Surat to surpass China in the lab-grown diamond production by 2025

Surat (Gujarat) : The lab-grown diamond industry is expected to benefit greatly from the Gujarat Government’s decision to eliminate a 15% duty on electricity and the Centre eliminating an import duty of 5% on the seeds from which diamonds are grown in laboratories in India, particularly in Surat. As a result of the Russia-Ukraine conflict, declining rough diamond production worldwide, and a significant increase in the prices of rough diamonds sold by the world’s largest diamond mining company De Beers, roughly a fifth of diamond manufacturing companies, including the big diamond companies, have already switched from natural to lab-grown diamond manufacturing.

According to a memo written by John Jeffay and published on IDEXONLINE.com, India currently produces around 1.5m carats, making it the world’s second-largest producer of diamonds behind China’s 3m carats (Bain/AWDC figures for 2021). However, in May of this year, Colin Shah, the then-chairman of the Gems and Jewellery Export Council, predicted that the industry could grow to 150 million carats annually and reach an export turnover of $5.14 billion in the “near future.” To put that in perspective, the global lab grown market is expected to hit nearly $50 billion by 2030. (Allied Market Research). According to Tacy’s 2021 Diamond Pipeline, the total value of the retail diamond jewellery market is $85.5 billion.

Note that India’s public sector bank, State Bank of India (SBI), has announced it will begin lending to manufacturers so that they can finance the purchase of lab-grown machinery. The SBI’s action may change the mindset of lenders who have previously been reluctant to work with companies that produce lab-grown diamonds.

According to Jeffay, the urgency surrounding the supply of rough diamonds has increased as a result of the conflict in Ukraine. The supply of Alrosa’s goods, on which many manufacturers have relied, has been constrained for nearly a year due to formal sanctions by the US as well as informal boycotts across the industry as a whole. By saying, “with the depletion in deposits of natural diamonds, the industry is moving towards lab-grown diamonds and it holds huge promise,” Sitharaman made a cryptic reference to this.

The Union Government’s decision to eliminate the seed tax has not been well received by the companies that produce natural diamonds. The Gems and Jewellery Export Promotion Council (GJEPC) has been lobbying for years to have India’s import tax on polished diamonds reduced from 7.5% to 2.5%.

The GJEPC has lobbied the government for the right to hold viewings of rough diamonds in India’s Special Notified Zones (SNZs) in Mumbai and Surat, tax-free zones set aside specifically for the trade of diamonds. Due to the taxation of diamond sales, approximately 60% of rough diamonds are currently sent back to Dubai or Antwerp for the transaction before being shipped back to India by importers.

According to GJEPC, miners in the SNZ would bill at a rate no higher than 0.16 percent of revenue (the same as in Belgium). To date, however, the Indian government has failed to meet this need.