import of diamonds in india

IMPORT MANAGEMENT

IMPORT OF ROUGH DIAMONDS

IN INDIA

Publisher:[email protected]

SIIB

They say

“India gives life to a Diamond”

An amazing 11 out of 12 finished diamonds in the world are cut and diamonds in the world are cut and polished in India

Gujrat accounts for an overwhelming 72% of World’s diamond cutting and polishing industry

India as a whole has 80% dominance in this Industry

Introduction• India’s imports of rough diamonds

declined 25 percent to US $848 million,while in the same month last year itvalued US $1138. Import of cut andpolished diamonds decreased 5 percentto US $763 million, as compared July2008 figures of US $802.2008 figures of US $802.

• Direct Import of Rough Diamonds fromAfrica

• Diamond cutting and polishing trade isvery employment-intensive and provideslivelihoods to over 10 lakh families inIndia.

Introduction

• Rough diamonds are procured through a plethora of sources with the bulk flowing through Antwerp in Belgium

• Steps are being undertaken to diversify and beef up supply of roughs from the African beef up supply of roughs from the African countries.

• Indian mining companies are seeking to explore and develop diamond mines in Angola.

• Namibia and India have agreed to set up a joint working group to prepare a detailed plan for long-term partnership in the diamonds sector

Introduction

• India can no longer be stuck in the public sector mode of cooperation as Indian private companies are very much sought after.

• Need to work with private sector companies closely since they enjoy a good repute globally and signify the ‘new’ India that is commanding so much clout abroad.

Impact of Global Financial Crisis

• Indian diamond industry was severely hit

• Dried up liquidity has made it extremely tough to buy diamonds from foreign mining companies

• G n J EPC had asked to members to halt imports • G n J EPC had asked to members to halt imports from overseas suppliers in November 2008

• This move by the Indian Diamond Industry is meant to apply pressure on the global diamond miners so that they may also share in the financial burden along with the exporters, who are currently undergoing unprecedented crisis

World Production of Rough Diamonds, Year 2009

Weight Million Carats

World Production of Rough Diamonds, Year 2009Value, US $ Million

Trend Of Imports/Exports in Diamond Industry

Net Imports of Rough Diamonds

30000

35000

40000

45000

0

5000

10000

15000

20000

25000

30000

Year

Value(Rs in Crores) 40039 38410 39921.5 34405.56 29901.45

2004-05 2005-06 2006-07 2007-08 2008-09

20000

30000

40000

Net Imports of Cut & Polished Diamonds

0

10000

20000

Year

Value(Rs in Crores) 16010 8832 22252 31884.19 35665.67

2004-05 2005-06 2006-07 2007-08 2008-09

30000

40000

50000

60000

Net Exports of Cut & Polished Diamonds

0

10000

20000

30000

Year

Value Rs(in Crores) 53892 48905 57117.17 58649.45 59759.03

2004-05 2005-06 2006-07 2007-08 2008-09

2000

3000

4000

Net Exports of Rough Diamonds

0

1000

2000

Year

Rs(in Crores) 1865 2388 2280.32 3474.93 2715.97

2004-05 2005-06 2006-07 2007-08 2008-09

World Diamond CouncilWorld Diamond CouncilWorld Diamond CouncilWorld Diamond Council

• Set up in July 2000 to prevent conflicts entering into the diamond market through illegal trade.

• Consists of Diamond manufacturing • Consists of Diamond manufacturing and trading countries.

• 10 committees like Finance, Banking, Legal, Legislative etc.

• Charts out diamond grading guidelines.

GEM AND JEWELLERY EXPORT PROMOTION COUNCIL

Gem and Jewellery Export Promotion Council

• Set up in 1966• Effectively made the Gem and Jewellery

sector the driving force of India’s export led growthled growth

• Has continuously worked to strengthen the pool of artisans and designers trained to international standards

• More than 6500 members• Has regional offices in Mumbai, Delhi,

Jaipur, Chennai, Surat and Kolkata.

Role of G & J EPC

• Trade Facilitator– Undertakes direct promotional activities like trade shows,

exhibitions

• Advisory Role– Takes up relevant issues with the government

• Nodal Agency for KPCS• Nodal Agency for KPCS– Works with Govt of India to implement and oversee KPCS

• Training and Research– Runs training institutes in Mumbai, Surat, Jaipur and Delhi

to have highest standards

• Varied Interests– Publishes a number of Brochures, Statistical Booklets for

members and international circulation

Indian Institute of Gem and Indian Institute of Gem and Indian Institute of Gem and Indian Institute of Gem and JewelleryJewelleryJewelleryJewellery

• Is a project of G & J EPC sponsored by Ministry of Commerce and Finance

• Entirely supported by the Industry

• Mission Statement• Mission Statement

“To harness the creative energy of youth and foster a commitment to professionalism, quality and excellence to meet the rising demand for skilled manpower as India develops into the undisputed world leader of the gems and jewellery industry.”

India International Jewellery ShowIndia International Jewellery ShowIndia International Jewellery ShowIndia International Jewellery Show

• An initiative by G & J EPC

• IIJS 2009 was the Silver Jubilee of this show

• IIJS is a brand in itself and is an ideal destination for an ideal destination for networking and sourcing widest variety of products

• More than 30000 visitors, 5000 Indian and International Exporters.

Marketing Development Assistance Marketing Development Assistance Marketing Development Assistance Marketing Development Assistance of G & J EPCof G & J EPCof G & J EPCof G & J EPC

i) Assist exporter for export promotion activities abroad.

ii) Assist Export Promotion Councils (EOCs) to under take export promotion activities for their product(s) and commodities.

iii) Assist approved organizations/trade bodies in undertaking exclusive non-recurring innovative activities connected with export promotion efforts for their members. their members.

iv) Assist EPCs to contest Countervailing Duty/Anti Dumping cases initiated abroad.

v) Assist Focus export promotion programmes in specific regions abroad like FOCUS (LAC), Focus (Africa), Focus (CIS) and Focus (ASEAN + 2) Programmes.

vi) Residual essential activities connected with marketing promotion efforts abroad.

Word 2007

Document

Application for MDA

KIMBERLEY PROCESSKIMBERLEY PROCESSKIMBERLEY PROCESSKIMBERLEY PROCESS

Kimberley ProcessKimberley ProcessKimberley ProcessKimberley Process

• Kimberley Process Certification Scheme (KPCS)

• Established in 2003 to prevent rebel groups being financed by diamond groups being financed by diamond sales

• Is a process introduced by United Nations to certify the origin of rough diamonds which are free from the conflicts fueled by Diamond production

Kimberley ProcessKimberley ProcessKimberley ProcessKimberley Process

• The scheme aims at preventing the Blood DiamondsBlood DiamondsBlood DiamondsBlood Diamonds from entering the mainstream Rough Diamonds Market.

Members of Kimberley Process

Blood DiamondBlood DiamondBlood DiamondBlood Diamond• Refers to a Diamond mined in a War

Zone and sold to finance an Insurgency, usually in Africa

• In 1980s reports estimated that almost 15% of total diamonds were sold for illegal purposes or insurgencies.

• In 1998, UN placed sanctions forbidding • In 1998, UN placed sanctions forbidding countries to buy Diamonds from Angola

• Angola was under a civil war and UNITA sold diamonds for financing its war against the Government.

• Other countries facing UN ban include: Republic of Congo, Cote d’lvoire, Sierra Leone

Establishment of Kimberley Establishment of Kimberley Establishment of Kimberley Establishment of Kimberley ProcessProcessProcessProcess

• The diamond industry as a whole took steps to avoid conflicts.

• May 2000: Diamond producing countries of Southern Africa meet– To halt conflicts arising out of diamond trade

– To ensure buyers that their diamonds have not contributed to violence

– After negotiations with diamond producers and governments the Kimberley process came into existence.

KPCSKPCSKPCSKPCS

• Is a 3 Step Plan

• In order to be a member the country must

– Prove that diamonds originating are not sold to finance illegal activitiesto finance illegal activities

– Every diamond export is accompanied by KP Certificate

– And no diamond is exported to/ imported from a non member country

Compliance with KPCSCompliance with KPCSCompliance with KPCSCompliance with KPCS

• Requirements of KPCS– Each shipment of rough diamonds crossing an

international border should be:�Transported in a tamper-resistant container. �Accompanied by a government-validated Kimberley

Process Certificate.Process Certificate.

– Each certificate must be resistant to forgery, uniquely numbered and describe the shipment's contents.

– The shipments are only supposed to be exported to other KPCS participant countries.

Failure to fulfill these criteria may lead to removal from the KPCS scheme.

KPCSKPCSKPCSKPCS

• KPCS emphasizes collecting and publishing data relating to diamond production and sales.

• All member countries have to publish an • All member countries have to publish an annual report on their diamond trade.

• In 2006, KPCS monitored around 35.7 B$ rough diamond exports

• Number of KPCS certificates issues was around 55,000

•Application made as given in Appendix-

29 in the form given in Appendix-15B.

•Exporter shall give:

(i) Declaration giving name and address of his bankers

Diamond Imprest License

his bankers

(ii) Certificate from his bankers to the effect that realization of export proceeds against exports made by the exporter are not outstanding for a period of more than six months.

Bulk License• Following persons are eligible

a) M/s Hindustan Diamond Company Ltd(HDCL), Mumbai

(b) MMTC Ltd, New Delhi

(c) Exporter whose annual average FOB(c) Exporter whose annual average FOBvalue of export of cut and polisheddiamonds during the preceding threelicensing years has been not less than Rs.75 crores

Bulk License

(d) Any overseas company with its branch office in India whose annual average turnover in diamonds during the preceding three licensing years is not less than Rs. 150 crores

• Application made as given in Appendix-29 in the form given in Appendix-15C along with documents prescribed

• Validity– Value shall be for a period of 12 months

from the date of issue

Entitlement

• The value shall not exceed 50% of the annual average value of export of cut and polished diamonds made by the applicant during the preceding three licensing years.

• In the case of any overseas company with its branch office in India, the entitlement shall branch office in India, the entitlement shall not exceed 50% of annual average turnover of the preceding three licensing years.

• For HDCL/MMTC the value shall be 1.5 times of the total value of rough diamonds imported by them against the bulk license(s) in the preceding year.

Procedure for Servicing Rough

Diamonds Under Bulk Licence

• Bulk Licensee shall follow the procedure as given inAppendix-30C while servicing rough diamonds to theeligible persons.

• Fulfillment of Obligation by Bulk Licensee– Proof of supplying rough diamonds to the REP/Diamond– Proof of supplying rough diamonds to the REP/Diamond

Imprest licensee and to the EOU/EPZ units within theprescribed period.

– Details of such supplies along with the original proformasigned by the licensing authority

– Failure to supply rough diamonds within the prescribedperiod shall attract surrender of REP Licences of S.No. 2.1to 2.6 of Appendix-30A for a value twice the value of suchrough diamonds imported under the Bulk licence.

– Such licenses shall have a minimum validity of three monthson the date of surrender.

Procedure for Servicing Rough

Diamonds Under Bulk Licence

• The licensing authority shall compare such originalwith the proforma retained by it and thereafterredeem the case provided the Bulk licensee hassupplied the rough diamonds upto the value ofrough diamonds imported under the Bulk Licence.

• Bulk licencee may apply for issuance of furtherBulk licence even before the expiry of the previousBulk licence provided he submits the proof to thelicensing authority of supplying rough diamonds tothe extent of 75% of the value of the previous Bulklicence.

Diamond Dollar Account

• All pre and post shipment credit facilities given bythe banks in terms of Dollars to diamondsimporters/exporters operating under DiamondDollar Accounts Scheme (DDAS) shall bedesignated in Dollars and be reflected asdesignated in Dollars and be reflected asborrowings in their DDAS.

• Export realisation as well as dollar realisationfrom local sale of rough/polished diamonds shallbe credited immediately to such dollar accountson receipt of the same.


• DDAS eligible firms and companies may be allowed to open it with their bankers.

• A maximum of two Diamond Dollar Accounts would be allowed with two separate banks.

• Sources of dollars in Dollar Accounts shall be • Sources of dollars in Dollar Accounts shall be (i) bank finance

(ii) export proceeds from shipments of

polished/rough diamonds

(iii) sale proceeds from local sales of

polished/rough diamonds.


• An exporter/local seller of cut & polished diamondsoperating under DDAS may apply forReplenishment licence to the Regional LicensingAuthority (RLA) of DGFT

• It shall be in accordance with the para 8.2 of theExim Policy and para 8.2 to 8.7 of Handbook.Exim Policy and para 8.2 to 8.7 of Handbook.

• In respect of local purchase of cut & polisheddiamonds, the buyer will pay to the seller thepurchase value in dollars along with a disclaimercertificate with respect to the license according toappendix 30A for the local purchases


• It will be on the basis of which the seller will applyto the office of the RLA for theReplenishment/Imprest obligation application asper Appendix 30A.

• Enclosures with the certificate from the bank• Enclosures with the certificate from the bank

– details of the value and invoice of cut andpolished diamonds purchased by him locally.

• Bulk licences for rough diamonds may be issuedas per paragraph 8.10 and 8.11 of Exim Policyand paragraph 8.21 to 8.26 of Handbook


• Customs appraisal shall be applicable to physicalimports/exports as at present and shall not applyto domestic sale/purchase of rough/polisheddiamonds.

• Procedure and documents for physical imports• Procedure and documents for physical importsand exports shall remain unchanged for DDAholders including the requirement of DiamondImprest Licence/ Rep Licence/Bulk Licence/GemRep Licence and replenishment norms, (Appendix30A) prescribed in the Exim Policy

Word 2007

Document

Application for DDA

REP License

• Replenishment Licence�Application for REP Licence may be made to the

licensing authority concerned as given in Appendix-29

�Application shall be filed within six months following the month/quarter during which the export proceeds are realised.

�Consolidated application for entire month/quarter shall be filed for export proceeds realised during the month/quarter.

�For third party exports, REP benefit provided if the EP copy of the Shipping Bill shows the names of both the manufacturer and the third party and REP licence against such exports is claimed by either of the parties after furnishing a disclaimer from the other party.furnishing a disclaimer from the other party.

�REP licences will be transferable.

• PART PAYMENT HAS BEEN REALISED�Application for REP licence can be made within six

months following the payment month.

• Conditions:

�Not more than two such applications may be made for each such invoice

�The first such application shall be made only after 50% of the proceeds of the invoice is realised.

• REP Licence Against Rough Diamonds

�Exporter shall furnish Bill of Entry in his own name for imports of rough diamonds.

�Suitable endorsement on the original Bill of Entry by the licensing authority while issuing Entry by the licensing authority while issuing the REP licences.

�This avoids further use of the same Bill of Entry for claiming additional REP Licences.

Original Bank Certificate/Customs Attested Invoice/Shipping Bill Lost.

• Duplicate copy of the Bank Certificate of Export and Realisation OR certificate from the Customs.

• Affidavit by the exporter about the loss of the Bank Certificate of Export and Realisation or the Customs attested copies of invoice.Customs attested copies of invoice.

• An Indemnity Bond from the exporter indemnifying the Government against loss.

• No REP licence shall be issued in cases where all the three documents in original have been lost.

� Mar 02, 2007

� The Expert Committee on Gems and Jewellery Sector, constituted by the MoF, GoI.

� RBI/2006-2007/278-A. P. (DIR Series) Circular No. 34.

� Recommended a more liberal approach.

� AD Category - I banks permitted advance remittance up to USD 1,000,000/- or its equivalent, w/o a bank guarantee / Standby loc.

List of companiesList of companiesList of companiesList of companies:

i) Diamond Trading Company Pvt. Ltd., UK,

ii) RIO TINTO, UK,

iii) BHP Billiton, Australia,iii) BHP Billiton, Australia,

iv) ENDIAMA, E. P. Angola,

v) ALROSA, Russia, and

vi) GOKHARAN, Russia.

AD Category AD Category AD Category AD Category ---- I banks may I banks may I banks may I banks may ensure the following ensure the following ensure the following ensure the following :

• The importer should be a recognised processor of rough diamonds ,approved by GJEPC.

• The transaction based on their commercial judgment.

• Amt is credited directly to the account of the company concerned.

• Follow up -submission of the Bill of Entry / documents evidencing import of rough diamonds into the country

Name of the importer Entity and IEC No.

Amt. of adv. payment

Documents for evidence

India's finished diamondIndia's finished diamondIndia's finished diamondIndia's finished diamondexportexportexportexport----imports imports imports imports surge surge surge surge :

• India’s polished diamond exports :

17.65 % totalling $ 1.431 billion (Rs 61.732 billion).billion).

• Imports of polished diamonds :

112 % to $ 726.1 million (Rs 31.77 billion).

Value addition from industry : $ 704.9 million.

In terms of volume In terms of volume In terms of volume In terms of volume

• polished diamond exports :

16% in volume to 4.128 million carats.

Imports of polished diamonds :

1.94 % in volume to 1.765 million carats.

2.363 million carats of Rough diamond imports

� India is a net exporter of polished diamonds.

� It has + ve. balance of trade.

� India’s exports exceeded imports by $704.9 million (Rs 30 billion approx.).

Problems faced by Diamond Industry

• Export industry is predominantly an export oriented industry

•Hence effected by global economic situations

• Diamond industry in Gujarat accounts for 72% of the world’s processed

diamonds and 80% of India’s diamond exports

•The diamond industry is, essentially, a closed family-based sector where the

labour force is not systematically organised.

•However due to recession, it is estimated that approximately 4.13 lakh workers

have lost their jobs in the recession-hit diamond industry.

Name of the District

No. of Diamond units (approx)

No. of Diamond workers (approx)

No. of functioning units (approx)

No. of Diamond workers engaged (approx)

No. of workers who have lost their jobs (approx)

Surat 2,500 4,00,000 1,238 2,00,000 2,00,000 Ahmedabad 900 1,00,000 315 42,000 58,000 Mahesana 32 9,450 20 5,670 3,780

Banaskantha 300 20,500 90 10,000 10,500 Patan 50 2,000 37 1,500 500 Patan 50 2,000 37 1,500 500 Rajkot 290 39,000 90 10,000 29,000

Amreli 1,450 60,000 250 12,000 48,000 Junagadh 125 10,000 20 2,000 8,000 Bhavnagar 900 70,000 170 14,000 56,000

Total 6,547 7,10,950 2,230 2,97,170 4,13,780

• It may be observed that the aggregate of finance extended to diamond units by the four major commercial banks operating in the state and SIDBI works out to Rs.21.09 crore only

Bank Rajkot Bhavnagar Surat Navsari Valsad Ahmedabad Total

Unit Amt. Unit Amt. Unit Amt. Unit Amt. Unit Amt. Unit Amt. Unit Amt.

BoB 545.0

0- - 4 34.00 - - - - 9 79.00

75.0 152.3 11.3BoI 2

75.0

316

152.3

76 28.04 2

11.3

71 2.75 27 269.56

SIDBI - - 1 29.79 12 287.58 - - - - 13 317.37

SBI 11 66.00 21 159 32 225.00

Dena 3 946.64 1272.0

04

1218.6

4

Total 7120.

0328

248.1

646

1455.2

62

11.3

71 2.75 1

272.0

085

2109.5

7

ISSUES AND SUGGESTIONS

• Banks’ support to units:RBI has taken several measures to enhance credit delivery to

the employment intensive Micro and Small Enterprises (MSE) sector. On August 27, 2008, RBI vide its circular DBOD.BP.BC No.37/ 21.04.132/2008-09 issued comprehensive prudential guidelines for restructuring of advances by banksguidelines for restructuring of advances by banks

• Banks may consider granting additional facilities / concessions / relaxations as provided in the IBA special guidelines for micro credit

• Operationalisation of units:

Authorities may, through moral suasion, persuade the units to open and operate at lower levels of turnover

• Registration of units

Mitigate the problems arising out of non-registration of Mitigate the problems arising out of non-registration of the units

• Encouragement for re-employment

Encouraged to employ the workers identified as diamond workers even at a lower scale of wages.

Identification of diamond industry workers

Category Skill set

Level – I Uneducated, unskilled, mostly engaged in manual labour

Level – II Less educated / partially skilled / capable of undertaking

small business, etc.

Level – III Primary level education, moderate capability for

undertaking business

Level – IV Highly skilled; those with managerial capability, etc.

The training and skill development required by the workers to undertakeActivities will have to be arranged by the Labour Department through thetraining / technical institutions available in the State.

THANK YOUTHANK YOU