(IDEX Online News) – Diamond companies in Surat, India's cutting and polishing center, have slashed production levels in the past three months, with small and medium size firms cutting manufacturing levels by almost half.

 

The cutback is a result reason of a 12 percent rise in rough diamond prices by De Beers, Alrosa and Rio Tinto, according to the report in The Times of India.

 

The Diamond Trading Company (DTC) raised its prices by 4 percent at its last sight two weeks ago from the previous sight, raising around $600 million.

 

Many Indian diamond firms which receive goods from the DTC, Alrosa and Rio Tinto are selling on the rough diamonds at a premium of 4 percent in the secondary market. As a result, the final price of rough goods for small and medium sized companies, when adding in brokers' fees and other costs, comes to around 16 percent.

 

There are close to 3,000 small and medium sized manufacturers in Surat and approximately 120 larger diamond firms, according to the report.

 

Surat Diamond Association President Dinesh Navadia said an additional problem for small and medium sized firms was that they have to pay cash for rough diamonds from the secondary market while large diamond manufacturers enjoyed bank financing.

 

"Most of the small diamantaires have stopped purchasing new stock due to eroding profit margins," Navadia said.

 

One diamond manufacturer said that one result of rising rough prices was that owners of small diamond manufacturing plants had started polishing low-quality diamonds in order to ensure continuing employment for their workers.