Print edition : November 02, 2012

A diamond merchant examines a polished stone.-ARKO DATTA/REUTERS

The economic slowdown affects diamond clusters in Saurashtra, where loss-making units render thousands jobless.

HIRA BAZAAR IN BHAVNAGAR, in Gujarats Saurashtra region, wears a dismal look. The diamond business in the region, which employs 10 lakh workers, is now close to losing its shine, thanks to the economic slowdown.

According to the Gems and Jewellery Export Promotion Council (GJEPC), Gujarat accounts for 72 per cent of the global trade in processed diamonds and 80 per cent of Indias diamond exports. India is the worlds largest centre for cutting and polishing small rough diamonds. After Surat, which accounts for 92 per cent of the worlds cut diamonds, the Saurashtra region is the biggest centre for the cutting and polishing of stones weighing less than a carat (a unit measuring 200 milligrams).

The past one year has seen a serious decline in the diamond cutting and polishing trade following a slump in the demand for the gem in international markets. As is typical of economic crises, the workers have been the worst affected. More than 30,000 diamond workers in Bhavnagar and nearby towns such as Amreli are now out of work. If the global economy does not look up, thousands more will be on the streets, owners of diamond units say.

Already, out of the 1,600 factories located in Bhavnagar, 300 have been shut down. Other factories are working at 50 per cent of their capacity and have begun laying off workers. We suffered very badly in 2008, says Vithal Mendapara, a factory owner and the chairman of the Bhavnagar Diamond Association. Diamond cutting is the only source of income for many families in the region. With the rains playing truant, there is no work in the agricultural fields. It is going to be a terrible situation for the workers, Mendapara says.

The diamond industry in India suffered a huge setback in 2008-09 when international markets plummeted. Hundreds of units were forced to shut down, rendering thousands jobless. There were reportedly close to 200 cases of suicide by unemployed workers. The region, which has approximately 5,000 diamond units, never quite recovered from that crisis. This time round, diamond traders have slowed down production in the hope that the workers will remain in employment. However, this is as good as no work because diamond workers are paid daily wages according to the number of carats they cut and polish. Fewer work hours mean less pay, Mendapara says.

The problem is that there is no demand these days. We mainly export to the United States and Europe. The recession in those countries has directly affected our industry. The high exchange rate of the dollar and the high price of rough diamonds have added to our problems. In India, many people have lost the capacity to buy diamond jewellery as the price of gold has shot up dramatically. Ninety per cent of our production is exported, the remaining is for the Indian market. So if there are no exports, the industry suffers, Mendapara explains.

DIAMOND WORKERS AT A unit in Bhavnagar. It takes up to 20 minutes to polish a stone weighing less than a carat.-PICTURES: ANUPAMA KATAKAM

In 2008, we were left with a large inventory. This time we are trying not to allow that to happen, Chirag Patel, a trader in Bhavnagar, observes. For the past eight months we have survived because of the Indian market, but that is not our main market. Our losses are mounting, and we have told many workers not to come to work because we cannot pay them salaries. We paid them as long as we could. We fear a repeat of 2008, he says.

Statistics published by the GJEPC recently predict a bleak future for the industry. The exports of polished diamonds in the four months after April 2012 were worth $4.8 billion, whereas the exports in the corresponding period in 2011 were valued at $8.3 billiona 42 per cent decline. India exported $28 billion worth of polished diamonds in 2010-11. I wouldnt say the situation is so bad, says a spokesperson for the GJEPC. However, the fluctuating dollar and the rising price of rough diamonds have put a strain on the industry. Additionally, gold prices are very high, and so in general there is some caution in the industry. The GJEPC admits that there are conflicting reports in the industry. Ever since there was a dip in the demand for polished diamonds in the U.S. and Europe, the industry has begun to explore smaller economies for export. The United Arab Emirates emerged as the largest importer of Indian diamonds in 2011.


A walk through the labyrinthine lanes of Hira Bazaar, where hundreds of diamond units are located, provides interesting insights into the world of diamonds in Gujarats fifth largest city. A quaintly old-fashioned sight presents itself with the owners seated on the floor on cushions, resting their hands on a desk in front of them. People are milling about, but not many are trading. The general feeling is that the market is not good and there is not much business to be transacted.

In better times, the area used to be crowded with buyers, says Kalpesh Patel, who runs a sorting unit. We buy rough diamonds at a high cost but are unable to sell the cut stones at a good price after they are polished. They [the mining companies and sight holders] will have to reduce the prices to boost the industry. A carat was worth Rs.25,000 three months ago, but is only worth Rs.16,000 now.

Another sight that takes a visitor by surprise is that for a product as expensive as diamonds, none of the units has any form of security cover. In fact, all of them face the street and are entirely open. Everything is based on trust. Even the workers we hire will never pilfer, such is the level of trust, Kalpesh Patel points out.

Hundreds of workers are sorting and sifting diamonds according to shape, size and grade. The segregated pieces are then placed in small white packets which can easily fit into a wallet. It is unimaginable that each of those little packets is worth several lakhs of rupees. From time to time, the little packets are opened. To an untrained eye, the pieces of diamond seem like a small heap of glass shards. But under a magnifying glass, the sparkle of what is unmistakably a diamond is stunning. Traders carry these little packets and go about their business, which is: sell the stones to a middleman who takes them to Mumbai to sell to another trader who in turn sells the diamonds in the international or domestic market.

In Amreli, the office of Lalit Thummar, chairman of the Amreli Diamond Association, in the middle of the diamond market, is the only one with some manner of activity. The work benches in the other offices are empty. Some have a few workers, but by and large the work appears to have slowed down.

No one is lifting the stocks. We have estimated a 65 per cent drop in sales, Thummar says. There are few solutions in times such as these. Unless mining companies bring down the price of roughs, this industry will not improve in India because we are also unable to compete with a strong dollar. In spite of the diamond business being a huge sector in Gujarat, the State government does nothing for it. Why should diamonds [cut and polished in Gujarat] be exported from Maharashtra and benefit that State? There was a Diamond Development Board in Gujarat, but it has folded up. The government treats the diamond industry like a village industry and, therefore, we are unprotected and not organised. According to Thummar, in 2008, it was the GJEPC that disbursed compensation to the workers and not the government.

This correspondent was taken to a diamond factory on the recommendation of Mendapara and Thummar. Although there is no security shield around the premises, nobody can enter the shed-like structures without permission. A steady noise emanating from the unpainted sheds is the only giveaway that cutting and polishing are going on inside.

There are three shop floors of polishing machines. Each machine has four workbenches. Tubelights light up the hall and there is some ventilation from open windows. Workers are hunched over the machines, polishing tiny diamonds, paying little attention to anything else. Outside the shop floor, paan stains line the stairway.

A POLISHER AT his workstation.-

This is better than what it was before. Until a few years ago, there was hardly any electricity. We used to work by daylight, says Kalubhai Suhagia, who manages 80 workers in a unit in Bhavnagar. A typical worker spends eight to nine hours a day at his or her workstation. There is an hours lunch break. The daily wage is Rs.250 or more, depending on the weight of the diamonds polished.

The units in Saurashtra resemble sweatshops and follow no labour or industry rules. The clusters in Surat deal with pricier stones and, therefore, are larger and meet international standards and regulations. Thummar says it is easy to set up a unit in these districts. Essentially, diamond factories are non-polluting units and hence require sanction only from the municipal body. He says nobody checks the labour conditions in the thousands of units scattered across Saurashtra as long as the owners pay their taxes.

Diamond workers require very little qualification to be cutters or sorters. They learn on the job. Eventually, experience and employers trust are crucial for survival in the job. For decades, the industry was dominated by male workers. In recent years, women have entered the shop floor and now comprise at least 40 per cent of the workforce, says a spokesperson of the Bhavnagar Diamond Association. Diamond work is better than any other labour, says Manisha Makwana, who has been polishing diamonds for two years. They let us leave early, so we do not have to put in long hours like the men.

The diamond cutting and polishing industry came to Bhavnagar approximately 40 years ago. Earlier, workers from Saurashtra went to Surat and Mumbai to work in the diamond clusters there. Some enterprising workers returned to their villages to start small cutting and polishing units. It was a niche area that took off and brought economic prosperity to the region. We face some threat from China [a growing competitor in the diamond polishing business], but no one can match the skill of Indians in polishing and cutting, says Thummar. Hope the government recognises this and does something to save the industry.

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