Corruption, looting cloud Kashmir's gems future
By Haroon Mirani
SRINIGAR - In 1882, the then ruler of Kashmir Maharaja Ranbir Singh heard that
extremely beautiful gems found in his territory were being traded in the Indian
city of Calcutta (now Kolkata). Enraged, he went there - then instigated a most
remarkable feat of reverse trading.
The maharaja's men traced and seized the gems, then gradually undid all the
transactions that had taken place during the transfer of the stones to Calcutta
from Kashmir.
The gems originated in a landslip that had exposed unusual blue
stones noticed by members of a passing caravan, who in ignorance of their value
traded them for salt in the Indian state of Himachal Pradesh. The stones then
changed hands a few times until someone recognized them as sapphires of
particular beauty and breathtaking color. Soon, their price multiplied and by
the time they reached a Calcutta jeweler they were worth the equivalent of
US$400,000.
So the maharaja, starting in Calcutta, went through the various towns and
cities where the gems had been traded reversing the numerous deals. The jeweler
got back his $400,000 and the first trader got his bag of salt.
The gems were found to come from an extremely rugged area called Padder, where
an industry quickly developed to extract more in the two months of the year
when the deposits were accessible.
The next five years yielded sapphires whose quality earned them fame in the
jewelry world to the extent that more than 100 years later the gems have
achieved a legendary status. A limited number still appear to fetch huge prices
at auction.
In April 2007, Christies sold a 22.66 carat Kashmir sapphire set in a pendant
for over $3 million. According to eBay, Kashmir blue sapphires fetch upwards of
$15,000 per carat.
The more recent history of Padder and its sapphire deposits is less glittering.
War has blighted the region, allowing unregulated miners to grab over the past
two decades what spoils they could. As a fragile peace has returned, the
state-owned company that is now supposed to run the mine, Jammu Kashmir
Minerals Ltd (JKML), could get only 13.2 million rupees ($33,000) from an
auction of 12 kg of the corundum (raw sapphire) accumulated from its own
sporadic mining over those years.
Sapphires are a mere sideline for JKML, whose staff of around 2,000 are more
involved in extracting coal, gypsum, marble and other minerals that occur in
the state. Gem experts and politicians were fiercely critical of JKML's
auction. Sajjad Ahmed Kichloo, an opposition legislator from the region accused
the miner of undervaluing the auction process.
"The bids were manipulated so as to benefit some traders, who are involved in
underhand dealings with higher officials," he said. Kichloo also questioned the
amount of sapphire that was available for sale. "The amount of sapphire
auctioned is less than what was actually extracted," he said. He demanded an
inquiry by Central Bureau of Investigation, India's premier investigation
agency, in the entire process.
Disrespect for ownership seems a constant when it comes to sapphires, with
people in the industry claiming that corruption and looting - from the state
treasury as well as from mines - are prime factors behind the decay for what
should be highly promising industry.
In 1989, when an anti-India insurgency broke out in Indian administered
Kashmir, the mines became a no-go area for the state authorities, with the
region deemed to be rebel-controlled. That left the mines open for about a
decade to anyone who could extract the sapphires.
When a team of JKML and other state officials visited the mines in 1998 after a
gap of 10 years they reported: "It seems everyone except the government of
Jammu and Kashmir has been benefiting from mining and selling the priceless
sapphires. The loss is phenomenal. It can never be quantified.''
Smugglers had broken all the mines' gates, locks and seals and damaged the four
operational tunnels with crude blasting techniques. Police have yet to recover
any of the illegally mined gems.
Suspicion was also raised over some JKML employees, who according to some
quarters, "conveniently helped to start one of the most profitable smuggling
rings in Kashmir".
If that is the case, they would be carrying on a strong tradition. In 1947,
when the monarchy in Kashmir was ended, the rulers were reported to possess
enormous amounts of sapphires but few of these have been seen since.
Sofi Mohiudin, a political commentator said the last king, Maharaja Hari Singh,
left Indian-administered Kashmir with sapphires, diamonds, gold and other
valuables. "He took away what he could when he fled Kashmir. The rest was put
in the [state] government treasury, or Toshakhana," he said.
The Toshakhana was looted by successive rulers, Mohiudin said, and no concrete
record or catalogue of the articles was strictly maintained. "In 1963 the
Kashmir government donated 717 kg of gold to India for its defense fund during
Indo-China war, and it is during this time that first large-scale embezzlement
took place."
Then in the late '70s more valuables were looted by authorities, and besides
this "there was a regular pilferage," Mohiudin said.
Various sapphire collections have come to light at different times only to
recede into the darkness of history. Kathryn Bonanno Patrizzi, a jewelry
consultant, wrote in a journal that her husband, Osvaldo Patrizzi, founder of
Geneva-based Antiquorum auction house and a renowned gemologist, once came
close to inspecting a chest of Kashmir sapphires.
"He had already arrived in India and was only moments away from the chest that
was supposedly filled with 18,000 carats of Kashmir sapphires!! However, it
seems that the Indian government had also been made aware of the treasure, and
all was confiscated just prior to his arrival," Ms Patrizzi wrote in the June
2002 issue of Antiquorum Magazine.
The government has remained silent over such claims, further fueling
speculation.
The corruption in the area (Kashmir was India's second-most corrupt state
according to a 2005 Transparency International survey) and absence of
accountability have taken their toll of the sapphire industry and prevented
what could be a valuable development.
"Sizeable"' sapphire deposits still exist in the 2 sq km area around the
original mine, say experts, a view supported by a satellite survey by National
Remote Sensing Agency (NRSA) of the Padder mines. Geo-scientist Haji Abdul
Majid Butt says that on the basis of the satellite imagery there are 480kg of
gem varieties on one ridge that could be recovered. There are six such ridges,
putting the potential of the mines at billions of dollars.
That would suggest a profitable future for JKML, but its present circumstances
argue otherwise. The company survives on government aid and is unable to pay
its employees for months at present seven, according to JKML general manager
Abid Sohail - at a time. The recent corundum auction was carried out to raise
cash for wages.
The Jammu and Kashmir government six years ago moved towards initiating a
global tender to attract international companies to exploit the region's
sapphires, with offers sought four times including last year. Only six
companies have taken part in the tendering process due, said some in the
industry, to the government's lackadaisical attitude and unprofessional manner.
Three have been asked to make presentations about their financial and technical
capability and past experience.
The authorities continuously say that they are getting a poor response from
bidders, but given the global demand for Kashmir sapphires, industry experts
believe other factors are at play.
Butt, who recently attended an international conference on Kashmir sapphires in
London, recalls: "Such is the demand for these gems that during my stay I got
hundreds of calls from people seeking Kashmir sapphires and willing to pay any
amount. Actually it is the incompetence by our government which fails to get
the project through."
Of the three companies under consideration, Gujarat Minerals Development
Corporation (GMDC), and controlled by the Gujarat government, is tipped as the
hot favorite. India's second-largest producer of lignite, it has the economic
resources to develop the sapphire mines, with net sales in its most recent
reported quarter almost doubling to 2.57 billion rupees from 1.33 billion a
year earlier and net profit rising to 932.5 million rupees from 526.571 million
rupees.
It is in the running four years after the government tried to sell the rights
to the mine to London-based jeweler Dianoor for $2 billion. That deal fell by
the wayside after the Daily Rehmat local newspaper exposed flaws in the
tendering process and possible kickbacks received to ministers.
While the authorities delay a final decision, illegal mining continues.
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