Losing its lustre? A model wears a diamond and ruby necklace

Ahmedabad, Nov. 12: The US credit crisis has clamped a forced holiday on Surat’s diamond industry — not a single cutting and polishing unit has reopened since Diwali and the break threatens to extend past Christmas.

Around 92 per cent of the world’s rough diamonds are cut and polished in the south Gujarat city which did business of around Rs 50,000 crore last year. The US, the world’s largest consumer of diamond jewellery, accounts for 60 per cent of Surat’s exports.

In 2007, Christmas orders from the US were worth Rs 20,000 crore. This year, orders for only Rs 5,000 crore have been received, putting at risk the jobs of 10 lakh workers.

“The impact of the global financial slowdown is such that not a single trader is seen in the market,” said C.P. Vanani, president of the Surat Diamond Association.

The layoffs have begun. In Mumbai, where many Surat firms have establishments, over 10,000-12,000 workers — most of them day labourers — have been asked to go on a three-month leave. In Surat, 50,000 have lost their jobs or been sent on extended leave.

“We are waiting for inventories to clear, hopefully by Christmas-New Year, after which we will take a call. If the situation does not improve, the forced leave may extend,” said Vasant Mehta, chairman of the Gems & Jewellery Export Promotion Council.

Surat has some 500 big diamond units, each employing between 5,000 and 10,000 workers, and around 3,500 small firms with a workforce of 100 to 500. The workers earn between Rs 5,000 and Rs 15,000 a month while the master-cutters get Rs 60,000-80,000.

In other years, the Diwali vacation would last 15 days, beginning a week before the festival. This year, it started two weeks before Diwali, celebrated on October 28.

“It looks like the vacation will be extended to December-end. Small units may not reopen at all,” said Vanani, adding the next two months would be vital for the future of Surat, which had an annual GDP growth rate of 16.5 per cent against the national 9 per cent.

With the sensex also falling, Diwali sales were low. Two local diamond markets — at Varachha and Mahidharpura — that were to reopen on Monday were deserted.

Many US jewellery firms have shut shop, some have defaulted on payments and others have cancelled orders. Sources said some big diamond merchant houses based in Mumbai and Surat have closed offices in the US and moved to West Asia, Hong Kong and Russia.