Union finance minister Nirmala Sitharaman in her budget speech on Wednesday announced a five-year research grant for one of the Indian Institutes of Technology (IITs) to encourage the indigenous production of lab-grown diamonds (LGD), and a reduction in customs duty on the seeds and machines used to produce these precious commodities.
“Lab Grown Diamonds (LGD) is a technology-and innovation-driven emerging sector with high employment potential. These environment friendly diamonds have optically and chemically the same properties as natural diamonds,” the finance minister said.
Lab-grown diamonds are made in a lab using cutting-edge technology that replicates the natural diamond growing process and the result is a man-made diamond that is chemically, physically, and optically the same as those found beneath the earth’s surface.
A disruption in the import of rough diamond pieces to be processed by Surat’s diamond industry after Russia invaded Ukraine has led to renewed efforts to encourage the use of lab-grown diamonds.
Lab grown diamonds can be created by two processes – High-Pressure High Temperature (HPHT), which is used in China, and Chemical Vapor Deposition (CVD), which is used in USA and India.
“India is a global leader in cutting and polishing of natural diamonds, contributing about three-fourths of the global turnover by value. With the depletion in deposits of natural diamonds, the industry is moving towards Lab Grown Diamonds (LGDs) and it holds huge promise. To seize this opportunity, I propose to reduce basic customs duty on seeds used in their manufacture,” the FM said in her budget speech.
Surat is the hub for diamond industry, where over 85-90% of the world’s roughs are processed. The industry employs close to 8 lakh people and is a major contributor to India’s gems and jewellery exports of USD 39 billion for 2021-22, according to data by India’s Gems and Jewellery Export Promotion Council (GJEPC).
India’s exports of polished lab-grown diamonds were USD 274 million, USD 473 million, USD 637 million and USD 1,293 million during 2018-19, 2019-20, 2020-21 and 2020-21 respectively. Annual growth during the same periods was 72%, 35% and 103%, respectively, according to GJEPC.
These diamonds are 70% cheaper as compared to mined diamonds, said Dinesh Navadiya, regional president of GJEPC and president of Surat Diamond Association.
“The announcement made by the FM in her budget is a positive step for the diamond industry. The lab-grown diamond exports have already doubled this year as compared to FY22,” he said.
India exports polished lab-grown diamonds to the USA, Hongkong, UAE, Israel, and Belgium. The USA accounts for around 67% of India’s exports followed by Hongkong with a share of 14%.
“The grant provided to IIT for lab-grown diamonds is positive. The segment has seen a steep 54% growth in exports on-year and accounted for 5% of total diamond exports YTD23,” Crisil said in a tweet on Wednesday.
Dr Snehal Patel, CEO of Surat based Dungrani Lab Grown Diamonds, one of the leading companies in India for producing LGD, said if the import duty on machinery is reduced, it will give a huge boost to the industry.
“Any step taken by the government for promoting lab-grown diamonds is welcome. Surat has the advantage over other cities for cutting and polishing diamonds. Instead of depending on imported roughs, the industry here will turn to processing LGD. Presently there are about 7-8 large companies in Surat and 20-25 small establishments for producing LGD,” said Patel.
