NEW DELHI: 10% import duty, annual demand pegged at 840 tonnes, low prosecution rate make gold smuggling a lucrative option once again.
This spurt since 2012-13 is most visible in seizure figures over the last three years at India’s two busiest international airports handling roughly 30,000 international passengers each every day — 64 kg to 943 kg in Mumbai and 6 kg to 574.81 kg in Delhi.
In Mumbai Customs lingo, ‘Dhanalakshmi’ or ‘Kuber’ aren’t gods their officers propitiate or horses they bet on at the city’s famous Mahalaxmi racecourse. ‘Dhanalakshmi’ is the code for the Emirates flight EK500 from Dubai to Mumbai while ‘Kuber’ refers to Air India’s AI 984 which flies the same route. Officials say these are the flights used most often by gold smugglers.
goldAccording to Customs officials, ‘Dhanalakshmi’ alone accounted for 72kg of seizures in 2014-15 — almost 8 per cent of the 943kg seized at Mumbai’s Chhatrapati Shivaji International Airport, a record for the last three years and a 173% hike from the previous year.
But countrywide figures show that Mumbai is just one of the many landing grounds for these smugglers. Officials and industry insiders attribute this spike to a “high” import duty of 10 per cent from 2013, a booming demand pegged by the World Gold Council at around 840 tonnes in 2014 – 191.7 tonnes in the first quarter of fiscal 2015 alone, up 15 per cent from the same period last year — and a low prosecution rate of those caught smuggling gold.
May 12: 2 kg gold bars tied to the soles, seized in Mumbai. May 13: 2 kg gold bars tied to the soles, seized in Mumbai.
So much so, that at a time when the NDA government announced a monetisation scheme in this Budget to unlock the value of a part of the 22,000 tonnes of gold (US$1trn) in private hands, a big chunk lies with its own Customs departments – over 2,000 kg seized over the past 10 years (see “Costly Stock”).
“These are people operating in an organised way. We have busted five Mumbai gangs in the past year alone,” Milind Lanjewar, additional commissioner of Air Intelligence Unit, Mumbai Airport Customs, told The Indian Express.
“The big fish are those who were earlier involved in ‘airport smuggling’ of gutkha, memory cards, cosmetics and electronic goods. Once the import duty shot up in 2013, they were attracted to the high premium attached to gold-smuggling,” he added.
March 20: 40 gold pieces (Rs14.24 lakh) in liquor bottles in Mumbai. March 20: 40 gold pieces (Rs14.24 lakh) in liquor bottles in Mumbai.
According to Customs rules, Indian men who have lived abroad for over a year are allowed to bring jewellery duty-free upto an aggregate value of Rs 10,000 each, while women are allowed a duty-free limit of Rs 20,000. The rules also allow for gold to be imported otherwise as part of baggage or as unaccompanied baggage provided the duty is paid in foreign currency.
Blame it on duty, duty-free
Industry experts attribute the spurt in gold smuggling to the rise in duty two years ago, and the RBI’s 80:20 import-export norm that was in force till November last year.
As India’s current account deficit rose to a 20-year high of 4.2 per cent of the GDP in 2011-12 and the rupee fell sharply, the government increased the import duty on gold in 2013 — from four per cent to a record 10 per cent.
Imports fell sharply but the price difference between Indian gold prices and those in duty-free havens such as Dubai led to an increase in smuggling to feed the demand for gold.
“Under the 80:20 scheme, importers were allowed to import gold only if 20% of the lot was exported,” said Ketan Shroff, spokesperson, India Bullion and Jewellery Association.
gold ahdVipul Shah, chairman of Gems and Jewellery Export Promotion Council, said the industry has been “constantly urging the government to lower the import duty on gold”. “The current import duty coupled with high gold consumption in India is encouraging smuggling. The government should bring down the import duty and probably look at other ways of curtailing imports,” said Shah.
After arrests, the long delay
The other main factor encouraging gold smuggling, say Customs officials and lawyers whom The Indian Express spoke to, was the low prosecution rates and the delay in the legal process.
“Typically, once a gold smuggler is arrested, it takes at least six months for the Customs to complete its investigation and issue a showcause notice. Thereafter, the authority takes another six months to adjudicate the case — usually, prosecution is launched only after a year,” said A P S Suri, Commissioner of Customs, Mumbai airport.
“Sometimes the process is further delayed by six months or a year if the accused moves court against the showcause notice or adjudication order of the Customs,” said a senior Customs official at the Hyderabad airport.
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