IMPORT MANAGEMENT

IMPORT OF ROUGH DIAMONDS

IN INDIA

SIIB
Publisher:
sidharthkapil@yahoo.com
They say
“India gives life to a
Diamond”

An amazing 11 out of 12 finished

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 it
valued US $1138. Import of cut and
polished diamonds decreased 5 percent
to US $763 million, as compared July
2008 figures of US $802.

• Direct Import of Rough Diamonds from

Africa

• Diamond cutting and polishing trade is

very employment-intensive and provides
livelihoods to over 10 lakh families in
India.
 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
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
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 2009
Value, US $ Million
Trend Of Imports/Exports in Diamond
Industry
Net Imports of Rough Diamonds

45000
40000
35000
30000
25000
20000
15000
10000
5000
0
2004-05 2005-06 2006-07 2007-08 2008-09
Value(Rs in Crores) 40039 38410 39921.5 34405.56 29901.45
Year
 Net Imports of Cut & Polished Diamonds

40000

30000

20000
10000

0
2004-05 2005-06 2006-07 2007-08 2008-09
Value(Rs in Crores) 16010 8832 22252 31884.19 35665.67
Year
 Net Exports of Cut & Polished Diamonds

60000
50000
40000
30000
20000
10000
0
2004-05 2005-06 2006-07 2007-08 2008-09
Value Rs(in Crores) 53892 48905 57117.17 58649.45 59759.03
Year
 Net Exports of Rough Diamonds

4000

3000
2000
1000
0
2004-05 2005-06 2006-07 2007-08 2008-09
Rs(in Crores) 1865 2388 2280.32 3474.93 2715.97
Year
 World Diamond Council
• Set up in July 2000 to prevent conflicts
entering into the diamond market
through illegal trade.
• 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 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
– 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
Jewellery
• Is a project of G & J EPC sponsored by Ministry of
Commerce and Finance
• Entirely supported by the Industry
• 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 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
networking and sourcing
widest variety of products
• More than 30000 visitors,
5000 Indian and International
Exporters.
Marketing Development Assistance
of 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.

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.

Application for MDA

Word 2007
Document
KIMBERLEY PROCESS
 Kimberley Process
• Kimberley Process Certification
Scheme (KPCS)
• Established in 2003 to prevent rebel
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 Process

Members of Kimberley
Process
• The scheme aims at preventing the
Blood Diamonds from entering the
mainstream Rough Diamonds Market.
 Blood 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
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
Process
• 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.
 KPCS
• Is a 3 Step Plan
• In order to be a member the country must
– Prove that diamonds originating are not sold
to 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 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.
– 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.
 KPCS
• KPCS emphasizes collecting and
publishing data relating to diamond
production and sales.
• 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
 Diamond Imprest License
•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

(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

value of export of cut and polished
diamonds during the preceding three
licensing 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
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 in
Appendix-30C while servicing rough diamonds to the
eligible persons.

• Fulfillment of Obligation by Bulk Licensee

– Proof of supplying rough diamonds to the REP/Diamond
Imprest licensee and to the EOU/EPZ units within the
prescribed period.
– Details of such supplies along with the original proforma
signed by the licensing authority
– Failure to supply rough diamonds within the prescribed
period shall attract surrender of REP Licences of S.No. 2.1
to 2.6 of Appendix-30A for a value twice the value of such
rough diamonds imported under the Bulk licence.
– Such licenses shall have a minimum validity of three months
on the date of surrender.
 Procedure for Servicing Rough
Diamonds Under Bulk Licence
• The licensing authority shall compare such original
with the proforma retained by it and thereafter
redeem the case provided the Bulk licensee has
supplied the rough diamonds upto the value of
rough diamonds imported under the Bulk Licence.
• Bulk licencee may apply for issuance of further
Bulk licence even before the expiry of the previous
Bulk licence provided he submits the proof to the
licensing authority of supplying rough diamonds to
the extent of 75% of the value of the previous Bulk
licence.
Diamond Dollar Account
• All pre and post shipment credit facilities given by
the banks in terms of Dollars to diamonds
importers/exporters operating under Diamond
Dollar Accounts Scheme (DDAS) shall be
designated in Dollars and be reflected as
borrowings in their DDAS.
• Export realisation as well as dollar realisation
from local sale of rough/polished diamonds shall
be credited immediately to such dollar accounts
on receipt of the same.
Diamond Dollar Account
• 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
(i) bank finance
(ii) export proceeds from shipments of
polished/rough diamonds
(iii) sale proceeds from local sales of
polished/rough diamonds.
 Diamond Dollar Account
• An exporter/local seller of cut & polished diamonds
operating under DDAS may apply for
Replenishment licence to the Regional Licensing
Authority (RLA) of DGFT
• It shall be in accordance with the para 8.2 of the
Exim Policy and para 8.2 to 8.7 of Handbook.

• In respect of local purchase of cut & polished

diamonds, the buyer will pay to the seller the
purchase value in dollars along with a disclaimer
certificate with respect to the license according to
appendix 30A for the local purchases
Diamond Dollar Account
• It will be on the basis of which the seller will apply
to the office of the RLA for the
Replenishment/Imprest obligation application as
per Appendix 30A.
• Enclosures with the certificate from the bank
– details of the value and invoice of cut and
polished diamonds purchased by him locally.
• Bulk licences for rough diamonds may be issued
as per paragraph 8.10 and 8.11 of Exim Policy
and paragraph 8.21 to 8.26 of Handbook
 Diamond Dollar Account
• Customs appraisal shall be applicable to physical
imports/exports as at present and shall not apply
to domestic sale/purchase of rough/polished
diamonds.
• Procedure and documents for physical imports
and exports shall remain unchanged for DDA
holders including the requirement of Diamond
Imprest Licence/ Rep Licence/Bulk Licence/Gem
Rep Licence and replenishment norms, (Appendix
30A) prescribed in the Exim Policy

Application for DDA Word 2007

Document
 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.

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
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.

• 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 companies:
companies

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

ii) RIO TINTO, UK,
iii) BHP Billiton, Australia,
iv) ENDIAMA, E. P. Angola,
v) ALROSA, Russia, and
vi) GOKHARAN, Russia.
 AD Category - I banks may
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
 Amt. of adv. payment

Name of the importer

Entity and IEC No.
Documents for
evidence
 India's finished diamond
export-
export-imports surge :
• India’s polished diamond exports :

17.65 % totalling $ 1.431 billion (Rs 61.732

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

• 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 No. of No. of No. of No. of No. of
District Diamond Diamond functioning Diamond workers
units workers units workers who have
(approx) (approx) (approx) engaged lost their
(approx) 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
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.

45.0
BoB 5 - - 4 34.00 - - - - 9 79.00
0
75.0 152.3 11.3
BoI 2 16 6 28.04 2 1 2.75 27 269.56
3 7 7

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

SBI 11 66.00 21 159 32 225.00

272.0 1218.6
Dena 3 946.64 1 4
0 4
120. 248.1 1455.2 11.3 272.0 2109.5
Total 7 28 46 2 1 2.75 1 85
03 6 6 7 0 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 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
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 undertake

Activities will have to be arranged by the Labour Department through the
training / technical institutions available in the State.
THANK YOU