Surat Diamond Units Losing Sparkle After Massive Lay-Off, Closure

Ahmedabad/New Delhi: Surat’s diamond cutting and polishing industry has come to a grinding halt due to the absence of government support, a non-friendly export policy, the Russia-Ukraine war, the horrible COVID-19 situation in China and the economic slump in the West.

A decline of around 30% in global demand has resulted in the closure of smaller processing units and a massive lay-off. A rough estimate suggests that more than 7,000 units have stopped functioning or laid off around 20,000 workers in the past six months.

Employing 800,000 workers, Surat is home to 4,000-odd diamond cutting and polishing units. The USA is the biggest market for cut and polished diamonds with China a close second.

Premal Sakaria (27), who was employed with various units in the past 10 years, was suddenly jobless in December when his factory shut down.

“I along with 150 workers was fired post-Diwali (last October). We are looking for jobs, but the salary is not more than Rs 10,000. It is too less during this high inflation,” he told Newsclick.

Another worker Vipul Jinjala (31) committed suicide by consuming poison on January 31. The father of two couldn’t make ends meet with his shrinking salary and skyrocketing prices.

“There are thousands of workers who cannot make ends meet, and pay their children’s tuition fees and house and vehicle EMIs,” said Jinjala’s younger brother.

If claims made by the Diamond Workers Union are something to go by, 20,000 workers have been fired in Surat’s $40 billion diamond industry.

“More than 20,000 workers have lost their job across Surat since Diwali. A company in Katargam recently shut down and fired 700 workers. Thousands of such smaller units in the city had to close operations. We receive, at least, two to three complaints about lay-off daily,” union vice-president Bhavesh Tank said.

The union has demanded strict implementation of labour laws and the Factory Act in the diamond industry so that workers can get provident fund, ESCI, health, other social benefits and fixed working hours.

According to Tank, the workers don’t have social security because they are not registered. “Since they don’t get salary slips and file income tax returns”, he said, “they don’t get other benefits as well.”

However, diamond merchants termed the job loss figures exaggerated. A majority of units, they said, have reduced working hours but not fired such a large number of staff.

“The figures are exaggerated and incorrect; not a single worker has been fired. The working hours are being reduced. If some big company has fewer orders, it gives offs on Saturdays and Sundays. Instead of removing and reducing their workforce, they are managing,” claimed Dineshbhai Navadiya, a member of the Surat Diamond Association.

Association president Nanubhai Vekariya denied the closure of units. “Not a single unit has shut down in the past two to three months. The hue and cry about the recession is unnecessary when the industry is working at 100% capacity,” he said claiming that seven lakh workers are employed with 3,000 diamond processing units.

Gems and Jewellery Promotion Council (GJEPC) regional chairman Vijay Mangukia feels the same. “Since an 18% decline in imports,” he explained, “the production had witnessed a cut of 20-21% during the peak season of Christmas.”

The exports and imports of gems and jewellery witnessed a double-digit decline last October supposedly because of the slowing global economy and high inflation across key markets.

The export of cut and polished diamonds, as per data, was estimated at $2,356.70 million last December—a decline of 18.90% from $2,905 million recorded in the same month in 2021.

GJEPC data shows that the gross exports of cut and polished diamonds in the April-November period of this financial year 2022-23 declined by 5.43% from the year-ago period.

“As a result, several units had to decrease production,” Mangukia said claiming that the production cut “did not result in lay-offs”. The processing units, he said, too have reduced working hours from 12 to 10 or 8 and give two weekly offs instead of one.

Countering the claim, Tank explained that the reduced working hours and increased weekly offs have forced workers to cut and polish fewer diamonds. “And since their salaries are linked to pieces they process everyday, these steps are proving to be disastrous for workers,” he said. 

Several other industry experts contradicted the claims of GJEPC and Diamond Association as well asserting that workers have been drying up of late.

“The fear of recession has forced most of the units to reduce their capacity by 30-40%,” Ajay Kedia, managing director of Kedia Commtrade and Research told Newsclick.

He said that the decline in the demand for cut and polished diamonds in the West and China is the major reason for reduced exports. “Business has been hit badly in the past 10 months. If 100 diamonds were sold earlier, now only 60 are being sold,” he added.

Industry officials said that both countries are facing recession fears, which has adversely impacted demand and forced many units to sack workers or suspend operations.

Surat is the world’s largest hub of diamond processing—90% of the total diamond processed here is exported largely to the USA and China.

GOVERNMENT SUPPORT CRUCIAL AMID GLOBAL UNCERTAINTY

For doing business overseas, small firms have to pay the government a 2% equalization tax through e-commerce since they don’t have offices there. 

“How can they give 2% in high value? We have been requesting the government for the past two years to remove the levy to enable small merchants to do business and compete with larger players,” Navadiya said. Amid the global uncertainty, only government support will help the industry survive the tough situation, he added. 

GJEPC has asked the government to allow the sale of rough diamonds through a special notified zone to facilitate trade between SMEs and diamond mining companies and allow diamond exporters to benefit from the policies of major African mining countries. The council has urged the government to abolish the 7.5% import duty on raw materials for lab-grown diamonds.