US Sanctions on Russian Diamonds: An Impending Crisis for Surat's Diamond Industry

• The sanctions have triggered a crisis in Surat's diamond industry, particularly impacting the diamond polishing units.
• Approximately 30% of the diamonds processed in Surat are procured from Alrosa, leading to a significant shortfall in the supply of rough diamonds.
• This scarcity has resulted in a considerable wage reduction for diamond polishers, many of whom rely on loans for their livelihood.
• The US has further complicated matters by mandating diamond manufacturers to certify that their rough diamonds are not sourced from Russia.

Surat: The Global Hub of Diamond Industry

• Surat is globally renowned as a diamond cutting and polishing hub, with eight out of ten polished diamonds in the world originating from this city.
• Rough diamonds enter India primarily through Surat and Mumbai.
• Surat is the epicenter of India’s diamond industry, employing approximately a million people and generating annual revenue between $22 to $24 billion.
• The polished diamonds from Surat are set in jewellery and exported to various countries including the US, UK, Gulf nations, and more. Some diamond companies also export loose polished diamonds to Hong Kong and other markets.

Challenges Confronting the Diamond Industry

• Impact of Sanctions on Russia: Following Russia's invasion of Ukraine, the US imposed sanctions on various Russian exports, including diamonds. As a result, diamonds are no longer sourced from Russian mines.
• Dependency leading to Shortage: A substantial 30 to 35% of the rough diamonds supplied by Alrosa are processed in Surat and Mumbai. This dependency has led to a scarcity of raw materials in the industry, prompting many business owners to reduce their production.
• COVID Impact: The diamond industry was just beginning to recover from the effects of the COVID-19 pandemic, with an increase in the export of cut and polished diamonds in 2021-2022. However, this growth is likely to be hampered once again.
• Unemployment: The diamond polishing industry in Surat is staring at a potential 25% job loss as the US and Europe are expected to impose stricter sanctions on diamonds originating from Russia.
• Policy Loopholes: Many factory owners have not registered under the Factory Act, which governs the benefits provided to labourers. As a result, diamond polishers, being ineligible for government aid, are left in a lurch.

Conclusion

The diamond workers' union has called for a financial relief package of Rs 1,000 crore for the diamond polishers. They have also demanded the abolition of professional taxes imposed by civic bodies in Ahmedabad and Surat and payment of wages during the lockdown period. The government should consider establishing the Ratnakalakar Kalyan board to assist diamond polishers and their families, as well as the families of those polishers who committed suicide due to financial distress.

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