Govt launches Diamond Imprest Authorisation scheme for diamond sector to boost exports; to be implemented from April 1

The central government on Tuesday, January 21, launched the Diamond Imprest Authorisation scheme allowing duty-free import of cut and polished diamonds with specified limits. The move is expected to fuel exports and enhance value addition.

This comes at a crucial time when the diamond industry is experiencing a steep decline in exports and job losses, the commerce ministry said. The scheme aimed at rejuvenating the industry and combatting the downward trend. It mandates export obligation with value addition of 10%.

"The Department of Commerce has introduced the Diamond Imprest Authorization scheme on January 21, aiming to enhance the global competitiveness of India's diamond sector," the statement said.

Diamond exporters with two-star export house status and above, with $15 million in exports per year, are eligible for this scheme, the commerce ministry said.

"This scheme allows the duty-free import of natural cut and polished diamonds, of less than 25 carats (25 Cents)," it said, adding that it will be implemented from April 1.

The scheme will provide a level playing field for Indian exporters, especially from the MSME (micro, small and medium enterprises) sector, the ministry said.

"It aims to prevent the potential flight of investments by Indian diamantaires to diamond-mining destinations," it said.

Job creation, beneficiation, falling demand and more

The scheme is expected to create jobs, mainly for diamond assorters and workers engaged in the processing of semi-finished diamonds in factories.

The commerce ministry said that this scheme is to protect the Indian diamond processing industry and generate employment by facilitating domestic exporters.

"This scheme is also expected to create employment opportunities for skilled craftsmen in the diamond industry and is also expected to increase the export of cut and polished diamond from India," the ministry added.

The new scheme is designed as a response to "Beneficiation" policies undertaken in many natural diamond mining countries like Botswana, Namibia and Angola where diamond manufacturers are required to open cut and polishing facilities for minimal value addition.

"This scheme is aimed towards retaining India's position as a global leader in the entire value chain of the diamond industry," the ministry said.

A 24.5% drop seen in the imports of rough diamonds, from $18.5 billion in FY22 to $14 billion in FY24, points toward weaker global markets and fewer processing orders.

Additionally, exports of cut and polished diamonds fell by 34.6% to ₹24.4 billion in FY22 from $13.1 billion in FY24.

The demand for polished diamonds has weakened in major markets including the US, China and Europe caused by economic uncertainty, inflation, and geopolitical tensions. The lower demand has led to reduced consumer spending on luxury goods, including diamonds.

Moreover, the Russia-Ukraine conflict has disrupted the global diamond supply chain. Sanctions on Russia, a major rough diamond producer, have resulted in complicating trade further and slowing down the global diamond trade.

Notably, changing consumer trends with consumers preferring lab-grown diamonds—which are more affordable, ethical and sustainable—are also impacting the demand for natural diamonds.

Diamond industry in India

The diamond industry in India is made up of more than 7,000 companies involved in various activities such as cutting, polishing and exporting diamonds. The majority of these companies are concentrated in Surat, Gujarat, Mumbai and Maharashtra. Most of these firms are SMEs (small and medium-sized enterprises), with many family-owned businesses dominating the industry.

The domestic diamond industry provides direct employment to about 1.3 million workers including those involved in the cutting, polishing, trading and exporting of diamonds.

Surat alone accounts for nearly 8,00,000 of these workers, making the city the world's largest hub for diamond cutting and polishing. The industry also adds millions of indirect jobs to the country’s economy, in related sectors like logistics, transport, retail and diamond tool manufacturing.