By Raj Kumar Sahu

NEW DELHI, OCT 10, 2015: THE global diamond market is worth USD 80 billion.  A huge portion of it is "blood diamond", as many Hollywood movies call it. In fact, recently it was reported that one of India's most wanted fugitives Dawood Ibrahim is focusing on expanding his business to conflict diamonds in Africa and Dubai.

What these fugitives are trying to do is to tap the demand supply mismatch and make big bucks. As per a study, global diamond output fell from 176 million carats in 2006 to 146 million carats last year. And going forward the global supply of mined diamonds will fall to just 14 million carats by 2050.

So, for the generations to come is the beautiful stone becoming 'antique' only to be seen in museums?

And what should the governments' across the globe do to stop these illicit businesses?

Probably, science has the answer. And the answer is promoting lab grown diamonds, which are, as real as the mined diamonds in all aspects.

Right now, the lab-grown diamonds are not getting the recognition from governments, including Indian government. But Malaysia has shown the way and even India can take a cue from the same. In 2013 Malaysia categorized grown diamond under HS Code 7102. This helps the government in collection of trade statistics of diamonds - grown or mined and enables businesses and governments to track their inflow-outflow and therein measure impact of each.

Under HS code 7104 leading diamond-processing countries like India, will typically indicate big inflows of 'synthetic' stones and mislead the trade to believe that high quality grown diamonds is being imported for processing but relatively smaller quantities of 'synthetic diamonds' are exported in lieu.

This data has been used to fuel rumours that illicit traders "are mixing" grown diamonds with mined diamonds to fool the consumer and the diamond industry. These allegations not only tarnish India's image as a diamond processor but may categorically affect the domestic consumer sentiment.

What is HS Code?

Harmonized System (HS) code is a standardized multi-functional system to classify goods, universally applied by governments of all countries, international organizations and individuals in many other fields, such as domestic tax, trade policy, price control, quota control, budgeting, and economic research and analysis.

At present, Grown Diamonds are categorised under HS Code 7104, alongside other synthetic stones like CZs, quartz,diamond simulants and inferior quality of industrial diamonds imported for use as abrasives (unfit for jewellery application), etc.

The categorization under HS 7104 gives misleading trade data to government and hence opens up room for illicit trade and related activities.

Pearl Culture

Governments can also take a cue from the Pearl industry. In the early 1900 natural pearls were the height of fashion and an important indicator of wealth and status. But pearl oysters were found in only a few regions, such as the Persian Gulf, freshwater rivers & ponds in China, and coastal Japan.

Not to mention, just like the diamond industry, natural pearls too have a dark side. Slaves were forced to dive for them in the 16th-century Caribbean and South America, and throughout the world, pearl divers remained poor while traders reaped the profits.

But as the gulf between the supply of natural pearls and demand widened, it was cultured pearls that helped in creation of a new industry, supplementing the existing pearl supply chain and ensuring consumers had a wider yet an assured quality choice for their pearls.

And now there is no difference between a "grown pearl" and "mined pearl"

Just as the 'Pearl Boom' helped an entire industry survive the gradual extinction of Earth's supply, ensuring the finest quality and widest choice of pearls were still available for the consumers; likewise, the emerging 'Grown Diamond Age' is set to tread the same path.

In both cases, a critical point is to ensure that the consumer is always aware and educated about the virtues of the luxury product they are buying by means of certification and offered choices based on individual preferences - sustainable, affordable, origin-guaranteed and certified assurance of quality.

Grown diamonds will supplement the earth mined industry over the next 2 decades, becoming an important raw material source, and give a chance for the Diamonds and Jewellery industry to survive in processing countries like India as well as internationally in wholesale and retail centers.

Now coming back to the issue of HS code, the disparity is more visible when one sees the codes of natural pearls and grown pearls vis-à-vis mined diamonds and grown diamonds. In case of pearls, - both mined and grown - are under same HS code. Whereas, when it comes to the HS code of mined diamond and grown diamond, both are placed under different categories.

This can have huge implications for the Indian Gems &Jewellery (G&J) sector, which contributes around 6-7 per cent of the country's GDP. India is also world's largest cutting and polishing center for diamonds, with India exporting 95 per cent of the world's diamonds, as per statistics from the Gems and Jewellery Export Promotion Council (GJEPC).

The domestic Indian G&J industry is projected to generate up to USUSD 35 billion of revenue from exports this year. But the domestic processing industry has been steadily downsizing. Reports suggest that small & medium sized processing units have shut shop and laid off their workers due to "drop in the amount of rough diamonds that are imported for polishing from African nations, Russia, Canada, Australia and Indonesia.

In contrast, a study from Frost & Sullivan pegs Grown Diamond industry would be able to employ nearly 60,000 people in less than a decade and can employ about 276,000 cutters and polishers by 2030. But to facilitate and expand the import of high quality grown diamonds rough for processing in India, it's important that Grown Diamonds be given appropriate trade recognition and a rightful commercial identity.

This is where probably the right HS categorization will help. By maintaining same heading code (HS-7102) for both mined as well as grown diamond but different remaining four digits, we can account for the difference in their point of origin effectively. This will be consistent with the existing HS policy for cultured pearls and natural pearls where both are in the same HS Code 7101 but different sub-categories - 1010 & 1020 for natural pearls and 2100 & 2200 for cultured pearls.

Introduction of new sub-headings under HS Code 7102 will allow to monitor and measure correctly how Grown Diamonds contribute to a country's economy and existing commerce.

So just the right HS-categorization will bring in parity in the trade along with generating employment, generating revenue, making diamonds more affordable and sustainable.

Yes, it will help the grown diamond industry, but it will also reduce blood from diamond along with leaving behind a sustainable legacy for the coming generation.