Late afternoon in Bombay's Opera House district. The sun is slanting in golden shafts from the Arabian Sea on the tall trees of Malabar Hill and the jumble of rooftops below. Up here in the Pancharatna Building, Vasant Mehta is talking in Gujarati simultaneously down two of the four telephones on his desk. When a plastic courier satchel arrives, he manages to cradle a telephone in each shoulder while opening it up. He breaks the wax seal and pulls out two sachets of tissue paper. They contain what look like large sugar granules or the finer remains of a smashed windscreen. Still talking he weighs some in an electronic balance, and then, flipping open a fold-up eyepiece, squints closely at them. 'Exactly as he described it,' Mr Mehta said with a satisfied smile after hanging up the phones. The package has come from Antwerp, the ancient Belgian port that is also the worldwide market centre for uncut diamonds. The contents are worth about US$80,000. Mr Mehta has paid for them on the basis of a verbal description by an old trading partner halfway round the world. 'He's good in the business,' said Mr Mehta. 'So I ordered just on the phone, without seeing. It's all done on trust.' Mr Mehta is one of India's leading importers and cutters of diamonds, with a simple manner and plain dress (always a shirt of fine, white Indian cotton) which belies the enormous value of the gems passing daily across his desk. Down in the Pancharatna's car park - a world away from Mr Mehta's air-conditioned office with its huge steel safe adorned with a daubed ochre swastika (the Hindu emblem of good luck) - Bhavesh Shah, 25, and Jigdish Parekh, 23, are hoping that one day they will make it to an office upstairs. Like the swarm of other young men in the car park, dressed in lurid cheap shirts, they have come to Bombay from Gujarat with a couple of thousand dollars of borrowed capital hoping to make it big in diamond trading. Sachets of gems are passed hand to hand as they stand and jostle. Bhavesh Shah makes under US$140 a month, Jigdish Parekh claims to make about US$300. But the big-shots like Mr Mehta and the small dealers downstairs now have one thing in common: they are worried about a price war in the diamond trade. In June, the world's biggest diamond miner, Argyle Diamond Mines, based in Australia's rugged northwest, decided to split with the Central Selling Organisation (CSO) controlled by South Africa's De Beers Corporation - the most successful and tightest resource cartel in modern times. For 13 years previously, Argyle sent most of its output to the CSO in Antwerp, which sold it to its recognised 'sight-holders' at prices De Beers judged the market would bear. De Beers kept a commission, partly to pay for its US$400 million promotion to convince the world these pieces of clear, largely useless stones are a good investment and the supreme symbol of love. The break was a gamble by Argyle that it could get a better price by selling direct to manufacturers. By an accident of global comparative economics and Australian geology, most of these manufacturers are and will be in India. Only the Indians have the cheap, skilled labour that can put 56 facets on a stone the size of a grain of salt. The 40 million carats a year mined by Argyle are mostly tiny stones like this. After a dignified split, with murmurs of regret, De Beers and Argyle have recently made stinging public criticisms of each other - accusing each other of threatening the price stability of a commodity whose appeal has always been based on mystery and exclusivity. The normally secretive diamond traders of Bombay, Antwerp and Tel Aviv are appalled and embarrassed. 'This was a rather selfish act,' said De Beers chairman Julian Ogilvie Thompson. 'If everyone did this, there wouldn't be a diamond market at all.' Argyle said it was not increasing its supply of rough diamonds, only switching marketing channels to sell directly to cutters instead of through the CSO. Last week its managing director, Gordon Gilchrist, accused De Beers of flooding the Indian market. 'In the second quarter this year, in the lead-up to the expiry of contract with Argyle, CSO sales into this market were at least 60 per cent above normal levels,' he said. Although Argyle provided only about 6 per cent of the total supply marketed by the CSO, the cartel clearly thinks the Australians have set a bad example and need to be brought into line. De Beers is worried about unruly Russian mines leaking diamonds into the market. Within the next few years, at least three new diamond mines will come into production. They all have Australian connections and may be tempted to sell directly to India, too - further eroding the cartel's grip. Argyle's 60 per cent owner, the Anglo-Australian mining giant, is a partner in the Diavik prospect in Canada. The other Argyle partner, Ashton Mining, has its Merlin find in Australia's Northern Territory, and Australia's BHP has a huge find at Lac de Gras in Canada. Gems and jewellery have become India's biggest export earner, increasing 16 per cent to hit US$5.4 billion in the year ended March 1996. The industry, only four decades old, now employs 600,000 people. Diamond cutting is the best-paid occupation for an illiterate worker in India, with monthly pay up to 9,000 rupees (about HK$1,950). India's diamond traders and manufacturers are fearful of suffering a loss in the value of the US$1 billion in stocks of rough diamonds normally in their inventories. They are unsettled by the prospect of a new, competitive market. 'We were not very happy because we have been used to this single channel system for three or four decades,' said Vasant Mehta. De Beers has warned it will not allow Argyle to undercut the CSO. Last month, De Beers' vice-chairman, Nicky Oppenheimer, told analysts in London 'it would be silly for us to hold prices to protect the market and allow them [Argyle] to sell ahead of us'. He invited Argyle back into the CSO fold. The worries in Bombay are ironic, given that India has been steadily positioning itself to take control of the world diamond business for years. On former marshland in the Bombay suburbs, a huge new diamond trading complex is nearing completion. The Bharat Diamond Bourse, as it will be called, will group traders together in one huge community with banks, bonded warehouses, and customs facilities to hand. Earlier this year, the Indian Ministry of Commerce announced it would allow licensed diamond traders the freedom to import and export roughs, through bonded stores. Previously diamond rough imports have been allowed only to feed domestic manufacturers, a one-way trade. Eventually, this new activity will transfer a lot of business from Antwerp to Bombay. The Indian industry hopes to double its exports to more than US$10 billion by the end of the decade, moving into larger diamonds and improving the quality and styling of its settings. Jewellers with presently obscure Gujarati names are hoping to be set up in New York, Milan, Paris and Tokyo with the top French and Swiss houses.