Hindustan Diamond Company Private Ltd (HDC), the Indian government's joint venture with diamond giant De Beers, is going through rough times, according to the Hindu Business Line.

The ties between De Beers and HDC are three-decade old, but certain commercial disputes, as well as De Beers' decision to reduce its production and supply of rough diamonds in India following the global financial crisis, have caused them to "strain." Nevertheless, sources told the website that HDC is not contemplating any legal action against the diamond producer.

Hindustan Diamond Company is one of the largest suppliers of rough diamonds to cutting and polishing units, as well as to small and medium manufacturers-exporters of polished diamonds in India. The company said it is looking for alternative sources of rough diamonds, and even mulling a deal with Russian diamond power Alrosa. The dispute between HDC and De Beers is unlikely to affect HDC's 26% stake in De Beers India.

“At present, our manufacturers go to Antwerp to source rough diamonds. They are also at the mercy of dealers there. Even HDC is not of much help as they also depend on mining companies. If we can source directly from Africa, we can save around 5 per cent. It will make a big difference to the margins of our exporters,” said Vasant Mehta, Chairman of the Gems and Jewellery Export Promotion Council (GJEPC).

Mehta added that African governments have long-term diamond sourcing contracts with various companies, and that India should enter into such contracts to help its diamond industry.