Dealers Looking to Liquidate StockThe expectations for this year’s Hong Kong show are very high because Indian diamantaires are trying to liquidate their stock in response to the liquidity crunch facing the industry. Traders reportedly have a lot of stockpiled inventory they would like to clear out to collect on their investment, get to leaner inventory levels and build up a bigger cash cushion to ease cash flow. “All the players in the industry have a lot of inventory to liquidate,” Vipul Shah, chairman of the Gem and Jewelry Export Promotion Council (GJEPC) told Rapaport Magazine. “There is no fresh buying of rough taking place. The polished that is available is priced high so there is not much movement of polished being seen.” Over Diwali, the factories remain closed for more than two weeks so that creates additional pressure to raise cash by depleting stockpiled inventory. On another front, diamantaires from the Saurashtra Patel community called a meeting at which they asked local manufacturers to curtail their production of polished diamonds to keep from further inflating the supply of polished in the pipeline. The meeting was held in response to the large inventories dealers are carrying as well as the sluggish market demand the industry is seeing in the lead-up to Diwali, traditionally a strong retail holiday.
GJEPC also is planning to present a proposal to the Ministry of Commerce and Industry on the development of additional Special Economic Zones (SEZs) for diamond cutting and polishing units in the country. The council is soliciting recommendations in various committee meetings as to what should be in the proposal. SEZs provide special economic, bureaucratic and tax incentives to producers and manufacturers located within the zones. According to Shah, “We are meeting with our committee members over a period of two days and based on the report that we are producing in association with Accenture, we will bring a proposal before the ministry to talk about the development of SEZs to give a boost to exports.” Accenture is a global management consultancy. The meeting with the ministry was scheduled for September 22, 2014.
In mid-September, traders made their annual trek to the Hong Kong show. Speaking to Rapaport Magazine in advance of the show, which opened September 15, Shah said, “The entire industry is looking forward to the show. The Chinese market remains very important to us and this particular show also has many visitors from the U.S. Based on the response we receive at the show, we will come to know what can be expected from the months ahead in terms of international demand for gems and jewelry.” International diamond industry players were excited at the news that the Indian national air carrier, Air India, has introduced two daily flights — morning and evening — from Delhi to the country’s manufacturing hub at Surat, beginning September 17, 2014. The new service followed a series of meetings in which various diamond associations and trade groups expressed the importance of connecting Surat via air travel.
The Times of India has reported that tax authorities are claiming that Surat diamantaires who imported state-of-the-art technology for diamond cutting and polishing owe outstanding import taxes of approximately $28 million. The computerized equipment imports have helped the diamond industry improve their manufacturing processes and train their workers. Imported equipment and machinery are assessed 22 percent duty. In another unexpected blow for the manufacturing community, the customs department said it has decided to collect import duty on the software used in these machines as well. In line with that decision, it has issued notices to the diamond companies that imported computerized equipment for diamond cutting and polishing, asking them to pay import duty separately on the software included in that machinery. The issue of new duties on equipment software is expected to be of utmost importance at the second edition of the India Gem and Jewellery Machinery Expo (IGJME) to be held in association with the Surat Diamond Association from November 28 to 30, 2014. A failure to resolve the issue could hold up orders placed at the expo. IGJME will be held at the Surat International Exhibition and Convention Center and 85 exhibitors are scheduled to appear. According to a press statement, approximately 5,000 decision makers from the production and retail segments of the gems and jewelry industry are expected to visit the expo, which will showcase the latest developments and equipment in the technology arena.Article from the Rapaport Magazine - October 2014. To subscribe click here.