IMPORT MANAGEMENT IMPORT OF ROUGH DIAMONDS IN INDIA

SIIB
Publisher: sidharthkapil@yahoo.com

They say

“India gives life to a Diamond”
An amazing 11 out of 12 finished diamonds in the world are cut and polished in India Gujrat accounts for an overwhelming 72% of World’s diamond cutting and polishing industry India as a whole has 80% dominance in this Industry

Introduction
• India’s imports of rough diamonds declined 25 percent to US $848 million, while in the same month last year it valued US $1138. Import of cut and polished diamonds decreased 5 percent to US $763 million, as compared July 2008 figures of US $802. • Direct Import of Rough Diamonds from Africa • Diamond cutting and polishing trade is very employment-intensive and provides livelihoods to over 10 lakh families in India.

Introduction
• Rough diamonds are procured through a plethora of sources with the bulk flowing through Antwerp in Belgium • Steps are being undertaken to diversify and beef up supply of roughs from the African countries. • Indian mining companies are seeking to explore and develop diamond mines in Angola. • Namibia and India have agreed to set up a joint working group to prepare a detailed plan for long-term partnership in the diamonds sector

Introduction
• India can no longer be stuck in the public sector mode of cooperation as Indian private companies are very much sought after. • Need to work with private sector companies closely since they enjoy a good repute globally and signify the ‘new’ India that is commanding so much clout abroad.

Impact of Global Financial Crisis
• Indian diamond industry was severely hit • Dried up liquidity has made it extremely tough to buy diamonds from foreign mining companies • G n J EPC had asked to members to halt imports from overseas suppliers in November 2008 • This move by the Indian Diamond Industry is meant to apply pressure on the global diamond miners so that they may also share in the financial burden along with the exporters, who are currently undergoing unprecedented crisis

World Production of Rough Diamonds, Year 2009 Weight Million Carats

World Production of Rough Diamonds, Year 2009 Value, US $ Million

Trend Of Imports/Exports in Diamond Industry
Net Imports of Rough Diamonds
45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Value(Rs in Crores) 2004-05 40039 2005-06 38410 2006-07 39921.5 Year 2007-08 2008-09

34405.56 29901.45

Net Imports of Cut & Polished Diamonds
40000 30000 20000 10000 0 2004-05 2005-06 2006-07 2007-08 2008-09 8832 22252 31884.19 35665.67 Year

Value(Rs in Crores) 16010

Net Exports of Cut & Polished Diamonds
60000 50000 40000 30000 20000 10000 0

2004-05 2005-06 2006-07 2007-08 2008-09 48905 57117.17 58649.45 59759.03 Year

Value Rs(in Crores) 53892

Net Exports of Rough Diamonds
4000 3000 2000 1000 0 Rs(in Crores) 2004-05 2005-06 2006-07 2007-08 2008-09 1865 2388 2280.32 3474.93 2715.97 Year

World Diamond Council
• Set up in July 2000 to prevent conflicts entering into the diamond market through illegal trade. • Consists of Diamond manufacturing and trading countries. • 10 committees like Finance, Banking, Legal, Legislative etc. • Charts out diamond grading guidelines.

GEM AND JEWELLERY EXPORT PROMOTION COUNCIL

Gem and Jewellery Export Promotion Council
• Set up in 1966 • Effectively made the Gem and Jewellery sector the driving force of India’s export led growth • Has continuously worked to strengthen the pool of artisans and designers trained to international standards • More than 6500 members • Has regional offices in Mumbai, Delhi, Jaipur, Chennai, Surat and Kolkata.

Role of G & J EPC
• Trade Facilitator
– Undertakes direct promotional activities like trade shows, exhibitions

• Advisory Role
– Takes up relevant issues with the government

• Nodal Agency for KPCS
– Works with Govt of India to implement and oversee KPCS

• Training and Research
– Runs training institutes in Mumbai, Surat, Jaipur and Delhi to have highest standards

• Varied Interests
– Publishes a number of Brochures, Statistical Booklets for members and international circulation

Indian Institute of Gem and Jewellery
• Is a project of G & J EPC sponsored by Ministry of Commerce and Finance • Entirely supported by the Industry • Mission Statement “To harness the creative energy of youth and foster a commitment to professionalism, quality and excellence to meet the rising demand for skilled manpower as India develops into the undisputed world leader of the gems and jewellery industry.”

India International Jewellery Show
• An initiative by G & J EPC • IIJS 2009 was the Silver Jubilee of this show • IIJS is a brand in itself and is an ideal destination for networking and sourcing widest variety of products • More than 30000 visitors, 5000 Indian and International Exporters.

Marketing Development Assistance of G & J EPC
i) Assist exporter for export promotion activities abroad. ii) Assist Export Promotion Councils (EOCs) to under take export promotion activities for their product(s) and commodities. iii) Assist approved organizations/trade bodies in undertaking exclusive nonrecurring innovative activities connected with export promotion efforts for their members. iv) Assist EPCs to contest Countervailing Duty/Anti Dumping cases initiated abroad. v) Assist Focus export promotion programmes in specific regions abroad like FOCUS (LAC), Focus (Africa), Focus (CIS) and Focus (ASEAN + 2) Programmes. vi) Residual essential activities connected with marketing promotion efforts abroad. Application for MDA
Word 2007 Document

KIMBERLEY PROCESS

Kimberley Process
• Kimberley Process Certification Scheme (KPCS) • Established in 2003 to prevent rebel groups being financed by diamond sales • Is a process introduced by United Nations to certify the origin of rough diamonds which are free from the conflicts fueled by Diamond production

Kimberley Process

• The scheme aims at preventing the Blood Diamonds from entering the mainstream Rough Diamonds Market.

Members of Kimberley Process

Blood Diamond
• Refers to a Diamond mined in a War Zone and sold to finance an Insurgency, usually in Africa • In 1980s reports estimated that almost 15% of total diamonds were sold for illegal purposes or insurgencies. • In 1998, UN placed sanctions forbidding countries to buy Diamonds from Angola • Angola was under a civil war and UNITA sold diamonds for financing its war against the Government. • Other countries facing UN ban include: Republic of Congo, Cote d’lvoire, Sierra Leone

Establishment of Kimberley Process
• The diamond industry as a whole took steps to avoid conflicts. • May 2000: Diamond producing countries of Southern Africa meet
– To halt conflicts arising out of diamond trade – To ensure buyers that their diamonds have not contributed to violence – After negotiations with diamond producers and governments the Kimberley process came into existence.

KPCS
• Is a 3 Step Plan • In order to be a member the country must
– Prove that diamonds originating are not sold to finance illegal activities – Every diamond export is accompanied by KP Certificate – And no diamond is exported to/ imported from a non member country

Compliance with KPCS
• Requirements of KPCS
– Each shipment of rough diamonds crossing an international border should be:
Transported in a tamper-resistant container. Accompanied by a government-validated Kimberley Process Certificate.

– Each certificate must be resistant to forgery, uniquely numbered and describe the shipment's contents. – The shipments are only supposed to be exported to other KPCS participant countries. Failure to fulfill these criteria may lead to removal from the KPCS scheme.

KPCS
• KPCS emphasizes collecting and publishing data relating to diamond production and sales. • All member countries have to publish an annual report on their diamond trade. • In 2006, KPCS monitored around 35.7 B$ rough diamond exports • Number of KPCS certificates issues was around 55,000

Diamond Imprest License
•Application made as given in Appendix29 in the form given in Appendix-15B. •Exporter shall give: (i) Declaration giving name and address of his bankers (ii) Certificate from his bankers to the effect that realization of export proceeds against exports made by the exporter are not outstanding for a period of more than six months.

Bulk License
• Following persons are eligible a) M/s Hindustan Diamond Company Ltd (HDCL), Mumbai (b) MMTC Ltd, New Delhi (c) Exporter whose annual average FOB value of export of cut and polished diamonds during the preceding three licensing years has been not less than Rs. 75 crores

Bulk License
(d) Any overseas company with its branch office in India whose annual average turnover in diamonds during the preceding three licensing years is not less than Rs. 150 crores • Application made as given in Appendix-29 in the form given in Appendix-15C along with documents prescribed

• Validity
– Value shall be for a period of 12 months from the date of issue

Entitlement
• The value shall not exceed 50% of the annual average value of export of cut and polished diamonds made by the applicant during the preceding three licensing years. • In the case of any overseas company with its branch office in India, the entitlement shall not exceed 50% of annual average turnover of the preceding three licensing years. • For HDCL/MMTC the value shall be 1.5 times of the total value of rough diamonds imported by them against the bulk license(s) in the preceding year.

Procedure for Servicing Rough Diamonds Under Bulk Licence
• Bulk Licensee shall follow the procedure as given in Appendix-30C while servicing rough diamonds to the eligible persons. • Fulfillment of Obligation by Bulk Licensee
– Proof of supplying rough diamonds to the REP/Diamond Imprest licensee and to the EOU/EPZ units within the prescribed period. – Details of such supplies along with the original proforma signed by the licensing authority – Failure to supply rough diamonds within the prescribed period shall attract surrender of REP Licences of S.No. 2.1 to 2.6 of Appendix-30A for a value twice the value of such rough diamonds imported under the Bulk licence. – Such licenses shall have a minimum validity of three months on the date of surrender.

Procedure for Servicing Rough Diamonds Under Bulk Licence
• The licensing authority shall compare such original with the proforma retained by it and thereafter redeem the case provided the Bulk licensee has supplied the rough diamonds upto the value of rough diamonds imported under the Bulk Licence. • Bulk licencee may apply for issuance of further Bulk licence even before the expiry of the previous Bulk licence provided he submits the proof to the licensing authority of supplying rough diamonds to the extent of 75% of the value of the previous Bulk licence.

Diamond Dollar Account
• All pre and post shipment credit facilities given by the banks in terms of Dollars to diamonds importers/exporters operating under Diamond Dollar Accounts Scheme (DDAS) shall be designated in Dollars and be reflected as borrowings in their DDAS. • Export realisation as well as dollar realisation from local sale of rough/polished diamonds shall be credited immediately to such dollar accounts on receipt of the same.

Diamond Dollar Account
• DDAS eligible firms and companies may be allowed to open it with their bankers. • A maximum of two Diamond Dollar Accounts would be allowed with two separate banks. • Sources of dollars in Dollar Accounts shall be (i) bank finance (ii) export proceeds from shipments of polished/rough diamonds (iii) sale proceeds from local sales of polished/rough diamonds.

Diamond Dollar Account
• An exporter/local seller of cut & polished diamonds operating under DDAS may apply for Replenishment licence to the Regional Licensing Authority (RLA) of DGFT • It shall be in accordance with the para 8.2 of the Exim Policy and para 8.2 to 8.7 of Handbook. • In respect of local purchase of cut & polished diamonds, the buyer will pay to the seller the purchase value in dollars along with a disclaimer certificate with respect to the license according to appendix 30A for the local purchases

Diamond Dollar Account
• It will be on the basis of which the seller will apply to the office of the RLA for the Replenishment/Imprest obligation application as per Appendix 30A. • Enclosures with the certificate from the bank – details of the value and invoice of cut and polished diamonds purchased by him locally. • Bulk licences for rough diamonds may be issued as per paragraph 8.10 and 8.11 of Exim Policy and paragraph 8.21 to 8.26 of Handbook

Diamond Dollar Account
• Customs appraisal shall be applicable to physical imports/exports as at present and shall not apply to domestic sale/purchase of rough/polished diamonds. • Procedure and documents for physical imports and exports shall remain unchanged for DDA holders including the requirement of Diamond Imprest Licence/ Rep Licence/Bulk Licence/Gem Rep Licence and replenishment norms, (Appendix 30A) prescribed in the Exim Policy
Application for DDA
Word 2007 Document

REP License
• Replenishment Licence
Application for REP Licence may be made to the licensing authority concerned as given in Appendix-29 Application shall be filed within six months following the month/quarter during which the export proceeds are realised. Consolidated application for entire month/quarter shall be filed for export proceeds realised during the month/quarter.

For third party exports, REP benefit provided if the EP copy of the Shipping Bill shows the names of both the manufacturer and the third party and REP licence against such exports is claimed by either of the parties after furnishing a disclaimer from the other party. REP licences will be transferable.

• PART PAYMENT HAS BEEN REALISED
Application for REP licence can be made within six months following the payment month.

• Conditions:
Not more than two such applications may be made for each such invoice The first such application shall be made only after 50% of the proceeds of the invoice is realised.

• REP Licence Against Rough Diamonds
Exporter shall furnish Bill of Entry in his own name for imports of rough diamonds. Suitable endorsement on the original Bill of Entry by the licensing authority while issuing the REP licences. This avoids further use of the same Bill of Entry for claiming additional REP Licences.

Original Bank Certificate/Customs Attested Invoice/Shipping Bill Lost.
• Duplicate copy of the Bank Certificate of Export and Realisation OR certificate from the Customs. • Affidavit by the exporter about the loss of the Bank Certificate of Export and Realisation or the Customs attested copies of invoice. • An Indemnity Bond from the exporter indemnifying the Government against loss. • No REP licence shall be issued in cases where all the three documents in original have been lost.

Mar 02, 2007 The Expert Committee on Gems and Jewellery Sector, constituted by the MoF, GoI. RBI/2006-2007/278-A. P. (DIR Series) Circular No. 34. Recommended a more liberal approach. AD Category - I banks permitted advance remittance up to USD 1,000,000/- or its equivalent, w/o a bank guarantee / Standby loc.

companies: List of companies
i) ii) iii) iv) v) vi) Diamond Trading Company Pvt. Ltd., UK, RIO TINTO, UK, BHP Billiton, Australia, ENDIAMA, E. P. Angola, ALROSA, Russia, and GOKHARAN, Russia.

AD Category - I banks may ensure the following :
• The importer should be a recognised processor of rough diamonds ,approved by GJEPC. • The transaction based on their commercial judgment. • Amt is credited directly to the account of the company concerned. • Follow up -submission of the Bill of Entry / documents evidencing import of rough diamonds into the country

Amt. of adv. payment Name of the importer Entity and IEC No. Documents for evidence

India's finished diamond exportexport-imports surge :
• India’s polished diamond exports : 17.65 % totalling $ 1.431 billion (Rs 61.732 billion). • Imports of polished diamonds : 112 % to $ 726.1 million (Rs 31.77 billion). Value addition from industry : $ 704.9 million.

In terms of volume
• polished diamond exports : 16% in volume to 4.128 million carats. Imports of polished diamonds : 1.94 % in volume to 1.765 million carats. 2.363 million carats of Rough diamond imports

India is a net exporter of polished diamonds. It has + ve. balance of trade. India’s exports exceeded imports by $704.9 million (Rs 30 billion approx.).

Problems faced by Diamond Industry
• Export industry is predominantly an export oriented industry •Hence effected by global economic situations • Diamond industry in Gujarat accounts for 72% of the world’s processed diamonds and 80% of India’s diamond exports •The diamond industry is, essentially, a closed family-based sector where the labour force is not systematically organised. •However due to recession, it is estimated that approximately 4.13 lakh workers have lost their jobs in the recession-hit diamond industry.

Name of the District

No. of Diamond units (approx)

No. of Diamond workers (approx)

No. of functioning units (approx)

No. of Diamond workers engaged (approx) 2,00,000 42,000 5,670 10,000 1,500 10,000 12,000 2,000 14,000 2,97,170

Surat Ahmedabad Mahesana Banaskantha Patan Rajkot Amreli Junagadh Bhavnagar Total

2,500 900 32 300 50 290 1,450 125 900 6,547

4,00,000 1,00,000 9,450 20,500 2,000 39,000 60,000 10,000 70,000 7,10,950

1,238 315 20 90 37 90 250 20 170 2,230

No. of workers who have lost their jobs (approx) 2,00,000 58,000 3,780 10,500 500 29,000 48,000 8,000 56,000 4,13,780

• It may be observed that the aggregate of finance extended to diamond units by the four major commercial banks operating in the state and SIDBI works out to Rs.21.09 crore only
Bank

Rajkot
Unit Amt.

Bhavnagar
Unit Amt. Unit

Surat
Amt.

Navsari Unit Amt.

Valsad

Ahmedabad Amt. Unit

Total Amt.

Unit Amt. Unit

BoB

5

45.0 0 75.0 3 -

-

152.3 7

4

34.00

-

11.3 7 -

-

-

9

79.00

BoI SIDBI SBI Dena

2 -

16

6 12 21 3

28.04 287.58 159 946.64 1455.2 6

2 -

1 2.75 -

27 13 32 1 272.0 0 272.0 0 4

269.56 317.37 225.00 1218.6 4 2109.5 7

1 29.79 11 66.00

Total

7

120. 03

28

248.1 6

46

2

11.3 7

1 2.75

1

85

ISSUES AND SUGGESTIONS
• Banks’ support to units:
RBI has taken several measures to enhance credit delivery to the employment intensive Micro and Small Enterprises (MSE) sector. On August 27, 2008, RBI vide its circular DBOD.BP.BC No.37/ 21.04.132/2008-09 issued comprehensive prudential guidelines for restructuring of advances by banks

• Banks may consider granting additional facilities / concessions / relaxations as provided in the IBA special guidelines for micro credit

• Operationalisation of units: Authorities may, through moral suasion, persuade the units to open and operate at lower levels of turnover • Registration of units Mitigate the problems arising out of non-registration of the units • Encouragement for re-employment Encouraged to employ the workers identified as diamond workers even at a lower scale of wages.

Identification of diamond industry workers
Category Level – I Level – II Skill set Uneducated, unskilled, mostly engaged in manual labour Less educated / partially skilled / capable of undertaking small business, etc. Level – III Primary level education, moderate capability for

undertaking business Level – IV Highly skilled; those with managerial capability, etc.

The training and skill development required by the workers to undertake Activities will have to be arranged by the Labour Department through the training / technical institutions available in the State.

THANK YOU

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