Kiran Gems, one of the world’s leading manufacturers of polished diamonds, has announced an unprecedented 10-day vacation for its 50,000 employees from August 17 to 27. The diamond firm of Surat in Gujarat will be unusually quiet during this period, reflecting the dramatic drop in global demand for polished diamonds, exacerbated by ongoing economic turbulence and geopolitical tensions.
What Led to This Drastic Measure?
Kiran Gems’ chairman, Vallabhbhai Lakhani, emphasized the necessity of this break, a first in the company’s history. “We’ve declared this holiday to control diamond production,” Lakhani told The Indian Express, highlighting the industry’s ongoing struggles.
The Industry’s Tough Times
According to Lakhani, the diamond industry is experiencing a “bad patch.” He explained, “The price of polished diamonds has gone down globally, making it difficult for diamond manufacturers to sustain their businesses. If the supply is controlled, the demand will grow, benefiting the industry.”
Despite the tough times, Lakhani assured that all workers would receive their salaries during this period, although certain amounts would be withheld, as reported by PTI. Kiran Gems, employing over 50,000 polishers, faces significant challenges, with De Beers reporting a 15 percent drop in rough diamond production in the second quarter of the 2024 fiscal year compared to the first quarter.
How is the Local Industry Affected?
Jagdish Khunt, president of the Surat Diamond Association, echoed Lakhani’s views, noting that the recession has severely impacted the local diamond industry, which processes nearly 90 percent of the world’s diamonds. “This is the first time Kiran Gems has declared such a vacation for employees. Though no other diamond firm has taken such a step, it is a reality that the recession has reduced the sale of polished diamonds,” said Khunt. He added, “In 2022, our diamond industry’s turnover was nearly Rs. 2,25,000 crore, which has now decreased to nearly Rs. 1,50,000 crore. So, we have been negative for the last two years.”
What Are the Global Factors at Play?
Khunt explained that since 95 percent of India’s polished diamonds are exported, global factors invariably impact sales. The Russia-Ukraine war and the Israel-Palestine conflict are major contributors to the slump in global demand. Russia’s Alrosa, a diamond-mining enterprise partially owned by the Russian state, supplies approximately 30 percent of the world’s rough diamonds, with India sourcing about 60 percent of its roughs for polishing from Alrosa. Following Russia’s invasion of Ukraine in February 2022, the Biden administration imposed sanctions on Alrosa, disrupting the overall rough diamond supply.
The United States, being the largest market for India-processed diamonds, saw several major American companies refusing to purchase goods of Russian origin, further impacting Surat’s diamond industries, leading to downsized operations and thousands of job losses.
What Are the Future Prospects?
Last year, the EU and G7 countries, which purchase 70 percent of the world’s diamonds, initiated a ban on Russian-origin diamonds via third countries, with its first phase beginning in early March. External Affairs Minister S. Jaishankar addressed this concern, stating, “Our effort is to delay, soften it, and best of all, not let this happen at all. For us, this has become a priority issue, and we will try to find a solution in the coming days.”
Khunt emphasized that these international sanctions and conflicts have forced Surat’s industry to adapt and struggle amidst these global challenges. As the diamond firm navigates these turbulent times, the hope remains for a revival in demand and stabilization of the market.
