India Protests DTC Sight Reduction

The Gem & Jewellery Export Promotion Council has expressed what it describes as “grave concern” over De Beers Diamond Trading Company‘s pruning of Indian sight holders for 2008-2011.

The new DTC list eliminates 25 established sightholders, including eight firms in India and three Indian-owned firms in Belgium, GJEPC said. DTC added six firms, including three from India.

This means that 75 firms will receive regular supplies of rough diamonds for the three-year period, down from the 94.

“While the inclusion of three new Indian firms in the sight holder list is welcomed, the pruning of eight Indian firms defies analysis,” GJEPC said in a statement.

The DTC has said that one reason for the reduction of sightholders is due to a global shortage of rough diamonds. GJEPC argues that while it believes the shortage is real, adding six new sights goes against its own reasoning. In addition, GJEPC said that it believes the diamond shortage amounts to no more than 10 percent of supplies, but DTC cut almost 25 percent of capacity in India.

“The concern is on the impact of DTC’s business decision on the industry as a whole,” said Sanjay A. Kothari, GJEPC chairman. “This move by DTC will consolidate the business in few hands only, as small and medium enterprises dependent for rough diamond supplies through intra-trade dealings with sight holders will discontinue.”

Kothari added, “This will lead to massive unemployment in the sector and affect medium manufacturers. The exclusion has caused discomfort even amongst the existing sight holders as the ones removed will have to bear major investment losses. Mega expansion and investments were undertaken by companies towards integrating manufacturing facilities and now they would be deprived of assured rough supply which will greatly affect their set up.”

GJEPC said that the overall impact could have been reduced if the DTC would have increased allocation to the Hindustan Diamond Company. The HDC is a joint venture between De Beers and the government of India and is part of what is known as De Beers’ Diamdel system—a rough diamond supply system set up expressly to feed the market outside its own client list.

“The reasoning behind the announcement of the new sight holder list may be pertinent, but pulling the plug on established companies just after having watched them invest huge amounts in building infrastructure, suddenly triggers a massive loss of trust and business confidence throughout the industry, GJEPC said in its statement.

“No industry with any long-term vision can continue to do business with confidence or develop any plans for the future if it continually wonders whether its raw material supplies could completely vanish in an instant.

“The GJEPC requests DTC to review and reconsider its decision-making process for the selection of sight holders for the coming three-year contract period, as its responsibility to the diamond processing industry as a whole globally and in India particularly is immense, when weighing any new consideration.”