Manufacturing of

Lab-Grown Diamond at

Surat

Gems & JewelleryGovernment of Gujarat

Page 2

Contents

Project Concept 3

Market Potential 6

Growth Drivers 7

Gujarat – Competitive Advantage 8

Project Information 9

- Location/ Size

- Raw Material/ Manpower

- Infrastructure Availability/ Connectivity

- Key Players/Machinery Suppliers

- Potential Collaboration Opportunities

- Key Considerations

Project Financials 14

Approvals & Incentives 15

Page 3

Project Concept

What is Lab-Grown or Synthetic Diamond

► Synthetic diamonds are either partially or wholly crystallised or re-crystallised artificially in a

laboratory.

► They posses the same chemical and physical properties as natural diamonds, but have

different growth structures and impurities which enable rapid identification using specialist

equipment.

Difference Between Natural and Synthetic Diamonds

Nature of

production/

formation

Product

properties

Price

Environmental

hazards

► Formed out of carbon deposits

~150 kms inside the earth’s

mantle.

► Formation takes more than a

million years.

Natural Diamonds Synthetic Diamonds

► Grown in a lab, mostly inside a

reactor, treated to extreme

heat, pressure and gases.

► Production takes between 5 to

15 days.

► These are mineral formed of

carbon which is hard and

adamantine.

► Flawless diamonds are rare.

High level of inclusions found

in lower-grade diamonds.

► Possess the same chemical

and physical properties as

natural diamonds.

► Flawless diamonds can be

made in large quantities with

less inclusions.

► Natural diamonds are pretty

expensive with one carat

priced at more than INR0.3

million.

► They have good resale value.

► Synthetic diamonds are ~30-

35% cheaper than natural

diamonds.

► Low resale value as compared

to natural diamonds.

► Depth mining process used

which is not considered to be

environment friendly.

► Diamonds are still smuggled

out of conflict zones in Africa,

popularly known as blood

diamonds.

► Synthetic diamonds are

conflict-free and cause less

pollution on the environment.

Page 4

Project Concept

Classification of Diamond Types

► Diamond type classification is based on the presence or absence of nitrogen and boron impurities and their configuration in the diamond lattice

► Type Ia diamonds contain aggregated N purities – including A-aggregates (IaA), which consists of pairs of N atoms, and B-aggregates (IaB), which are made of four N atoms around a vacancy

► Type Ib diamonds have isolated N atoms. Type IIa contain no measurable impurities, and type IIb diamonds have boron impurities

► Color is strongly influenced by impurities / defects in the diamond lattice. Consequently, diamond type plays an important role in the potential colors of natural , synthetic, and treated stones.

Source: Christopher M. Breeding, James E. Shigley, “The “type” Classification System of Diamonds and Its Importance in Gemology”

Page 5

Project Concept

Classification of diamond industry

Natural

diamondsSynthetic

diamonds

Type I Type II

Type I a Type I b Type II a Type II b

CVD

Type I a A

Type I a B

HPHT

Techniques of producing synthetic diamonds

► There are two methods of manufacturing synthetic diamonds in a laboratory:

► High Pressure High Temperature (HPHT)

► Chemical Vapour Deposition (CVD)

HPTP lab CVD reactor

Page 6

Market Potential

Market potential for Gujarat

► Gujarat accounts for 72% of the world’s share of processed diamonds.

► 90% of the total diamonds in Gujarat are processed by about 10,000 diamond units located in

and around Surat.

► The majority of CVD and HPTP diamond manufacturers in India are based out of Surat, making

it the hub for synthetic diamond manufacturing.

► The global rough diamonds market is

expected to witness a huge demand-supply

gap in future due to the low supply of mined

diamonds which take hundreds of years to

form.

► Synthetic diamonds on the other hand can be

produced within ~200 hours and cost ~30%

lesser than natural diamonds.

► India can explore this new market for

synthetic diamonds by developing

manufacturing facilities to support the

growing demand for rough diamonds.

Market potential for India

134155

178200

221 240 254 270 281 292

134147

137113

62 43

38 30 14 14

2014 2018 2022 2026 2030 2034 2038 2042 2046 2050

Rough diamond demand Mined diamond supply

Global rough diamond demand-supply gap (million carats)

Current market scenario in India

350,000 carats is the estimated annual

production of gem-quality CVD and HPHT

synthetic diamonds in India. It is expected to

grow to 1.5 million carats between 2016 and

2021.

INR338m spent on import of CVD reactors

by Indian manufacturers between April to

November 2015 with ~50 culture diamond

manufacturers starting lab trials in the country

between 2014 and 2016.

~INR3.9b worth of rough synthetic

diamonds were imported for polishing in 2014-

15. India witnessed 216% increase in export

of synthetic stones between 2011-12 and

2014-15.

http://economictimes.indiatimes.com/industry/cons-products/fashion-/-cosmetics-/-jewellery/natural-diamond-traders-

up-in-arms-against-lab-diamond-traders/articleshow/51434200.cms

GROWN DIAMONDS: UNLOCKING FUTURE OF DIAMOND INDUSTRY BY 2050 (pdf)

Page 7

Growth Drivers

Higher

affordability

Increasing

purchasing

power of

consumers

Rising

demand

in foreign

market

Quality

production

► India’s economic condition has been improving since the past

two years driven by decline in oil prices and low inflation and

interest rates.

► Purchasing power of the people also witnessed an increase

with the growth in economy, growing at a CAGR of 17%

between 2012 and 2015. As a result, demand for diamond in

India also increased.

Support from

environment

activists

► The global synthetic diamond market was valued

at US$15.7b in 2014 and is anticipated to reach US$28.8b by

2023.

► Synthetic diamonds are 30-35% cheaper than natural

diamonds, making them more affordable than natural

diamonds.

► The gems and jewllery industry is the second largest contributor

to foreign exchange, with ~15% share of the total export

earnings of the country. CVD and HPHT diamonds account for

almost 95% of synthetic stones' export-import.

► Tiny synthetic diamonds are used in saw blades for cutting

asphalt and marble, in drill bits for oil and gas drilling, and even

as an exfoliant in cosmetics.

► Unlike natural diamonds which take millions of years to be

formed, synthetic diamonds are produced between 5 to 10 days

in a laboratory.

► It is also possible to clone a perfect, flawless synthetic diamond

with minimum inclusions through the CVD process.

► Countries such as Africa which are a major producer of natural

diamonds have always been criticized by environmentalists.

Mining of diamonds harm the environment, with cases of

workers dying in accidents or due to diseases driven by poor

working conditions.

► Lab grown diamonds are conflict free and less environmentally

polluting.

http://www.financialexpress.com/article/markets/indian-markets/pc-jeweller-may-benefit-from-rapid-branded-jewellery-

growth/90618/

https://www.gemkonnect.com/news/us-logs-39b-diamond-jewellery-demand-2015-drives-2016-growth

http://www.financeman.org/fingj06.htm

https://www.theguardian.com/environment/2015/may/26/dust-tb-hiv-ugly-face-mining-south-africa

http://economictimes.indiatimes.com/industry/cons-products/fashion-/-cosmetics-/-jewellery/natural-diamond-traders-up-in-arms-

against-lab-diamond-traders/articleshow/51434200.cms

http://www.prnewswire.com/news-releases/synthetic-diamond-market-is-anticipated-to-reach-us288-billion-by-2023-expanding-at-

a-significant-cagr-between-2015-and-2023-transparency-market-research-562615151.html

Page 8

Gujarat - Competitive Advantage

► Surat is an important

diamond processing

centre, exporting ~80%

of the production. The

city has more than 3,500

diamond processing

units.

► The easy availability of

processed diamonds

(used as seed for

culturing diamonds)

makes it a natural choice

for manufacturers of

synthetic diamonds.

► Located on the west coast of India, Gujarat is well connected to the major cities of the world by air and sea routes.

► The state has 45 ports, 12 domestic airports and 1 international airport in addition to an extensive rail and road network.

► Gujarat is a power

surplus state that attracts

a high degree of

investment across

industries and is a

preferred investment

destination in India.

► Gujarat contributes 7.2% of the Nation GDP and shows leadership in many areas of manufacturing and infrastructure sectors. Gujarat’s SDP (State Domestic Product) at current price registered a growth of 11% during the year 2014-15.

Diamond processing clusters in Gujarat

► Belgaum in Karnataka and Nellore in Andhra Pradesh

are clusters which specialize in studded jewellery

using synthetic and imitation stones

► Surat is the largest diamond processing cluster in the

world and is called ‘A Silky City Sparkling with

Diamonds’.

► Several traders in Surat are engaged in polishing

rough cultured HPHT diamonds sourced from China.

Bhavnagar

Navsari

Surat

Ahmedabad

Palanpur

Hub for diamond

processing

Established

infrastructure

Economic

development

Gujarat leads in ease of doing business in India

Overall ranking 1

Land allotment and obtaining construction permit 2

Complying with environment procedures 1

Complying with Labour regulations 2

Obtaining infrastructure related utilities 2

Carrying out inspections 2

Enforcing contracts 3

Page 9

Project Information

Site image for Surat Special Economic Zone

Location

► Manufacturers setting up units at Surat SEZ are eligible for various incentives by the

Government of Gujarat.

► The park is at a prime location which is 3 kms from Surat city, with direct access to NH-6 and

ONGC-Magdalla State Highway. Surat airport is at a distance of 8 kms and Surat railway station

is 18 kms away.

Area

► The park is anticipated to have 369 industrial plots with the size of the plots varying between

500 to 50,000 square yards. The total existing area of the facility is 968,172 square meters,

which can be categorized as follows:

Description Area (square meter)

Saleable Area 503,602.74

Owner’s Plot 118,851.70

Landscape Area & Parking Area 66,367.62

COP & Parking Area 66,237.05

Road 214,707.89

Total 968,172

Page 10

Project Information

► Involves high pressure and temperature

due to the high activation barrier involved

in the conversion of graphite into diamond.

► Using catalytic methods involving liquid

metal solvents, HPHT synthesis of

diamond has been achieved at pressures

of about 7-10 GPA and at a temperature

of1900 to 2000°C.

► Diamond films are synthesized at near

atmospheric pressures and at

temperatures below 1000°C.

► CVD involves direct deposition of a carbon

film from an activated carbon radical

source and optimizing the parameters to

stabilize the growing carbon film with a

diamond structure.

CVD process

Techniques involved in production of synthetic diamonds

► Cultured diamonds are grown from the ‘seed’ of a natural flawless mined diamond. Flawless

lab-grown diamonds which have previously been bred from a natural diamond can also be

used as a seed.

► Natural diamonds are easily available in Gujarat which can be used as seeds for cultured

diamonds, making it an attractive destination for synthetic diamond manufacturing.

► Gases such as methane and hydrogen used in the CVD process are easily available.

Raw materials for culturing diamonds

Technology Suppliers India – CVD Plasma Reactors

HPHT process

Seki Diamond Systems

(sales in India)

Microwave Plasma CVD

systems

Hot filament CVD systems

low Temperature CVD

Microwave Enterprises (USA)

Products focused on the

deposition and treatment of

CVD diamond

Standard Plasma system

products

Soni CVD Diamonds

(India)

Microwave Plasma CVD

reactor

Manufactured by YK

Diamond LLC, USA

Page 11

Project Information

Proposed

► Rail connectivity was proposed for Hazira and

Nargol ports in the 2016 rail budget.Proposed

► Proposed four-lane highways which are

expected to improve connectivity in Surat

include – Dakor-Savli, Vadodara-Dabhoi &

Surat-Olpad-Bardoli.

Proposed

► In January 2015, Airports Authority of India

gave an in-principle approval for cargo

terminal at Surat airport worth INR70 million.

The terminal is expected to be operational in

2017.

► In February 2016, Surat Airport Action

Committee filed an online petition for an

international airport at Surat.

► The nearest port is Hazira which is 25 km

from Surat.

► Additionally, Hazira port is well connected to

Mundra port and Jawaharlal Nehru Port Trust

(JNPT) – India’s largest container port

► Thus, it provides a convenient textiles-related

trade gateway to International (Europe,

Africa, America and the Middle East) and

domestic markets.

► Surat domestic airport is well connected to

various parts of the country. The city is

located ~275 kms from the international

airport at Ahmedabad.

► Surat is connected with other districts of the

state such as Rajkot, Vadodara and

Ahmedabad by rail.

► Hazira port in Surat is ~16 kms away from the

Surat railway station.

► The city is connected to Delhi Mumbai

Industrial Corridor (DMIC) which links

Ahmedabad, Vadodara and Surat.

► Proximity to NH-8 and NH-6 further enhances

connectivity in the city.

► Surat also has very good connectivity with

other cities of the state such as Vadodara

(154 km) and Ahmedabad (265 km).

► Water for industrial purposes can be obtained

from four sources viz. Gujarat Water Supply

and Sewerage Board (GWSSB), an irrigation

canal, dams, and surface reservoirs.

► The main source for the power supply is

Torrent Power Limited in Surat.

Power

Rail Road

Air Port

Water

Utility

Logistics & Connectivity

http://www.firstpost.com/investing/five-most-promising-indian-tier-ii-cities-you-should-invest-in-2796296.html

http://deshgujarat.com/2015/03/25/clearances-by-july-works-for-nargol-port-to-start-next-yeargog/

http://timesofindia.indiatimes.com/city/surat/Multi-mode-transportation-hub-soon-at-Surat-railway-station/articleshow/52095198.cms

Page 12

Project Information

Key players in India

Collaborations

Hiraco

2A Technologies

New Diamond Era

► Hiraco specialised in 'natts diamonds' (natural diamonds with

black spots) for 40 years before switching to lab diamonds.

► It has started producing small lab diamonds in its overseas

laboratories.

► 2A Technologies is a Singapore based lab-grown diamond

manufacturer.

► It owns the largest diamond-growing facility in the world,

using cutting edge technology in the form of Microwave

Plasma Chemical Vapour Deposition (MPCVD) process for its

grown - diamond production.

► New Diamond Era is engaged in production of CVD

(Chemical Vapor Deposition) Carbon Stone (i.e. synthetic

diamonds).

► The firm has set up a manufacturing facility at Sachin, SEZ in

Surat, Gujarat.

The Indian Diamond Institute (IDI) has decided to start a new course on identification of synthetic diamonds. The course will teach students to identify the Chemical Vapour Deposition (CVD) technique by which a diamond can be grown from a hydrocarbon gas mixture.

In April 2015, the Gems and Jewellery Export Promotion Council (GJEPC) inaugurated the first synthetic diamond detection and resource centre (DDRC) in collaboration with the Indian Diamond Institute (IDI).

Solitaire Gemmological Laboratories (SGL), an independent international laboratory that specialises in certification of diamond and diamond studded jewellery is now in collaboration with the Gem and Jewellery Skill Council of India (GJSCI) to offer Diamond Grading Courses.

http://timesofindia.indiatimes.com/home/education/news/Indian-Diamond-Institute-to-start-a-course-in-synthetic-

diamonds/articleshow/35101236.cms

http://2atechnologies.com/#

http://timesofindia.indiatimes.com/city/surat/synthetic-diamond-detection-made-easy-with-AMS/articleshow/46805445.cms

http://www.jewellerytechnology.com/education/SGL.php

Page 13

Key Considerations

► A number of cases have been witnessed in India and globally,

wherein, synthetic diamonds are mixed with natural diamonds and

sold at the price of the latter.

► India is facing rising credibility issues and thus diamonds exported

from the country are subject to critical tests to detect any mixing of

diamonds.

► A CVD lab with two reactors can cost ~INR100 million. The price of

various models of reactors imported from Germany, US and Japan

can vary between INR8 to 60 million.

► The manufacturing of cultured diamonds requires not just reactors

but technical expertise. Individuals having a masters' degree or a

PhD in material physics are preferred. However, there are only 500

material physicists globally who have experience in culturing

diamonds.

► Bharat Diamond Bourse banned lab diamond manufacturers on its

premises. The government also set up National Diamond

Monitoring Committee to check the proliferation of lab-diamonds in

the country.

► Cultured diamonds use high end technology which includes huge

capital investment and R&D costs. With the lack of support from

the government, manufacturers may find it difficult to find investors

for their company.

Mixing with natural diamonds

Expertise and capital expenditure requirement

Low government support

http://www.business-standard.com/article/companies/strike-effect-artisans-shift-to-imitation-jewellery-116041600206_1.html

http://timesofindia.indiatimes.com/city/surat/Jewellers-strike-Over-50k-artisans-move-out-of-city/articleshow/51593046.cms

http://www.businesstoday.in/magazine/features/why-indias-diamond-industry-is-facing-its-worst-crisis-ever/story/226005.html

Page 14

Project Financials

Project structure & implementation models

► Synthetic diamond manufacturing projects are usually funded through a private model.

Land cost

► The average allotment price of Gujarat Industrial Development Corporation estates in Surat is

INR2,319 per square meter with effect from 1 April 2016.

► The rates and charges for land at Surat SEZ are available on request from its Customer

Relation Department and Marketing Department.

Labour cost

► The labour cost per carat in Gujarat is ~INR600, the lowest among the major diamond trading

centers across the world.

Sources of financeAmount

(INR million)

Term loan 390

Unsecured loan 63.5

Equity 140

Total 593.5

Manufacturing unit particulars Units

Installed capacity (carat per annum) 72,000

Installed machinery 48

Profit margin 20%

Total project cost (INR million) 593.5

Destination Gujarat (pdf)

GIDC allotment price 2016-17 (pdf)

New Diamond Era ICRA report (pdf)

http://economictimes.indiatimes.com/industry/cons-products/fashion-/-

cosmetics-/-jewellery/natural-diamond-traders-up-in-arms-against-lab-

diamond-traders/articleshow/51434200.cms

Page 15

Approvals & Incentives

Incentives from Government of Gujarat for jewellery manufacturers

Exemption from obtaining No Objection Certificate from the Gujarat Pollution Control Board for

establishing a gems and jewellery industry and for conversion of land to 'non agricultural' use.

Maximum interest subsidy at the rate of 3% per annum, limited to maximum of INR1.5 million

per annum available to modern jewellery units for a maximum of 5 years.

Assistance of viability gap funding of 20% of the total project cost to private developer intending

to develop Jewellery park on PPP basis.

Support and assistance for establishing skill development centres, Hallmark Certification

centres and diamond testing centres.

Source:

http://gpcb.gov.in/industries-exempted.htm

http://ic.gujarat.gov.in/?page_id=329

http://www.finmin.nic.in

Recently approved incentives by Government of India

Exemption from submission of any ground plan of the premises for taking excise registration

Excise duty on jewellery to be payable at first sale invoice value. Sale of traded goods to be

exempted from excise duty.

Exemption from excise audit for the first two years for units whose duty payment (cash plus

credit) is less than INR10 million, with turnover of manufactured goods less than INR1000

million.

Increase in Supplemental Security Income (SSI) eligibility limit from INR120 million to INR150

million.

Increase in Supplemental Security Income (SSI) exemption limit from INR60 million to INR100

million in a financial year and INR8.5 million for the month of March, 2016.

Page 16

Approvals & Incentives

Gujarat government Introduced Scheme of Assistance to MSEs for

Shed and Plot Developed by Private Developer

(Government Resolution MIS/102014/430906)

Assistance

in Rent to

MSEs

► This scheme was introduced by the Government of Gujarat to help MSE

industrial units to keep more margins for purchase of land and buildings

while approving loans from financial institutions

► Under the scheme assistance of upto 50% of rent paid or INR 50,000/-

per annum, whichever is less in Municipal corporation area and under the

Urban Development Authority

► Assistance of upto 50% of rent paid or 25,000/- per annum, whichever is

less in other areas is provided for 3 years

Assistance

to Private

Developer

for

Developing

Readymade

sheds in

Mini Estate

► Government of Gujarat, in order to facilitate small estates having a small

row type shed for MSEs has introduced this scheme

► Under the scheme, assistance is provided to private developers @ 50% of

the total cost of land, building and other infrastructure facilities who meet

the following conditions:

► Size of the shed shall be around 50 sq. m. (500 sq. ft), size of the mini

estate shall not be more than 2 ha.

► Land shall be in industrial zone or commercial zone in the Municipal

Corporation/Urban Development Authority. All the proposed infrastructure

must be completed within 2 years from date of sanction

This project profile is based on preliminary study to facilitate prospective entrepreneurs to assess a prima facie scope.

It is, however, advisable to get a detailed feasibility study prepared before taking a final investment decision.

Gujarat Industrial Development Corporation

www.gidc.gov.in/

www.ic.gujarat.gov.in

Industries Commissionerate

Export Promotion Council

www.gjepc.org

Office of The Industries Commissionerate

Block No. 1, 2nd Floor, Udyog Bhavan,

Gandhinagar 382 010. Gujarat. INDIA

Ph.: 23252683/23252617 • Email

ID: iccord@gujarat.gov.in