India's huge diamond-polishing industry has furloughed around 250,000 of its roughly two million workers because of sanctions on Russia hitting supplies, a trade union said Thursday.

The South Asian nation cuts and polishes 90 percent of the world's diamonds, with Russian diamond miners such as Alrosa traditionally accounting for 30-40 percent of India's imported rough gems.

"This problem has started ever since the Russia-Ukraine war began," Ramesh Zilariya, president of the Diamond Workers' Union Gujarat, told AFP.

"Western countries like the United States and Europe have stopped accepting Russian diamonds that have been polished in India," he said.

Workers were furloughed this month in the western state of Gujarat, the main hub of the industry, Zilariya added, as companies struggle with cash flow and supply disruptions.

Traders say Russian supply has fallen short since Western sanctions forced Moscow out of the SWIFT cross-border payments system, plunging the supply chain into uncertainty.

"Supply is still disrupted and payments are mostly on hold," Sripal Dholakia, director at the All India Gem and Jewellery Domestic Council, told AFP.

Dholakia said imports from Russia are "not adequate" at present, and Indian traders are facing higher bank charges while making direct payments in rupees or rubles.

An industry pitch to the Indian government to make future payments via India's Unified Payments Interface system has gone unanswered.

India exported cut and polished diamonds worth $24 billion in the year ended March 31, data from the Gems and Jewellery Export Promotion Council showed.

Indian workers examine diamonds at a cutting and polishing workshop in Ahmedabad
Indian workers examine diamonds at a cutting and polishing workshop in Ahmedabad AFP / SAM PANTHAKY

Top export destinations included the United States, Hong Kong and the United Arab Emirates.

Many Western buyers are now refusing to accept diamonds sourced in Russia for fear of violating sanctions.

"They have started asking for a bill which specifies that the goods we are supplying are not Russian," a Mumbai-based jeweller told AFP on condition of anonymity.

Prices too have turned volatile.

"Fifteen to 20 percent instability is a big thing for us because we work on a margin of two to five percent... It becomes difficult," the jeweller said.

The Gujarat diamond union has asked the state government to provide financial aid and re-skilling training to out-of-work polishers to help tide over the crisis.

"(We) asked the government to support workers in the diamond industry because this issue is not going to be resolved in one month," Zilariya said.

"This issue will go on for at least five, six or seven months."

India has called for a cessation of violence but has stopped short of condemning Russia's invasion of Ukraine.

The two countries have historically had close ties, with Moscow supplying most of New Delhi's arms.