Dire times grip India's diamond capital

Thousands of people in Surat have lost their jobs as the demand for precious stones drops.

Gem polishers finishing stones at a company in Surat, where workers cut and polish almost 70 per cent of the world's rough diamonds.

SURAT, INDIA // It was his daughter's first birthday when Ashok Khunt, 30, an out-of-work diamond polisher ended his life by consuming pesticide. Khunt had worked for Simada, a diamond polishing unit, for five years until it closed in October for the annual Hindu festival of Diwali, never to reopen, leaving more than 60 men out of work. Khunt was the sole breadwinner for his wife, daughter and parents and became depressed after he lost his job and was unable to meet his family's financial needs.

The global economic recession has led to the closure of more than 30 per cent of the diamond polishing units in Surat, India's diamond capital, leaving thousands of workers jobless. In last three months 37 people have committed suicide, including family members of laid off workers. Surat has more than 5,000 diamond polishing units and more than 6.5 million people are involved in the industry. The desperation has also led to criminal activity.

"A jobless polisher, Shailesh Sojitra, recently snatched a bag of flour from a woman but was caught. As the mob tried to hand him over to the police, he broke down, pleading for forgiveness," said Pravin Bhalara, the president of the diamond workers association. "He told them that he was a diamond worker, the sole breadwinner of a family of five and that none of them had eaten anything for the past three days."

Most of the skilled diamond workers in Surat come from Gujarat, Rajasthan, Maharashtra and Uttar Pradesh. As the industry boomed in recent years, many workers settled in Surat, selling their homes in their native towns. In the narrow alleys of Katargam, Varachha, Mahidhapura and Punegam and other areas in Surat, workers cut and finished almost 70 per cent of the world's rough diamonds. Nearly 170 million carats of rough diamonds are polished annually with an average per carat value of US$287.88 (Dh1,057). The industry is estimated to be worth 800 billion rupees (Dh60bn).

The reduced demand for polished diamonds in world markets has left the industry in turmoil and the price of the finished diamonds is down by 30 per cent. Surat imports rough diamonds from South Africa, Belgium and Australia. Finished diamonds finished in Surat are generally sold in the West and the Middle East, with a small proportion sold in the domestic market. In recent months three chains in the US - Twitter and Sharper Image, Christian Bernard Stores Corp and Circuit City Stores - which imported Surat diamonds were declared bankrupt, resulting in the loss of an estimated 7 billion rupees for the diamond traders. Around 80 per cent of orders have been cancelled.

"The last five months have seen a steep decline in the demand of diamonds in the US and Europe," said CP Vanani, the president of the Surat Diamond Association. "During Christmas and Diwali, which used to be the main business periods, the sales were near to nothing. Our exports have fallen by around 70 per cent and our payments worth billions of dollars are blocked," meaning the money won't be transferred to the diamond traders' bank accounts.

More than 30 per cent of polishing units in Surat have stopped functioning in the last three months. The remaining units were reopened after the state government intervened, though working hours were reduced in the absence of demand. "We worked round the clock in shifts but the working hours have been reduced to four to six hours. Fifty per cent of the workers have been retrenched in past three months. Those who still have a job in the operational units have only minor cutting and polishing tasks for orders from domestic clients," said Mahadev Patel, a diamond polisher.

Previously polishers earned $250 per month, but that has gone down to $100. Industry experts say that apart from being hit by the global recession, the industry has suffered as diamond traders lost out on investments they made on the stock market and in real estate, which have tumbled to all-time lows. The recent attacks in Mumbai have added to the miseries. The traders have mooted a unique proposal to the central government for providing interest-free loans by accepting diamonds as mortgage. So far the government has been unable to formulate a bailout plan for the industry. Traders are also contemplating similar proposals to private banks and corporate.

"It's a hopeless situation; we don't have money to pay our workers from last three months. I had to close down my unit in November along with 32 workers. I had invested most of my savings in stock market and real estate. These are difficult times and there is no hope," said Vipul Shah, owner of Ratankar polishing unit. The government blames the unit holders for the delay in government assistance. According to the state labour department, only 426 factories are registered with them out of more than 5,000 estimated to be operating in and around Surat.

"The department had conducted many drives, but the manufacturers did not co-operate. The registration process has been started in the industry and we have to complete it as early as possible to access the exact number," said KM Patel, the labour commissioner in Gujarat. According to the state social welfare agency, more than 80 per cent of the school children whose parents are associated with diamond trade have not paid their fees from last four months. The Gems and Jewellery Relief Foundation (GJRF), a non-governmental organisation formed to help diamond workers raise money for their children's education, has received 8,000 applications in the last fortnight.

And according to reports, about 300 diamond workers are leaving the city every day. "One cannot afford to live in this city in these times. It's better to go back to my native place and work in farms," said Kiran Kadhania, a diamond worker from Junagadh in Gujarat, who has lived in Surat for 17 years. [e-mail]