India has diamonds but no one has been mining them! The country’s government has now woken up to take charge. But with the upcoming general elections and the global financial crunch, it may not be a cake walk.

Although, some of the world’s best known diamonds were mined in India, in its first innings, yet ironically, two hundred years later, there is not a single functional diamond mine in the country. India, that was historically the oldest diamond mining centre, even before Kimberly, where the world’s first diamond mine was set up, today imports all its diamonds.

But the Indian diamond treasure is not exhausted. Far from it. For several years, the Geological Survey of India (Gsi) has been working on its diamond project to tap into diamond deposits in various places in India. And it has succeeded at some places.

Geological Map for Diamonds :

Informs K.K. Nayyar, Technical Secretary to DDG (Operations), “Definitely, there are diamond deposits in India. We have located diamondiferrous kimberlite pipes in Andhra Pradesh, Madhya Pradesh and Chhattisgarh. In fact, in Vajrakarur village (even the name of the village is inspired by a diamond) in Anantpur, AP, our findings have been very positive. But our job is to plan preliminary surveys and conduct investigations on where to search for what. We have developed a geological map of India and we know the areas where there are kimberlite pipes that are diamondiferrous. However, unlike us, private companies possess sophisticated technologies to identify and assess new diamond deposits. And they are already doing so.”

Delay by Default :

But, in spite of the near certainty that there are diamonds waiting to be mined, no company has ventured into large scale diamond mining in India, primarily because we have, so far, never had a crisp and clear cut policy on diamond mining and allowed opportunities to slip by.

Sometime in the mid-1990s, De Beers wanted to start diamond mining in India but met with little success as a mining lease could not be worked out with our government. The stalemate continues.

As a result, while seven out of every ten diamonds in the world are still cut and polished in India, the country relies entirely on import of diamond roughs, estimated at nearly Us$ 20 billion per annum.

Finally, realizing this, our officialdom ‘The Jaggernaut Moves’ woke up. To promote diamond mining, the government of India directed the Geological Survey of India (GSI) to explore additional reserves of gold and diamonds to reduce our dependence on imports.

New Mining Policy :

The government also formulated a new Mining Policy and directed public sector companies like Hindustan Copper to diversify into diamond mining. Even the hibernating Panna mine, India’s only diamond mine, has been granted the permission to reopen! However, there are apprehensions that the upcoming parliamentary general elections and the continuing global financial crisis may precipitate a set-back for India’s ambitious diamond mining second innings.

Reluctance of Hindustan Copper :

Informs O.P.Chugh, Executive Director, Hindustan Copper, “The company’s new diamond mining initiative is in its infancy. But, with the global financial crisis, we are not venturing into any new area. Large financial outlays would be required. It is too risky and we are not prepared to go in for diamond mining at present.”

Understandably, the global financial crunch is making everyone tighten the purse strings. The Gem & Jewellery Export Promotion Council (Gjepc) has recently announced that India will curtail the import of rough diamonds for a month beginning November 25, 2008. In a statement, the GJEPC said, “The move would cause fewer roughs to enter the diamond pipeline and make the producer companies indirectly share the financing burden.”

Last month, the London-based head of the World Federation of Diamond Bourses, Avi Paz, issued a statement that the economic downturn in the US, the world’s top diamond consumer, may compound the debt burden in the diamond industry. He urged members to maintain liquidity and asked diamond producers to reduce supply during the current economic turmoil to stabilize the sector. Now Even De Beers has reportedly promised “to trim its supply of diamond roughs.”

Meanwhile, the diamond mining companies are eagerly awaiting the introduction of India’s new mines policy. Several private companies like De Beers, Rio Tinto and Jindal Steel are already undertaking diamond exploration in various states of India expecting the clearance of the new mines policy.

Mining Ministry sources say, “The Mines Ministry worked overtime since 2006 to draft a new mining policy, based on the recommendations of the Hoda Committee, and expedited its submission to Parliament earlier this year.”

The new policy introduces a slew of measures to reduce the country’s dependence on imports and to encourage the entry of private players into inland diamond mining. However, the new mining policy that was to be cleared last year, has been delayed inordinately. Sources in the Mining Ministry also said, “The new mines policy has been cleared by the Union Cabinet and already placed before the Parliament. But with the general elections round the corner, it is unlikely that the policy will be passed implemented soon.”

The new mines policy is reported to be a genuine attempt to correct erstwhile anomalies and to promote diamond mining in the country in right ernests. It eases the entry of multinational companies with their new fangled machines, technology and expertise into exploration and mining of diamonds within India.

Automatic Licensing :

The policy allows automatic grant of a mining license to the company conducting diamond exploration. Present rules allow the company, having successfully done the exploration, to be given preference in getting the mining license. “This is not logical because why should a company spend on exploration work if it is not certain that it shall receive the mining license,” mining sources questioned.

Scope for Joint Ventures :

The new policy also allows the company to transfer the mining lease to another entity. This is expected to encourage joint ventures between foreign multinationals and Indian companies. Even the foreign direct investment policy in the mining sector has been changed to allow for foreign equity holding up to 100 per cent on the automatic route for diamond mining companies.

“This is expected to attract larger inflow of foreign investment into India for the mining, that has been a largely an overlooked sector,” sources said.

Outlook Positive :

International diamond mining companies like De Beers and Rio Tinto believe that this policy could bring about change in the diamond industry, allowing smaller companies to enter the business of diamond exploration.

Earlier this year, in June, Rio Tinto submitted a mining lease application to the government of India for its Bunder diamond project in the Bundelkhand region of Madhya Pradesh.

Great Expectations :

Informs Bill Champion, Managing Director, Rio Tinto Diamonds, “The mining lease approval process is complex involving approvals from both State and Central government bodies. Our application is currently being processed by the Madhya Pradesh government. This could be a vital step in the development of what could become the first significant world class diamond mine in India.”

The Bunder project was discovered in 2004 as part of a regional reconnaissance exploration program that commenced in 2002. Diamond exploration involves a number of stages from broad scale reconnaissance mapping and sampling, through target generation, target testing to resource delineation.

“During the reconnaissance stage samples from creeks and rivers are collected and examined for minerals that may indicate the existence of diamond-bearing rocks, namely kimberlites and lamproites. The Bunder area was selected for follow-up work due to the identification of such ‘indicator’ minerals in samples in the areas,” Champion informs.

Prospecting in Progress :

A prospecting licence was granted in September 2006, which allowed exploration activities to continue, and magnitude study was commenced to evaluate the economic viability of the eight diamondiferrous lamproites.

“We have spent more than Rs. 100 crore (US$25 million) over the last six years on diamond exploration and evaluation in India, and remain excited about the prospects for the Bunder project,” says Champion.