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MP rejects De Beers proposal to seek diamonds in state

In a significant move, the Madhya Pradesh government has rejected the proposal of world diamond giant, De Beers, for mining, and prospecting for diamonds in the state.

The state government has declared the terms and conditions of De Beers as unacceptable and economically detrimental to the state.

Official sources on Thursday said the state government had also spurned the suggestion of De Beers against the open auction and other guidelines proposed by the high power committee of experts, which was constituted recently by the state government to finalise techno-economic parameters to protect state's interests and assure higher returns.

According to the sources, Chief Minister Digvijay Singh has conveyed his government's decision to officials of De Beers at a meeting recently.

The chief minister, the sources said, had informed De Beers that his government had decided to go in for a joint venture for exploitation of the precious minerals to ensure maximum returns which was in the overall interest of the state.

This has set to rest the opposition charge against the chief minister that he was trying to favour the multinational De Beers to have exclusive rights for prospecting and mining of diamonds from Deobhog area in Raipur district.

A high-level team, led by Digvijay Singh, also undertook a tour of South Africa last year to obtain firsthand knowledge about the technological advancements in the field of diamond mining.

Reiterating his government's commitment to safeguard the state's interests and to ensure transparency in all dealings on the matters, the chief minister, however, invited De Beers to participate in the open auction as recommended by the high-power committee of experts.

Allaying fears that the open auction might result in formation of a cartel within the country, the state government said it would be ensured that such attempts were not successful.

The sources said while the De Beers had indicated that it will not respond to the proposed global tender in view of the present impasse, the state government had made it clear that it would go ahead with tenders with or without De Beers as the state's interests and transparency were of paramount importance.

The high-power committee, constituted by the state government to work out the modalities, had recommended offering the contract to any party which was willing to offer the highest return to the state for the available produce. The state government had also insisted that the minimum cut-off limit of this share should be at least 10 per cent of the total sale value.

Apparently, to evolve a common strategy on this sensitive issue, the chief minister is shortly convening a meeting of former chief ministers and the leader of the opposition in the Vidhan Sabha to apprise them of the latest situation and seek their support on it.

The chief minister is also likely to discuss with these leaders the move of the federal government to reduce royalty on diamonds from 20 per cent to 10 per cent. The state government has already strongly protested against the move saying that it would prove detrimental to the interests of Madhya Pradesh, a major diamond producing state.

The chief minister, the sources said, had made it clear to De Beers that the company's system of acquiring diamonds from different producing countries and returning the same quantity to them at 10 per cent higher price, was unacceptable.

Besides, it was pointed out that the diamonds produced in Madhya Pradesh must be disposed off in open auction to be held in India as per the government's declared policy of transparency in all such dealings.

The sources explained that De Beers, which controlled 65 to 70 per cent of the world's mining of the precious minerals,marketed diamonds through its sister organisation -- Central Sales Organisation, which arbitrarily determined the price for diamonds through its authorised diamond valuers.

The irony of the entire system is that the producing country supplies its produce to the CSO, which mixes it with the produce of several other countries around the world, makes them into packets and returns the same quantity to the producing countries at a price which is 10 per cent higher than the price they paid at the time of purchase, the sources said. The CSO has sought to justify this by saying it was necessary as a promotional campaign to retain diamonds as a luxury item.