Such apprehensions had their reverberations in the recent Moscow conference of the World Federation of Diamond Bourses and International Diamond Manufacturers' Association.

Some leading diamantries demanded to know first-hand from representatives of De Beers who were present at the conference, whether their company would like to remain as the custodian of the industry, or whether it wanted to compete with its own clients by entering in a big way into the field of polished diamonds.

Managing director Gary Ralfe of De Beers who led his team to the conference tried his best to assuage the ruffled feelings of diamond manufacturers, but was unable to give them any assurance that De Beers would not enlarge its activities in polished diamonds.

He said that he was not in aposition at the moment to make any commitment on the subject. This, however, did not help diamond manufacturers to overcome their fears that De Beers was now wanting to increase its activity in the field of polished diamonds as well, either to increase its profitability or for some other reasons. Traditionally, De Beers' general selling organisation has been playing the role of a major supplier of rough diamonds. Its share in this business at one stage was as much as 75-80 per cent.

By stepping up or reducing the supply of roughs it could directly influence their prices and indirectly those for polished goods as well. This situation has undergone a considerable change in recent years. De Beers' share in the business of roughs is believed to have declined to about 65 per cent.

Secondly, the world production of roughs has continued to rise, whereas the demand for diamond jewellery in the world, has suffered some setback in the last three years. As the pipe-line got flooded with goods, the CSO had torestrict its supplies in 1998 which was incidentally one of the toughest years for global diamond business.

This led to a sharp fall in sales by De Beers as also in its profits. Even the dividend to its shareholders had to be slashed. On the other hand, its unsold stock of roughs reached a new peak.

East Asian markets have not yet fully revived. On the other hand, new problems have cropped up. Production of roughs continues to rise. Argyle has emerged as a successful independent channel for the supply of roughs.The Ekati mine in Canada has been unwilling to sell anything more than 35 per cent of its output directly to De Beers. Ashton Mining proposes to sell its initial production of roughs from Indonesia through IDH Diamonds, Antwerp.

In two years, another diamond mine is expected to be commissioned in Canada. Production at Orapa is going to be doubled soon.

Under this confusing situation, De Beers may like to maintain its hold on the industry and also explore ways to improve its own profitability tokeep its shareholders happy. It is believed that this may be the reason why De Beers may be contemplating to go downstream.

Even now it has some such activity. If it enlarges its manufacturing activity, directly or through subcontracting, both De Beers and its clients might be approaching the same buyers to sell their production.

This may give rise to conflict of interest... It is very difficult to say to what extent and how fast De Beers would move in this directions but such apprehensions have been triggered possibly by some pamphlets distributed among jewellers at Basel-1999 by the polished diamond division of De Beers.It stressed that it now offers a comprehensive range of sizes and shapes in fine make diamonds and that it would be hard to find another supplier to offer so much variety combined with such high standard of craftsmanship and presentation.