according to The Hindu.
Nearly 70 per cent of these workers are from Gujarat followed by workers from Rajasthan, Uttar Pradesh, Bihar and Kerala.
Nearly 50 per cent of the entire workforce involved in diamond processing in Gujarat works on small-size diamonds, locally known as “patli”.
While the processing of big-size diamonds, solitaire stones, is mainly carried out at units in the state’s Surat city, the entire work of small diamond (patli) cutting and polishing is done in rural Gujarat.
According to the Business Standard, Surat is the city which gives shapes to over 90 per cent of the world’s diamonds. Surat houses roughly 6,000 diamond polishing units that employ nearly 1 million workers and clock up an annual turnover of $21-24 billion or Rs 1.6-1.7 trillion.
Earlier, the workforce was mostly from the Patel community and the funding was done by traders belonging to the Jain community. Now, both communities have a stronghold over the diamond trade.
The demand for diamonds has increased over the years. According to the Gems and Jewellery Export Promotion Council, total exports of gems and jewels was about $37 billion in 2021-22 compared with $27 billion in the previous year.
Gujarat and Russia’s diamond connection
As per The Hindu’s report, Gujarat’s diamond industry imports 100 per cent of raw materials from Russia, Australia and African countries, including South Africa, Zimbabwe and Congo.
Nearly 27-30 per cent of raw materials come from Russia. In small patli size, almost 70 per cent is imported from Russia.
Before the war, about 30 per cent of the total rough diamonds imported to Gujarat for polishing were brought from Alrosa, the Russian diamond mining company.
How is the Russia-Ukraine war affecting Gujarat’s diamond industry?
Nearly 75 per cent of the consumption of end products is by the United States directly or indirectly. Due to the problems between Russia and Ukraine, the US has put a ban on Russian companies.
Due to the shortage of supply of small-size rough diamonds from Russia, businessmen in Gujarat are forced to buy the raw material from African countries and other places, affecting their profits.
“There is a shortage of rough diamonds due to the Russia-Ukraine war, hence we are procuring the raw material from African countries at a higher price. This has affected our profit margins by around 25 per cent,” said Lalit Thummar, a diamond trader from Amreli district, according to PTI.
Hence, the diamond units in the state have curtailed the working hours of their workers and polishers, thus impacting their livelihood.
This has adversely affected the diamond industry workers in Gujarat, mainly in Bhavnagar, Rajkot, Amreli and Junagadh districts of Saurashtra as well as in some northern parts of the state.
Some diamond units have also cut the working hours of polishers employed there by 5-10 per cent, he said.
Even with the increased production cost and final products not getting the right prices, the manufacturers are sustaining despite facing losses.
Vitthal Mendapara, who owns a diamond unit in Bhavnagar, said smaller units are the most affected due to the ongoing Russia-Ukraine war.
“There is a shortage of rough diamonds, but traders are using stocks lying with them to keep the polishers engaged. Workers in smaller units are affected due to the short supply of rough diamonds,” said Vitthal Mendapara, the former president of the Bhavnagar Diamond Association.
What is the solution?
Currently there is no telling when the war in Ukraine will end. Even when it ends, the sanctions of Russia are likely to outlast the war itself. It’s quite likely that the shortage of Russian rough diamonds will continue in the coming months.
According to Business Standard, the Gems and Jewellery Export Promotion Council has been calling for an intervention by the Central government, especially the Ministry of Commerce.
However, the council’s vice chairman, Vipul Shah, has said that until that happens, the industry might be staring at huge job losses in June and July.
Waiting for the government’s intervention, the diamond industry can explore one possible solution, even though it has its challenges.
The report cites Shreyans Dholakia, Entrepreneur and Brand Custodian, Shree Ramkrishna Exports Pvt Ltd, who said the polishing process for natural and lab-grown diamonds is the same. Some players have already shifted to lab-grown diamonds during Covid. Those dependent mostly on Russian supply can do the same now.
However, lab-grown diamonds may not offer a readily available solution as it takes six-eight months to set up a laboratory to grow diamonds. And, the actual production begins after almost a year.
With inputs from agencies
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