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In-Depth
Bringing the Industry Together
By Zainab Morbiwala
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| Praveenshankar Pandya |
The gem and jewelry industry in India has been going through a roller-coaster ride since 2008. The top industry organization, the Gem and Jewellery Export Promotion Council (GJEPC), has been working continuously to promote the industry. These efforts have gained tremendous momentum under the leadership of Praveenshankar Pandya, who was elected chairman of the council in October 2015. For him, an important priority is to bring the entire industry together and to work toward the promotion of diamonds, increasing both demand and consumption. In a recent interview with Rapaport Magazine, Pandya outlined his plan of action and explained his views on the dynamics of the industry.
Rapaport Magazine: What are the biggest issues facing the Indian diamond industry?
Praveenshankar Pandya: There are several issues, but the most important one is the lack of demand. The demand for diamonds has definitely slowed down, although we do get sporadic and occasional demand that somehow keeps the industry going. In 2016, we only saw a few instances of good demand. There have been slow periods that have not been good for the industry, especially when we talk of small stones. For larger stones, the situation has not been good either, although +11 has been doing well. Melee has picked up, but star has not been doing well at all. This is worrisome as star employs a lot of people and we are not able to generate demand in these sectors. This is an issue we need to resolve.
The second most important issue that is being faced, not just by the Indian diamond industry but the entire industry globally, is that of synthetic diamonds. We are not against their fair sale, legally and with full disclosure. In India, we are fully committed to put all the structures in place so that separate procedures are implemented for synthetic diamonds as well as for natural diamonds. This should be done by other countries as well. The trading of synthetic diamonds is banned completely at the Bharat Diamond Bourse (BDB). We are launching machines that can detect synthetics immediately, including synthetics in diamond jewelry. We also have to keep a record of rough coming into the country and the polish that is going out — not only of natural diamonds but also synthetic diamonds. Therefore, we shall be addressing the issue of synthetic diamonds on different fronts.
We have seen that there is business for all kinds of diamonds and we know synthetics will also bring in business, but everything has to be done ethically. I think government agencies also need to keep track of this and not just the diamond industry. I went to the U.S. Federal Bureau of Investigation (FBI) and U.S. Department of State meeting hosted by Europol in The Hague that Martin Rapaport also attended. I raised this issue there as well. India will be doing its bit, but globally, each country needs to ensure that a separate footprint is maintained for synthetic and natural diamonds. This is very essential.
The third issue that we are facing is that of profitability. The miners have to price their product properly so that there is some room left for the middle stream and, of course, the retail stream as well. Everybody needs to make money. If we tackle these issues, the industry should see good days.
RM: How is the tightening of banking rules impacting the diamond industry in India?
PSP: I think that as of now, the regulations are okay, but further tightening may impact the industry a little bit. If the banks start withdrawing from the industry, the players who are largely dependent on bank financing will feel the impact. But again, as business has slowed down, the requirement is lower. But if there is a sudden demand, then there may be a problem.
The banking industry is worried because of a few bankruptcy cases that took place during the past couple of years. Yes, there are genuine bankruptcies, where people have lost money due to continuous slow growth in the market since 2008, with the industry not really making much money. We have been raising the issue of profitability with the miners during forums at each of the various international shows. What we have noticed is that some miners have tried to look only at their sales and this has put pressure on pricing and profitability that has made diamond manufacturers lose money. All this needs to be corrected. I am not talking of fraudulent bankruptcy. That is something we have to monitor and avoid, and banks also need to be vigilant before lending money to people who do not have a credible business. This due diligence has to be there on their part. When it is a case of fraudulent bankruptcy, we are in agreement with the bankers. But when it comes to genuine difficulty and genuine liquidity problems, the banks need to understand and draw a distinction.
RM: What type of government collaboration does GJEPC want for the diamond industry and are there any areas of government regulations that are hurting the diamond industry?
PSP: In every budget, the government has continued to support the industry, which is why the diamond industry in India has grown and has been regulated. There are a lot of countries where they have high tariffs, where the market does not develop, where there is no structure in the market, where a lot of illegal activities go on, etc. With the support of the government, we need to have bilateral agreements created through the World Trade Organization (WTO) public forum or other forums. The aim should be to work toward bringing down the duties so that a structured market can be developed across the world. We want the government to keep trying to accomplish that with different countries. We want to have our overseas manufacturers come and set up shop here. We want the government to give them presumptive taxation. We want the government to help us promote the industry. These are some of the things on our wish list.
RM: What is the impact of the excise tax on the diamond industry?
PSP: Not much. The main impact has not been on the diamond industry, but on the local sale of jewelry. Although those companies that are into both diamond and jewelry manufacturing are facing an issue. We have requested that the government not include diamond manufacturing and jewelry manufacturing companies as liable for the excise tax, as almost 95 percent of diamonds are exported. An excise committee was formed at the request of Piyush Goyal, minister of state, with independent charge for power, coal, new and renewable energy and mines, and Amit Shah, the president of the ruling party, Bhartiya Janata Party (BJP). They have addressed most of the concerns of the jewelry industry and very shortly will announce a change in regulations or the law. Once that happens, most of the problem will be history.
RM: What are some of the new strategic alliances that are being made to help the Indian diamond industry?
PSP: I think the answer to that can be summed up in one word, “promotion.” The Indian industry is committed to full promotion of all categories of all diamonds. We recently signed a joint venture agreement with the Diamond Producers Association (DPA). We have collaborated with them and we will collaborate with others. We also will undertake initiatives ourselves, so that there is maximum impact in terms of promotion and advertising.
GJEPC has initiated the Know Your Customer (KYC) initiative. We want to bring the world diamond industry under one platform. We are also planning an International Diamond Conference in January 2017, where we want miners and mining ministers from different countries, retailers, manufacturers, traders and everyone related to this industry to come and air their concerns and grievances. We need to come and work together. The conference is aimed at addressing industry issues and devising ways to see how the industry can grow. In 2017, we also plan to have a World Gold Conference in India. All of this is going to be a part of GJEPC’s fiftieth-year celebration.
RM: What is your message to the global diamond market?
PSP: The industry is passing through a difficult time and we have to work together. If different centers start pulling in different directions, then we will not be able to resolve the issues. We have good institutions like World Federation of Diamond Bourses (WFDB), GJEPC, as well as others. It is all about working together. We should not be looking at regional interests but should be looking at global interests. I am seeing that happening. I am seeing that there is a desire among industry centers to work together. Article from the Rapaport Magazine - August 2016. To subscribe click here.
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