December 10, 2014 / 12:01 PM / 5 years ago

CORRECTED-Russia's Alrosa to sell more diamonds direct to India

(Corrects Alrosa sales figures in second paragraph)

By Douglas Busvine and Meenakshi Sharma

NEW DELHI/MUMBAI, Dec 10 (Reuters) - Russia’s state-controlled diamond monopoly Alrosa will sign a dozen deals with Indian buyers on Thursday to increase direct deliveries to Asia’s third-largest economy, as financial capital Mumbai aspires to expand as a trading hub.

Alrosa earns half of its revenue, or around $2.5 billion, from Indian-funded clients. Most of its sales go via trading centres like Antwerp, Dubai or Tel Aviv, with $700 million coming from direct sales of rough diamonds to India-based companies.

The direct deals, to be signed during a visit to India by President Vladimir Putin, would reduce the cut taken by middlemen in the secretive precious gems trade.

“A lot of our Indian customers buy rough diamonds through Antwerp or Dubai. For them it will be more comfortable to deal directly,” Alrosa Vice President Andrey Polyakov told Reuters in New Delhi.

Putin and his host, Indian Prime Minister Narendra Modi, are expected to preside over the signing of the contracts at a diamond industry conference during the Kremlin chief’s one-day visit to New Delhi.

India does not produce any of its own rough diamonds but cuts and polishes around 80 percent of the world’s output, its Gem and Jewellery Export Promotion Council (GJEPC) estimates.

“Only a few big diamond players are purchasing directly, otherwise most of the stones come through middlemen,” said Sabyasachi Ray, executive director at the GJEPC. “That increases the transaction costs and adds (to) the burden on the industry.”

While a direct sales route to India might reduce risks linked to Western sanctions imposed over Russia’s annexation of Crimea and support for an uprising in eastern Ukraine, India will also need to streamline its tax and import rules if direct trade is to take off.

“India will have to simplify procedures and relax taxation for direct diamond trade,” said Ray. His industry group has proposed allowing diamond imports by consignment and assessing taxes based on the presumed value of shipments.

Alrosa is the world’s leading diamond miner, accounting for 27 percent of global production by carats. Output totalled 36.9 million carats last year, the company says. (Writing by Douglas Busvine; Editing by David Holmes)

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