Indian diamond merchants are trying to source direct supplies from mining centers to make up for the shortfall from traditional sources like Australia and London's Diamond Trading Corporation (DTC).

India is currently able to import only small-sized rough diamonds from global trading centers, with the bigger stones reaching Israel and Belgium markets.

"We are now trying to source direct supply from mining centers in Russia and Africa to cut down on costs of rough diamonds and to get better quality and supply," Sanjay Kothari, chairman of the Gems and Jewellery Export Promotion Council (GJEPC), told.

Last year, following the visit of Russian President Vladimir Putin, India had signed a protocol of intent with Russia in December for the supply of rough diamonds. The process is yet to begin as the formalities for import are taking some time, said Kothari.

Within the country also, the Indian government has stepped up efforts in Chhatisgarh to help the traders source better gems.

Russia currently sells at least 10 million carats of diamonds to international diamond trading hubs such as Antwerp and the De Beers-controlled DTC, from where Indian merchants buy some of their stones.

India's decision to stop imports of "conflict diamonds" from countries like Sierra Leone, where the sale money is used for funding rebel activities, has also affected the supply of diamonds.

Polished diamonds are one of the biggest foreign exchange earner in India's export basket. During fiscal year 1999-2000, diamonds accounted for $6.6 billion out of $8.14 billion worth gems and jewelry exports from India.

During 2000-01, there was a drop in Indian diamond exports. Of the $7.7 billion worth of gems and jewelry exports, diamonds accounted for $6.1 billion. In the first quarter of the current fiscal year 2001-02, there has been a 15 percent drop compared to the same period last year.

"It is true that the diamond industry is passing through a slow period. But there is no cause for alarm as during the 1999-2000, the higher growth was due to the millennium hype. In the second half of this year we expect the exports to pick up around Christmas," said Kothari.

If the exports are down, the import value has also come down due to a drop in gold price, which is reflected in slimmer figures, he said.

Accounting for nine in every ten cut and polished diamond in the world, India's share in the global diamond market is 55 percent in value and 80 percent in carat.

The biggest threat India faces is not from Belgium and Israel, but from China, said Kothari. "Since the last three years, China is emerging as a major threat to India's jewelry and diamond industry as it not only has the same advantage of low cost skilled labor but also the expertise which existed in Hong Kong."

To boost exports, India is now looking beyond the U.S., which accounted for over 40 percent of the country's gem and jewelry exports.

"We are now increasingly looking at the Latin American, European and Middle East markets to boost our exports," said Kothari, who is scheduled to visit Dubai and Saudi Arabia later this month to promote the GJEPC's annually show in Mumbai.

After 15 years, the annual GJEPC show from September 28 to October 1, coinciding with the Bangkok and Hong Kong shows, will be restricted to trade only. The change has been effected to attract more international traders to the show.

The GJEPC is aware that much needs to be done to promote India's share in the global gems and jewelry market from the current one percent. To achieve this, it is in the process of setting up a new training center in Mumbai where international experts would be part of the team.