DUTY WAIVER LEADS TO SURGE IN DIAMOND IMPORTS
Imports of cut and
polished diamonds into the country have witnessed a steep rise in the aftermath
of abolition of import duty on them. Growth in imports of cut and polished or manufactured
diamonds has been an average 120 per cent in rupee value terms during the last
five months, according to data released by the Gem and Jewellery Export
Promotion Council (Council). The Government had, while presenting the Budget,
reduced the import duty on manufactured diamonds from 5 per cent to 3 per cent.
The Council thereafter made further representation to the Government which led
to the duty being abolished completely, with effect from May. Between April and
November 2007 imports of cut and polished diamonds nearly doubled to 91.22 lakh
carats from 44.16 lakh carats same time last year.
Trade sources point
out that current imports of cut and polished diamonds are mostly consignments
lying abroad pending any conclusive sale, i.e. rejected goods manufactured in
India. Earlier, with an import duty, rejected goods could not be bought back,
said Mr Vasant Mehta, Vice-Chairman of the Council. The goods are bought back
from various trading and other manufacturing centers like US, Hong Kong, Dubai,
Antwerp, Israel, and Belgium. These rejected goods may also be consumed in the
domestic market or be directed to other relevant centres, said Mr Mehta.
Unobstructed imports of rejected goods will allow flexibility in trade, said Mr
Praveen Shankar Pandya, Chairman of Diamond India Ltd.
Representatives of
the industry see the present surge as a natural reaction to the abolition of
duty. Mr Mehul Choksi, Chairman of Gitanjali Group, a diamond jewellery major,
felt that in the long run the trading activity will settle at around 20-25 per
cent of the total export of cut and polished diamonds. There will be more
stability next year and exports may pick up after global trading companies set
up offices here, said Mr Shreyas Doshi, Managing Director of Shrenuj &
Company. Depending on the market conditions, exports that constitute pure
trading may settle around the current level or may fall, said Mr Mehta. A
number of industry experts that this correspondent spoke to expect that global
trading firms may set up offices here. But they are also of the view that this
may not happen any time soon.
Substantial portion of the imports have found their way into Surat, the leading manufacturing hub of cutting and polishing of diamonds. Import of cut and polished diamonds in Surat alone increased by 1,115 per cent or over 100 times to 47.64 lakh carats during April to November 2007 from 3.92 lakh carats in the same period last year. This is only due to the fact that no octroi is levied in Surat as against the 2 per cent levied in Mumbai. With shrinking margins, a levy of 2 per cent as octroi is not making imports into Mumbai commercially viable and hence traders who have offices in Surat arrange to have it received there, said Mr Mehta.-www.thehindubusinessline.com