PM Narendra Modi seeks direct Indo-Russian diamond trade

In order to expand manufacturing sector and create more jobs here, Modi asked Putin to ease regulations and encourage Russian jewellers to process rough diamonds in India.

By ET Bureau | Dec 12, 2014, 04.00 AM IST

PM Narendra Modi seeks direct Indo-Russian diamond trade

NEW DELHI: Prime Minister Narendra Modi proposed ways of boosting the diamond trade between India and Russia to President Vladimir Putin on Thursday, including direct trading of major diamond companies on Indian bourses.

“I want major diamond mining companies to sell directly to the Indian diamond industry. It will be good for them and for India”, said Modi, while jointly inaugurating the World Diamond Conference in New Delhi with Putin.

Though India gets most of its roughs from Russia, less than 20% come directly while the rest come though trade hubs in Antwerp, Dubai, Tel Aviv, London, New York and Hong Kong, significantly adding to the cost for manufacturers and end consumers.

Modi said that the government has decided to create a special notified zone that will allow major mining companies to import rough diamonds on a consignment basis and re-export unsold ones.

“This is going to benefit Indian diamond industry and create more jobs for our youth,” he said. The move is expected to give a boost to the sector facing weak consumer demand.

Modi asked Putin, who was on a 24-hour visit to the capital, to reform regulations that will allow Russian jewellery makers to send rough diamonds to India and re-import polished diamonds without paying duty.

Alrosa, Russia’s largest rough diamond supplying company accounting for a third of global diamond production, signed agreements for direct sale of rough diamonds with 12 Indian companies, under which $2.1 billion worth of diamonds will be supplied to India at the rate of $700 million per year for the next three years. The move is expected to make diamonds less expensive for India and fuel consumer demand.

“I would like Alrosa to have direct long-term contracts with more Indian companies. I am pleased to know that they are moving in that direction”, said Modi. Putin asked India to improve ease of doing business.

“We expect India to improve customs procedures and ensure security enhancement besides ease of doing business,” he said.

The government has already announced the setting up of India’s first diamond special economic zone in Gujarat for exports. Surat, along with Navsari, Bhavnagar and Amreli are manufacturing and processing hubs while Mumbai is the trading centre.

“President Putin’s enthusiasm for Russian participation in our Make in India programme will help expand manufacturing and create jobs for our people,” Modi said.Commerce and industry minister Nirmala Sitharaman said that the diamond industry is an ideal example of Make in India. “We have achieved the number one position in the world for manufacturing of diamonds,” she said.

The diamond deal is seen as reducing costs by up to 10% for local companies that usually source unpolished stones from Antwerp, Dubai and Hong Kong.

“Half of our revenue is earned by direct and indirect sales to India. We sell diamonds worth $700 milllion to India as part of longterm sales, spot sales and auctions,” said Andrey Polyakov, vice president, Alrosa, the world’s leading diamond miner, accounting for 27% of global production. India cuts and polishes 85% of the world’s rough diamonds.

He said that sales of rough diamonds were expected to increase with the three-year direct contact with Indian players.

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Russian President Vladimir Putin in India for one day summit

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Russian President Vladimir Putin and Prime Minister Narendra Modi shake hands during their joint press conference at Hyderabad House in New Delhi on December 11, 2014.