Diamond Imprest Authorization Scheme

The Government of India has recently launched the Diamond Imprest Authorization (DIA) Scheme. This initiative aims to boost the diamond industry by allowing duty-free imports of natural cut and polished diamonds. The scheme is effective from April 1, 2025. It targets value addition and aims to enhance exports in the diamond sector.

Overview of the Diamond Imprest Authorization Scheme

The DIA Scheme permits the duty-free import of natural cut and polished diamonds weighing less than ¼ carat. Exporters must meet a value addition obligation of 10%. This requirement ensures that imported diamonds undergo processing in India, encouraging local industry growth.

Eligibility Criteria

To qualify for the scheme, diamond exporters must hold a Two Star Export House status or higher. They should also have annual exports of at least $15 million. This criterion is designed to support established players in the diamond market, particularly those who can effectively utilise the benefits of the scheme.

Exemptions from Duties

Under the DIA Scheme, imports are exempt from various duties, including Basic Customs Duty and Additional Customs Duty. This exemption extends to Education Cess, Anti-dumping Duty, and other specific duties. Such measures reduce the cost of importing diamonds, making it more attractive for exporters.

Response to Global Trends

The DIA Scheme is a response to global beneficiation policies. Countries like Botswana and Namibia require diamond manufacturers to establish local cutting and polishing facilities. By aligning with these international practices, India aims to retain its diamond industry investments and prevent capital flight.

Impact on the Indian Diamond Industry

The diamond industry in India has faced challenges, including declining exports and job losses. The DIA Scheme is expected to reverse these trends by promoting local processing and increasing employment opportunities. It aims to rejuvenate the diamond sector, supporting both small and medium enterprises and larger exporters.

Strategic Importance for MSMEs

The scheme is particularly beneficial for Micro, Small, and Medium Enterprises (MSMEs) in the diamond sector. By providing a level playing field, it enables these smaller players to compete with larger firms. This support is crucial for sustaining the domestic diamond processing industry and encouraging local economic growth.

Future Prospects

The implementation of the DIA Scheme is anticipated to have a positive impact on the Indian diamond market. As exporters adapt to the new rules, the scheme may lead to increased investments in the diamond processing sector. This could further enhance India’s position in the global diamond trade.

Conclusion

The Diamond Imprest Authorization Scheme represents step towards revitalising India’s diamond industry. By facilitating duty-free imports and promoting local value addition, it aims to strengthen the sector and safeguard employment opportunities.

Questions for UPSC:

1. Examine the impact of the Diamond Imprest Authorization Scheme on the Indian diamond export sector.
2. Critically discuss the role of MSMEs in India’s economic growth and their challenges in the current market.
3. Analyse the significance of beneficiation policies in diamond-producing countries and their implications for international trade.
4. Estimate the potential effects of duty exemptions on the competitiveness of Indian diamond exporters in the global market.

Answer Hints:

1. Examine the impact of the Diamond Imprest Authorization Scheme on the Indian diamond export sector.

1. The scheme allows duty-free imports, reducing costs for exporters.
2. It mandates a 10% value addition, promoting local processing and job creation.
3. Eligibility for exporters is set at Two Star Export House status and $15 million annual exports, targeting established players.
4. It aims to reverse declining exports and job losses in the diamond industry.
5. The scheme aligns with global trends, enhancing India’s competitiveness in the diamond market.

2. Critically discuss the role of MSMEs in India’s economic growth and their challenges in the current market.

1. MSMEs contribute to GDP and employment in India.
2. They face challenges such as limited access to credit and technology.
3. Market competition from larger firms can hinder their growth potential.
4. Regulatory hurdles often restrict MSME expansion and innovation.
5. Government initiatives like the DIA Scheme aim to support and empower MSMEs.

3. Analyse the significance of beneficiation policies in diamond-producing countries and their implications for international trade.

1. Beneficiation policies require local processing, creating jobs and economic growth in producing countries.
2. They enhance the value chain by promoting local industries over foreign imports.
3. Such policies can lead to increased investment in local facilities and technology.
4. They may cause trade tensions as countries adapt to new regulations.
5. India’s response through the DIA Scheme illustrates the need to remain competitive globally.

4. Estimate the potential effects of duty exemptions on the competitiveness of Indian diamond exporters in the global market.

1. Duty exemptions lower the cost of imports, making Indian diamonds more price-competitive.
2. They allow for better profit margins, enabling reinvestment in processing and technology.
3. Exemptions can attract foreign buyers looking for cost-effective sourcing options.
4. Increased competitiveness may lead to higher export volumes and market share.
5. Overall, duty exemptions could enhance India’s position in the global diamond trade.