Note ban comes as a deep cut for world's diamond polishing hub

In the third of a six-part series, Business Standard travels through diamond and textile units in Surat to assess the impact of demonetisation.

It was the evening of November 8 and Surat-based diamantaire Arjanbhai Ambaliya’s family was just back in their Gandhinagar hotel after a day of touristy travel through the city. They were already discussing the next vacation in Udaipur. But the following day, they were heading back to Surat, rather depressed. 

Demonetisation had struck.

That is not the only change in plan in his family. Ambaliya, 46, is now having second thoughts about going ahead with his son’s wedding that was planned for February 1, 2017. “We might have to postpone it,” says Ambaliya, whose diamond polishing unit near Katargam is lying virtually defunct.

After it shut down for days at a stretch, the diamond polishing unit opened to only five employees recently against the usual strength of 150. Along with his two brothers, Ambaliya is busy doing the rounds of the banks to withdraw cash and pay his workers. He needs to send money home to his farmer father in Amreli as well. 

Rinkesh Shekhawala, 36, too has been helping his father, Pravinbhai (62), in the textile business.

“Every day, my son stands in the queue to withdraw cash to pay our workers. We have not been able to pay enough wages to them since November 9,” the father says.

Not only have the orders dried up completely, orders prior to November 8 have also been cancelled. Their powerloom unit in Patel Industrial Society on Ved Road in Surat has been inactive for weeks. 

The current account withdrawal limit has meant that as against a daily requirement of Rs 3 lakh worth of working capital, textile unit owners like Shekhawala have to suffice with Rs 50,000.

Surat polishes 95 per cent of all diamonds processed in the world. While the size of the industry is estimated at around Rs 90,000 crore, the city houses close to 4,000 units which cut and polish diamonds. The textile industry is big too in the city, pegged at over Rs 60,000 crore. The diamond and textile units together employ more than 2 million people in this southern city of Gujarat bordering Mumbai.

The number assumes significance if one were to compare it with the IT industry, which employs around 3 million. Besides textile and diamond, agriculture too has been hit.

For instance, sugarcane farmers with decent land holding like Pinakin Patel of Sadlav village in Navsari, 40 km from Surat, are still able to carry through since their farm expenses are incurred by the sugar factories to whom they supply. November is the harvesting month for kharif sugarcane and sowing month for rabi crops. 

“However, the situation may get tough for us if the cash crunch continues,” says Patel. However, Naseeruddin Dabhi (50), who has to travel 15 km daily from Mohni village to the Agriculture Produce Market Committee in Surat to sell vegetables, it has been a nightmare since November 8. Dabhi, who mostly deals in brinjal, ladies finger and string beans, has seen prices fall by over 50 per cent. 

This is because while sugarcane and rice are sold mostly in large quantities of quintals and tonnes, thereby facilitating cheque payments, vegetables and fruits are sold in smaller quantity of 5 kg, 10 kg and 20 kg, making cash payments imperative.

Then there are others like Rajni Dudhat, a textile processing unit worker, who has been asked to stay at home for at least two months by his employer for want of work.

“As against a monthly requirement of Rs 10,000, we have reduced our consumption severely and are managing our house with Rs 3,000,” said Dudhat, 40, who had to put off shopping for a wedding in the family. To make ends meet, Dudhat plans to borrow from family and friends.

While workers like Dudhat have been sent home, employers like Shekhawala fear that the rest of the workers who were supposed to return from Diwali holidays may now extend their stay for at least two months.

“This could lead to mass exodus of workers who hail from other states like Bihar and Odisha,’’ says Shekhawala. The situation could only ease if cash could be mobilised at the earliest, according to Surat APMC Chairman Raman Jani. Till then, farmers, traders and buyers are transacting mostly in credit.

Image: An employee sifts through diamonds at a diamond cutting and polishing factory in Surat. Photograph: Arko Datta/Reuters.

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