Business Today

Surat's lost lustre

Although more than 90 per cent of the world's diamonds are processed in this port city of Gujarat, the industry is facing a multitude of challenges in an ultra-competitive market. The latest: workers are asking for better wages. Business Today's T.V. Mahalingam says the all-pervading joie de vivre among diamond-makers is misleading.

T.V. Mahalingam        Print Edition: August 10, 2008

As I walk down the dingy, claustrophobic bylanes of Pandol area in Surat on a July morning, it’s easy to overlook the importance of this port city in Indian history. The narrow streets and rundown buildings seem like an apt setting for a Ram Gopal Varma underworld flick but make no mistake; there is the whiff of money everywhere and history is just an arm’s length away.

City of diamonds: Surat boasts of over 4,000 units
City of diamonds: Surat boasts of over 4,000 units
First, the history bit. According to local folklore, Lord Krishna stopped over at the city (which used to be called Suryapur) on his way to Dwarka from his birthplace Mathura.

The city was ruled by the Chalukyas and other Hindu kings, till Qutub-ud-din Aibak overran the city in the 12th century. By the time the Mughals led by Akbar captured the city (year 1573), it was already one of the leading commercial cities of India. Trade with the Arabs flourished, who christened the city ‘Bunder-E-Khubsoorat’ (the beautiful port). That name was later crimped to Surat.

Surat’s tryst with diamonds began when Indian merchants came back from East Africa with boatloads of diamonds in 1901. By the mid-sixties, the industry was worth Rs 65 crore. At that time, Mumbai (erstwhile Bombay) was the hub for diamond manufacturing in India. Surat, situated on the banks of the Tapti river, was still a lowly backwater where crude, low-cost work would happen.

But soaring real estate, bellicose labour (the bane of Bombay’s industry in the ’60s) and some true blue entrepreneurship from Surat merchants saw the city grow into a diamond cutting and polishing hub not just of India, but of the world. Today, close to Rs 45,000 crore worth of diamonds are cut, shaped, polished and finally exported from Surat.

Babubhai Jirawala: Voicing the concerns of Suratís diamond workers
Babubhai Jirawala: Voicing the concerns of Suratís diamond workers
In all, the country exports Rs 80,000 crore worth of diamonds— making Surat the heart and soul of the diamond industry. More than 90 per cent of the world’s diamonds are ‘processed’ in Surat. Almost every eighth person in this city with a population of 4 million works for the diamond industry.

The diamond makers

One of these workers, Mahendra, 23, cuts and polishes stones worth a few crores each month only to make about Rs 6,000 a month. With prices of commodities and food going sky high, feeding his family of two can be tough. But Mahendra laughs it away. “I come to work whenever I want. I polish stones…there is no pressure at work,” he beams. In fact, most of his co-workers flash smiles at the sight of a camera.

This joie de vivre is all-pervading among Surat workers, but is misleading. Just a couple of days ago, most of the gantis (diamond workshops) in the city had to down shutters because this smiling workforce decided to go on a strike.

Bearing the brunt: The strike affected work in small- and medium-sized diamond factories
Bearing the brunt: The strike affected work in small- and medium-sized diamond factories
Some of them even pelted stones, shattering the odd window panes of a few factories. The reason: they were demanding better pay. Babubhai Jirawala, who heads Surat Ratna Kalakar Sangh (which represents the diamond workers in the city), led these workers to down their chisels and magnifying glasses. “The workers in the diamond industry have not been given salary hikes since 1998. And considering that inflation has been shooting up, we had to push for a hike in wages with all the means we had at our disposal,” says Jirawala. The union has been talking to diamond factory owners and their association for nearly six months demanding a wage hike of 30 per cent. After several rounds of protracted negotiations, the Surat Diamond Traders Association agreed to a raise.

Manpower woes: From 7 lakh people down to 5 lakh people now
Manpower woes: From 7 lakh people down to 5 lakh people now
Explains C.P. Vanani, the President of the Surat Diamond Traders Association: “We proactively decided to recommend wage hikes in the range of 20 per cent for workers on June 30. Most of the large factories immediately accepted our recommendations and announced hikes between 15-20 per cent.” However, the small and medium factories, which form the bulk of the 4,000 units in Surat, refused to hike wages citing that profits in the business were already wafer-thin. Moreover, the association’s recommendations were just that—recommendations that were not binding in nature.

The very next day, on July 1, workers in most of the small and medium units went on strike. As the word about the hikes and strikes in Surat spread across the state, diamond workers in the rest of the state in places like Bhavnagar and Ahmedabad struck work. Things got unruly in Bhavnagar when the private security guard of a diamond factory opened fire on agitating workers and killed one of them.

But in Surat itself, hectic negotiations saw work resuming within a couple of days in most units. Vanani believes that the strike itself did not cause any major monetary loss to the industry. “The smaller factories were badly affected as they did not implement the salary hikes. Large factories, which did lose a day or two of work, will make up for the losses by working on a holiday,” he adds.

Rough ride ahead

The wage hike will definitely add to the worries of diamond traders, who are being buffeted on several fronts, agrees Vanani. For starters, diamond roughs (the raw material) are getting fewer and costlier. As diamond yields in countries like Tanzania, Congo and Botswana are falling, these countries are planning to impose duties on diamond exports. Currently, the trio accounts for nearly half of the world’s rough diamond produce. A slowdown in demand, especially from the US (which consumes above 60 per cent of all processed diamonds from Surat) does not help their cause either.

Jivrajbhai Surani: The slump in (US) demand has made matters worse
Jivrajbhai Surani
“The slowdown in demand from the US has affected most players badly in the last three years. Most traders in the industry have waferthin margins in the region of 2-3 per cent. With salary hikes, some smaller factories may close down rather than go for salary hikes,” says Jivrajbhai Surani, Founder, JB Diamonds Group, one of the largest diamond exporters from Surat. JB Diamonds exports Rs 1,300 crore worth of diamonds annually and employs over 8,000 people.

The strike also brings to the fore another problem that’s creeping up on the industry—a manpower crisis. A decade ago, the diamond business was the industry to work for. Salaries were high and, more importantly, other industries did not pay as much. But with the textile sector booming in the city, salaries in the diamond industry have paled in comparison. “This industry used to employ close to 7 lakh people a couple of years ago. That has shrunk to 5 lakh people now,” adds Surani.

C.P. Vanani: The wage hike will add to the worries of diamond traders
C.P. Vanani
For the industry, it is a classic Catch-22 situation—raise wages and add pressure to already precariously thin profit margins or get ready for more strikes in the future.

But Surat has an uncanny knack of thriving as a commercial hub, despite seemingly insurmountable odds. The city has survived repeated sackings by the Maratha warrior Shivaji, prolonged sieges, bouts of bubonic plague, floods and is still called the city of Kubera (the god of wealth). Will diamonds be forever for Surat? If its historical resilience is any indication, getting the sheen back will be a cinch for the city.

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