INDIA & RUSSIA World of OPP0RTUNITIES

Presentation by Sabyasachi Ray, Executive Director The Gem & Jewellery Export Promotion Council

India Today
One of the Worlds fastest growing economy in terms of purchasing power parity Foreign Exchange Reserve of over US$141 Billion 6th Largest in the world

Modern Country blended with rich cultural heritage & spiritual values

Why India
Worlds largest source for trained, skilled and adaptive manpower Committed, Dynamic & Young Entrepreneurs Indias 70% of the population is below 40 yrs Liberalised Government policies Conducive Environment for bi-lateral business

Indias Gem & Jewellery Sector

One of Indias leading foreign exchange earning sectors

Gem & Jewellery sector accounted for 16.67% of Indias total merchandise exports
Gem & Jewellery Exports in FY 2009-10 were pegged at US$ 29 Billion The percentage increase over FY 09-10 is 18.23%

Gem & Jewellery Exports

35000

Value (in US$ Million)

30000 25000 20000 15000 10000 5000 0

01 00 20 02 10 20 03 20 20 04 30 20 05 40 20 06 50 20 07 60 20 08 70 20

2 78 7

9 56 7

2 16 9

12 21 1

8 65 15

1 70 16

9 15 17

1 92 20

94 48 2

3. 43 29

09 80 20

10 90 20

Year

Gem & Jewellery Export Basket

4.08% 1.01% 33.17% Gold Jewellery Cut &Polished Diamonds 61.74% Coloured Gemstones Others

The Indian exports of Gems and Jewellery are dominated by cut and polished diamonds
Percentage composition of Indian gems and jewellery exports 2002 -03 Exhibit 3C: Exports of gems and jewellery to major countries
2% 2% 6%

2%
3% 4%

2% 36%

17% 78% 0% 1% 2% 0%

5% 8%

22% 10%

Cut and Polished Diamonds Gold Jewellery Non Gold Jewellery Exports of Rough Diamonds

Coloured Gemstones Pearls Synthetic Stone s

USA UAE Thailand UK

Hong Kong Israel Switzerland Others

Belgium Japan Singapore

Source: Gems and Jewellery Export Promotion Council (GJEPC)

Source: Gems and Jewellery Export Promotion Council (GJEPC)

Making the exports from the Industry exposed to the vagaries of the diamond industry

DIAMONDS

The India Model is Unique

Pioneers In The Diamond Business

First in the world to mine, cut and use diamonds in jewellery

World leader in Diamond Manufacturing

Of the world polished diamond market, Indias share is 60% in terms of value

85% in terms of volume

92% in terms of pieces 11 out of every 12 cut & polished diamonds

set in jewellery worldwide are processed in India

Pioneers In The Diamond Business

Largest Skilled Workforce
Over 1 Million each in Diamond & Jewellery Manufacturing

Knowledgeable, Talented workforce aided by dynamic and Professional management More than 3000 offices worldwide Ethical Business Practices

Technological Advancement
Indias proficiency in software enables it to use state-of-the-art technology to design jewellery Computer Aided Design and Computer Aided Manufacturing expedites the processes World class manufacturing facility with state-ofthe-art technology in Special Economic Zones, EOUs (Free Trade Zones) and several other locations in the country

Indian Gem & Jewellery Industry Global Vision

Ascertain Indias Leadership Position in the Global arena Establish India as a BRAND to reckon with in Gem & Jewellery Truly make India the Worlds trading hub for the Gem & Jewellery Lead the industry in Driving Gem & Jewellery Sales worldwide

Facets of Indian Diamond Industry

Environment friendly factories Employment of Professionals across the Industry

State-of-the-art technology

Visionary Entrepreneurs

Marketing Offices spread around the world

Research & Development activities

Reliable & Prompt Service

Largest pool of skilled labour -- 1 million employed Strict quality control and adherence to International business practices and quality standards ISO, BPP, BEM
13

Pragmatic and liberalized Government Policies

Indias Advantages
India World Diamond Manufacturing Superpower 5 decades of accumulated experience in diamond manufacturing in all its aspects across all rough categories and sizes Unsurpassed critical mass in manufacturing capability in Gujarat and Maharashtra states

Surat, the worlds acknowledged diamond manufacturing hub employing 600,000 strong skilled, disciplined and dedicated workforce

World Scenario

Three factors that most affected the diamond industry in the recession

Major forces that will shape the future of the diamond industry

Rough diamond supply is still dominated by 6 major suppliers

ALROSA 13%

DTC 34%

Production increases in last 25 Years

Tacy Ltd. Diamond Industry Consultants Nov 19, 2008

21

Players and Countries: 2005 versus 2015

Tacy Ltd. Diamond Industry Consultants Nov 19, 2008

22

Areas of Cooperation with Russia

India & Russia The Gem & Jewellery Scenario

India- Jewellery: India possesses one of the largest workforce of jewellery manufacturers in the world. Russia-Production: The largest producers of rough diamonds in the world.

Rough Diamonds Production & Trade

Total World Rough Production 124.8 million carats Indian Import of Rough Diamonds 119.73 million carats Russian Production last year (2009) 34.75 million carats Indias direct imports from Russia 2.07 million carats Russian Origin Import from other Countries 0.62 million carats Most of the Rough Diamonds exported by Russia are being routed through other countries to India

SOURCING OF ROUGH DIAMONDS FROM RUSSIA

Direct Sourcing of Rough Diamonds from Russia
The Indian Diamond Industry had long been trying to take direct supplies from Alrosa and Industry had been working continuously from the last three years to achieve this.

The Mining giant M/s. Alrosa Co. Ltd. has signed deals with three big Indian manufacturers M/s. Diamond India Ltd. (DIL), M/s. Ratilal Becharlal & Sons ( Jasani Group) and M/s. Rosy Blue on 12th March, 2010 to supply Rough Diamonds to India for the next three years.

i) Rough Diamonds
A. B. C. D. E. Continued Cooperation in Rough trading & direct import of roughs Expansion of long term cooperation between Al Rosa & the Indian Companies Alrosa, Russia to set up office in BDB, India. Expansion and inclusion of Gokhran EXPLORE JOB WORK FOR CUT & POLISHED DIAMONDS TO RUSSIAN JEWELLERY MANUFACTURING UNITS
India has strongest workforce in cutting & polishing of diamonds Russia is one of the largest manufacturing centres of jewellery in Europs Diamonds are Raw Materials Duty of Diamond is high in Russia Cutting & Polishing of diamonds are Raw Material in Jewellery Manufacturing

ii) Jewellery
A. Creation of viable business environment for Trade Simplifying the customs procedure Rationalization of duty B. Cooperation in Jewellery Manufacturing & Marketing

High Duty Barrier

Duty Structure on Gems & Jewellery Items in Russia

The import duty on cut & polished diamonds, rough coloured gemstones, coloured gemstones, gold jewellery and silver jewellery is 21% in Russia. In India, the rough diamonds, cut & polished diamonds, rough coloured gemstones, cut & polished coloured gemstones, rough synthetic stones are duty free whereas cut & polished synthetic stones and pearls attract a duty of 5% and in case of gold and silver jewellery it is 11.4%.

The logistics are challenging and the duties and VAT to be paid are exorbitant. Duty is at the rate of 21% and on the landed cost, there is a VAT of 18%. The total cost works out to be 42%.
.

Duty Structure on Gems and Jewellery Items India

Rough Diamonds Free Cut & Polished Diamonds Free Rough Gemstones Free Coloured Gemstones Free Gold Jewellery 10% Silver Jewellery 10%

Russia
Diamonds 7102.31 Rough Free 7102.39 Cut & Polished 20% Coloured Gemstone 7103.10 Rough 20% 7103.91 Cut & Polished 20% Precious Metal Jewellery 7113.19 Gold Jewellery 20% 7113.11 Silver Jewellery 20%

Source: www.worldtariff.com

Customs procedure related Issues in Russia:

Our member exporters have to face various procedural hindrances imposed by the Customs authorities in Russia during export/import and while participating in any exhibition. The procedures mentioned in the Customs Notifications and Circulars are not being followed by the Customs Authorities in Russia. As clearing the goods from the customs is a formidable task most of the members are encouraged to use other sources by establishing favorable relationships with the authorities Besides importing, there is the possibility of using the temporary importation facility. This facility is cumbersome and involves a lot of paperwork. There is a charge of 3% that the customs charge for this and the clearing charge remains the same.

Customs procedure related Issues in Russia (contd)

The temporary importation can be extended for a further period of 6 months and will attract a further 3% as customs duty

The unsold goods have to be shipped back before the expiry of the temporary importation period and the duties and taxes on the sold goods have to be paid at the time of return of goods.
ATA Carnet is also available, but by using this facility one cannot sell any goods and all the goods must leave the country by the date allowed for the carnet To use the method of temporary importation, it is necessary to establish our own Company or have an agreement with a company in Russia to do the paperwork and import the goods.

India Russia Forum Statistical Background

Exports of Gems and Jewellery Items from India to Russia Rs (Lakhs) US$ (Million)
Cut & Polished Diamonds Coloured Gemstones

Year

Gold Jewellery

Others

Total

RS

US$

RS

US$

RS

US$

RS

US$

RS

US$

2007 - 08

43.16 44.32 10.71

0.11 0.10 0.02

1,465.77 3,023.66 1,291.06

3.64 6.57 2.74

271.14 338.16 162.57

0.67 0.74 0.35

274.46 687.79 554.81

0.69 1.49 1.17

2,054.53 4,093.92 2,019.16

5.11 8.90 4.28

2008 - 09

2009 - 10

Source : Customs Data

India Russia Forum

Statistical Background
Imports of Gems and Jewellery Items from Russia to India
Rs (Lakhs) US$ (Million)
Year Rough Diamonds Rough Colored Gemstones Others Total

RS

US$

RS

US$

RS

US$

RS

US$

2007 - 08

21,467.77

52.68

61.70

0.15

6,570.54

17.00

28,100.01

69.83

2008 - 09

32,775.03

71.27

9.98

0.02

11,335.02

24.64

44,120.03

95.93

2009 - 10

108,532.94

233.89

10,406.15

22.01

118,939.09

255.90

Source : Customs Data

Thank You