"Have you seen a jeweller in India selling man-made diamonds? Did you ever come across any ad, any brand?.. But everyone in the trade knows about lab-grown, synthetic stones being imported and sold in the wholesale market.

So, if no retailer in India is advertising synthetic diamonds, the suspicion is that some of them may be mixing these cheaper stones with the real ones...Some black sheep will give us a bad name," said a trade veteran. It's a suspicion that has deepened over the years, sparking a highstake battle over hundreds of millions of dollars in the secretive world of diamonds. Now, a recent development may intensify the tussle between dealers of natural and synthetic diamonds.

A fortnight ago, the commerce ministry, which was alerted about illicit trade in man-made diamonds, asked the trade body based in Mumbai, where bulk of the diamond deals are cut, to explain how synthetic diamonds are differentiated from natural ones, and the import practices followed by other countries. Synthetic diamonds are 30-50% cheaper than natural diamonds.

The query owes its origin to the way synthetic stones — grown in laboratories abroad under conditions of high temperature and pressure — reach traders in Surat and Mumbai. Indeed, the bone of contention lies in the ambiguous description of small cargoes of synthetic diamonds passing through Indian customs authorities. Every commodity has a numeric code that is disclosed to the customs department when it crosses a border.

It's called the Harmonized Commodity Description and Coding System — or HS code in official trade parlance. India (like some of the other countries) has no separate, identifiable code for "synthetic" or "lab-made" diamonds. Thus, synthetic diamonds that enter India are typically categorised under '7104' - the broad code for synthetic stones of various kinds. (There have been instances where select importers were found trying to bring in lab made diamonds under '7102' - the code for natural diamonds.) In the absence of a separate subcategory, there is no way for either the government or the local trade to figure out the quantum of synthetic diamond that is being imported.

In India, the term diamond is used interchangeably for natural as well as man-made diamonds and there is no compulsion at the retail level to spell out the origin of the stone. Indian diamond houses want this to change. They are asking the government to introduce a separate code under the 7104 to enable the industry to keep a track of inflow of rough lab-grown diamonds into the country. "A separate code to distinguish between imported synthetic rough diamond and natural rough exists in China. We are requesting the government for a similar system. Also, there should be a duty on lab-made rough import," said Sanjay Kothari, a spokesperson for the industry.

MENACE OF MIXING

About 70% of total import of all synthetic stones and 94% of exports were in the diamond hub of Surat. "There is a high chance many of these synthetic stones are man-made diamonds. You can get away by mixing man-made diamonds with natural diamonds. Once polished, they are visually identical. Also, it's not possible to test a diamond once set in jewellery.... Technically, it would be incorrect to describe a man-made diamond as 'cultured', like cultured pearl," said a person associated with a diamond house in Mumbai.

According to a confidential report prepared by the consultancy firm AT Kearney for the apex trade body Gems & Jewellery Export Promotion Council, 600 of 1,000 diamonds submitted to the International Gemological Institute in May 2012 turned out to be synthetic. "The risk of players illicitly mixing synthetic diamonds with (natural diamonds) exists at key points across the value chain," says the report. First made by GE in 1952, synthetic diamond labs came up in Russia in the '90s and currently Singapore, Malaysia and the US contribute majority of the manufacturing capacity of gem-quality man-made diamonds.

One of the leading makers of labgrown diamonds is the Singapore-based IIa Technologies. IIa is headed by Vishal Mehta, son of Jatin Mehta who promoted Winsome Diamonds. Winsome, along with group companies, had borrowed about Rs 6,000 crore from Indian banks which are yet to salvage the money. Clarifying that Jatin Mehta is in no way associated with IIa, a spokesperson for IIa said, "We have never objected to appropriate identification of diamonds. At present, grown diamonds are categorised under HS Code 7104 which is essentially meant for synthetic stones like diamond simulants, CZs, Moissanite which are not diamonds but imitation gemstones. Grown Diamonds are diamonds — real, genuine diamonds. They have identical physical, chemical, optical properties as mined diamonds and it is technically incorrect to club them alongside synthetic simulant or artificial stones. We believe that diamonds - grown and mined - should be classified under same HS Code (7102) with further sub-classification that correctly identifies the source of the diamonds....Every reputed grading lab out there grades and identifies us as diamonds and benchmarks us on same parameters as mined diamonds."

On the menace of mixing, the IIa official said, "In past, issues such as mixing of conflict diamonds in the supply of mined diamonds were also caused by truant dealers and it continues to be an area of constant education, awareness and stringent due diligence on part of the diamond industry to maintain its reputation and supply chain integrity."

According to her, grown diamonds are sustainable, cause no damage to environment and represent a new choice for customers. Armed with new technology, finance and access to different markets, makers of man-made diamonds claim that lab-grown diamonds are free of conflicts, human rights violations and controversies that have dogged real diamonds. While there may be shades of truth in this, powerful families of Hasidic Jews and Palanpuri Jains, having built their businesses over the past 50 years, are unwilling to let cheaper stones grown in labs to pass off as diamonds. "We are not against manmade diamonds. We are against mixing... The two should be differentiated," said one of them.