Diamond industry demands bailout from imminent crisis

December 16th, 2008 - 7:43 pm ICT by IANS  

Mumbai, Dec 16 (IANS) An apex body representing 5,500 manufacturers and exporters of gems and jewellery, Tuesday warned of “an imminent crisis” looming over the industry in the face of the global economic meltdown.The industry had been hit badly with the US, which accounts for nearly 35 percent of India’s exports, reeling under a severe recession, Gems and Jewellery Export Promotion Council (GJEPC) chairman Vasant Mehta said.

“The US condition has seen a huge fall in demand, consequently hitting Indian exports to that country. As a result, we have been forced to cut production by over 25 percent and recently announced a moratorium on the purchase of rough diamonds for processing and production,” Mehta told reporters here Tuesday.

Added to this is the crisis of overall exports of gems and jewellery, which have gone down by 34.25 percent last month, with a similar trend during the current month.

At the manufacturing level, exports of cut and polished diamonds are down by a little over 20 percent as compared to the same period last year.

Orders have seen an average 20 percent fall between April-October this year, he said.

Mehta said these factors had forced the industry to keep away from work nearly 30 percent of the total 1.3 million workforce in the past couple of months.

Unless the government steps in and supports the industry with interim relief, the fate of these workers would hang in the balance, he added.

Mehta has suggested certain measures to stave off the impending crisis and save the workers from retrenchment.

“All stakeholders must be permitted to import gold directly and sell it to exporters. This will help alleviate the crisis of inequitable gold supply confronting the industry and enable smaller exporters fulfil their requirements of gold in smaller quantities,” Mehta said.

“The government should release dollars from its reserves for extending credits to the industry to tide over the current crisis,” he urged.

He said banks must be asked to continue giving credit on the limits sanctioned to each individual exporter on absolute dollar terms rather than on fluctuating exchange rates.

Banks should also discontinue the current practice of declaring an exporter’s account as a non-performing assets due to delayed collections.

Mehta pointed out that it took the country over four decades to become a world leader in processing diamonds. “Our biggest concern is the possibility of losing this pre-eminent position if the government does not implement these measures immediately.”

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