Nirav Modi scam once again raises concerns over round tripping of diamonds
sagar diamonds share market news
Nirav Modi's alleged fraud came to light only after he failed to secure fresh loans to service his existing debt. And, the news of the purported crime committed by Modi and Gitanjali Gems groups has once again brought the issue of illegitimate havala channels and round tripping of diamonds centre stage.
Diamond business is predominantly involved in imports and then exports. Round Tripping is the practice of traders exporting the same stock of polished diamonds multiple times to borrow from banks against the receivables at a lower interest rate.
India is the biggest processor of rough diamonds globally. In 2017-18 till January, according to the Gem & Jewellery Export Promotion Council (GJEPC) data, India exported rough diamonds worth $1.175 bn against last full year’s $1.5 bn.
India’s import of polished diamonds was also $1.88 bn in the 10 months this year. Even the proportion of return consignment doubled in the last two years and remained high. When diamonds are sent abroad for sale on a consignment basis, some unsold diamonds come back but that proportion has doubled over the last couple of years.
Sources say that “diamond trade continues to be a route to launder money by sending dollars abroad or bringing official dollars in India as per trade requirements.” With government increasing the import duty for polished diamonds earlier to 2.5 per cent and now 5 per cent, the modus operandi keeps changing and non standardization of prices and synthetic diamonds have spoiled the sanctity of the trade.
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