Rough Cut

These are not the only deaths in Gujarat’s diamond hub. In Surat alone,at least 10 laid-off workers are reported to have committed suicide in the past fortnight. Gujarat’s Rs 70,000-crore diamond industry is seeing its worst crisis in years. Its processing industry accounts for 72 per cent of the world’s share of processed diamonds and 80 per cent of India’s diamond exports come from the state. But with the export market taking a hit,the long shadow of gloom has spread across Surat and Saurashtra where 90 per cent of diamonds are processed.

Usually,business in Surat,which hosts about 10,000 diamond units,peaks around Christmas and New Year. But the slowdown in the US and Europe has meant the orders have dried up. Around 60 per cent of diamonds polished in Gujarat are sold in the US,and the slowdown in the US has cost the state half of its business.

The industry’s troubles are compounded by the fact that it had earlier bought rough diamonds at peak prices. “The market demand was bound to go down. The way units were buying rough diamonds was abnormal. Despite higher prices,people bought the diamonds due to higher demand. After the slowdown in the US,they are now panicking,” says Sevanti Shah of Venus Jewels,based in Surat. Venus Jewels is one of the largest suppliers of polished diamonds to the US and is credited with pioneering the concept of online stocks for increasing sales. But with buyers drying up,the diamond units are now extending their forced vacation. While most units have closed,some like Surat’s Bhavani Gems has retrenched more than 300 workers. 

The boom
THE industry’s bleak times have come after two decades of boom,a period that triggered a wave of migration from the drought-prone districts of Amreli and Bhavnagar to Surat. Agricultural labourers and small-time farmers who made about Rs 50 a day,left their barren land for Surat’s booming industries where they could earn Rs 300 a day. The migrants account for 90 per cent of the 10-lakh work force of Surat’s diamond industry and live together in a ghetto in Varaccha in Surat.

But with the slump,the reverse migration has begun. Hundreds of workers have pulled their children out from school and are returning home,prompting the state government to make a list of school-going children of out-of-work diamond workers’ families in Ahmedabad,Surat,Amreli and Bhavnagar. While the state government sent a directive to schools to grant fee exemption for students from such families,NGOs have now stepped in to help them.

But these steps could be too small to stem the spreading desperation as out-of-job workers turn to stealing. On January 5,Arvind Patel and Anil Solanki were arrested in Surat with bootleg liquor worth Rs 62,000. The two diamond polishers had been unemployed for the last two months. Wanting to return the money they had borrowed from friends,they decided to ferry in liquor from Daman. The same day,Surat police arrested two more out-of-work diamond polishers,Mahesh Koli and Mukesh Patel,while they were trying to break into a shop.  

Political apathy
THE crisis in the diamond industry may have been the cause of many deaths but the gravity of the situation seems to have escaped the state’s political leaders,even though a few of them own diamond units themselves. As the industry suffered losses,the Gujarat government organised a three-day event—Sparkle 2008—in December to showcase its diamond industry. Gujarat Chief Minister Narendra Modi too hasn’t announced any relief package for the industry and has instead asked diamond barons to take care of their workers. The state government,in fact,has asked the central government to intervene.

So far,the Gujarat government has made two interventions. First,the labour commissioner has directed owners to keep their units open. But that’s not of much help to workers,as the owners are running their factories on bare minimum staff with lower wages.
Second,alarmed by the high dropout rate of children of jobless workers,district education offices have asked schools not to force children to pay their fees.

The road ahead
The industry,meanwhile,is struggling to find its way out of the slump. At Sparkle 2008 in Surat,a co-operative model of purchasing rough diamonds on the lines of Amul was discussed. Chandu Cheta,president of the diamond unit owners’ association,said they had opened the units under pressure from the government and there should have been a relief package.

But analysts have painted a grim picture. If 2008 was tough,2009 is likely to be worse. According to RSM Astute Consulting,the 5th largest audit,tax and consulting company in the US,the GDP growth of most of the developed nations/regions and the major diamond markets in the US and Europe is estimated to be negative in 2009.
Gujarat Bureau,Surat