Dimanataires in world's biggest diamond cutting and polishing centre in Surat, especially the small and medium unit owners, have stopped the import of rough diamonds rupee plunging to a record low against the US dollar.
Merchants in Surat and Mumbai are not willing to take the delivery of the rough diamond consignments bound to India from Antwerp, Dubai and other African countries.
Sources said the industry is already facing severe liquidity crisis and cash flows are further impacted significantly as the diamond companies, especially the small and mid-sized companies have to pay at the current rupee depreciated rate of Rs 59
For example, a diamond merchant who had booked the rough diamond consignment worth $1 million last month when the exchange rate of rupee was at Rs 55 per US dollar will have to pay Rs 59 per US dollar at present. However, the diamantaire will have to pay Rs 4 extra on the import of the rough diamond consignment.
Market sources said the rough diamond parcels are parked in Antwerp, Dubai and other African countries and Indian diamantaires are paying the depreciation charges to the exporters, believing the currency may recover soon. There are murmurs in the market that the rupee is likely to depreciate further.
"Nobody wants to take any risks. Though the prices of rough diamonds have increased by 15-17 per cent the last five months, the diamantaires are faced with a new set of worry about the weakening Indian rupee. Most of the diamond merchants have parked their diamond parcels overseas fearing the dollar may appreciate further in the coming days," president of Surat Diamond Association (SDA) Dinesh Navadia said.
As per the official statistics of the Gems and Jewellery Export Promotion Council (GJEPC), India imported rough diamonds worth $5.5 billion in five months from January-2013 to April-2013 against the $5 billion worth of import during the same period last year.
India's annual rough diamond import is pegged at $15 billion and that around 90 per cent is bound to Surat for cutting and polishing. The import of rough diamonds in the month of April was worth $2 billion registering an increase of 26 per cent compared to $1.5 billion in the same month in previous year.
Asked about the impact on the industry, Navadia said "The industry may experience the rough diamond shortage. This will further result in the diamond workers getting less work."
A diamond merchant Rakesh Patel said, "The industry is following the wait and watch strategy as far as the import of rough diamonds is concerned. Nobody in the industry want to cough up extra bucks at the time when the merchants are facing liquidity crisis."