After a four-decade lull, city sees a spike in gold smuggling

MUMBAI: Those magnificent men and their X-ray machines that scan every passenger and cargo at Mumbai's international airport of late have their shoulder to the wheel. They are tasked with the challenge of arresting a growing breed of criminals intent on throwing dust in their eyes. Only this is gold dust.

Law enforcement authorities are burdened by the resurgence in gold smuggling which had become a thing of the past after the infamous decades of the 1970s-80s. Each day, airport Customs or DRI (Directorate of Revenue Intelligence) apprehend smugglers who slip in contraband gold in astonishing ways--as bars, filings, paste or dust sewn into the inner lining of garments and baggage, or inside their bodies. Many are Sudanese nationals.

A potent cocktail of high import duty on gold, robust demand for the yellow metal, surge in domestic bullion prices and the exchange rate of rupee versus dollar is the fuel that inflames gold smuggling in India.

The Indian's appetite for gold consumption has been second to none, and has only now ceded top spot to China which strode ahead in 2023. Apart from its beauty and snob appeal, this valuable commodity is a reliable investment at all times, especially when the stock market fails, real estate stagnates, govts collapse or war breaks out.

At present, gold prices are hovering around an exorbitant Rs 67,000 per 10gm. Bullion traders say it is a matter of weeks before the Rs 70,000 fence is breached. Against this background, shorn of all duties and taxes, smuggled gold is a cheaper, attractive option.

In 2022-23, a four-year record was broken as security agencies seized almost 4,000kg of smuggled gold in India. Yet, despite seizure and arrests, this illicit trade continues to thrive. International airports in Mumbai, Tamil Nadu and Kerala have earned the dubious distinction of most offences.

Typical of this cat-and-mouse game, smugglers try to keep one step ahead by using innovative methods to tiptoe their way in. Gold is melted into seed-shaped chips, hidden inside dates or capsules, or ground into granules, in liquid or dust form. Sometimes it is converted into gold belt buckles and torch batteries or stashed inside bags, clothes, indeed inside the rectum. Vigilant Customs and DRI officers have had jaws drop in amazement on finding glittering chiplets or gold dust stuffed inside innocuous children's toys, chewing gum packets, sewing machines, wheelchair frames and suitcase liners.

A research study estimates that India imports around 800-900 tonne of gold every year while the annual consumption is around 1,000 tonne--suggesting that around 200 tonne of gold is being smuggled into the country. This illicit trade represents over $1 billion in value and at least $20 million in lost tax revenue to govt. The World Gold Council (WGC) estimates that 65-75% of smuggled gold comes by air, 20-25% by sea and the remainder by land.

As cost-effective smuggled gold finds greater appeal, the glitter has diminished for law-abiding jewellers. Goldsmiths say that business has steadily been shackled by high import duty to the tune of 15%, imposition of 3% GST levy as well as the mandate for buyers to furnish their PAN card while making "high value" purchases of over Rs 2 lakh. "In a time when 10gm of gold costs Rs 67,000, Rs 2 lakh fetches merely 30gm which can scarcely be termed a large purchase," they say. "While hallmarking has brought in quality assurance, it has made the yellow metal slightly more expensive."

Surendra Mehta, national secretary of IBJA (India Bullion & Jewellers Association), says the smuggled gold is costing govt much revenue -- given the temptation of sellers and consumers to avoid high import duty and taxation. "IBJA has repeatedly written to the GST Council to implement the Electronic Gold Receipt (EGR) mechanism which was announced by finance minister Nirmala Sitharaman in her annual budget around three years ago. Once gold as a commodity can be converted into securities, and back into a commodity, smuggling will be decimated. Every import will be accounted for," Mehta said. On Thursday-Friday, the issue was discussed at the India International Bullion Summit in Andheri East which drew participation from the who's who of the industry.

As gold rates rose to Rs 67,000 per 10gm two weeks ago, jewellers in Zaveri Bazar were sitting idle as sales volumes halved. Kanaya Kakad of J K Brothers said, "The spiralling rate of gold has caused a drop in demand by up to 60%. Customers have tightened their fists because the financial year comes to an end March 31 and spending typically slows down. No wedding mahurats are scheduled after Holi on March 25 either. And the general election is around the corner."

In the middle-class Maharashtrian enclave of Dadar, Yogesh Thakur, manager of Waman Hari Pethe Jewellers, said, "Demand has slowed considerably since the past 10-12 days. Grammage has fallen."

It is common knowledge that international factors directly impact gold prices in India. Former chairman of the Gem & Jewellery Export Promotion Council (GJEPC) Colin Shah, also MD of Kama Jewelry, said, "There is a strong indication that gold will breach the Rs 70,000 mark. The major propeller of this price trend continues to be global political unrest. In India this rise in rates will have a temporary (downward) impact on demand. However, the Indian customer has a large appetite for gold. Global economic shocks will trickle down into the domestic market, but will be absorbed. The consumer market of gold has remained buoyant irrespective of such global headwinds and will continue to do so."


Recent cases of gold haul in city

* April 2023: DRI busted a gold smuggling operation in Dongri with the arrest of 18 Sudanese women and Indian handler with 16.36kg of gold paste, gold cut pieces and jewellery worth Rs 10.16 crore. Most of the gold was found concealed on the bodies of the suspects. They were carriers who were promised a commission. They did not know each other. Their mission: Obtain Customs clearance and contact a handler who would extract the gold, melt it and hand it over to a middleman named Yunus in Dongri. Yunus, in turn, would deliver it to a jeweller at Kalbadevi


* Feb 2023: DRI had arrested 7 Sudanese and two Indian handlers for smuggling gold weighing Rs 101kg worth Rs 51 crore from Indo-Nepal border. Of late, India has become a hub for Sudanese syndicates running a booming trans-Saharan gold racket. Sudanese nationals enter India through the porous Indo-Nepal border or fly in from the UAE. In 2023, more than a dozen Sudanese gold smugglers were caught in Patna, Pune, Mumbai, Kolkata, Delhi and Kochi


* Oct 2023: DRI busted a syndicate involved in an inter-state smuggling racket and seized 31.7kg of gold worth Rs 19 crore. The Nagpur team of DRI arrested two persons with 8.5kg of contraband which was brought from Kolkata. The Mumbai team arrested five persons for ferrying 5kg of gold from Varanasi to Mumbai by train.


* Mar 2024: Commissionerate, Mumbai Customs Zone III, seized 6.78kg gold valued at Rs 3.65 crore across 10 different cases. Eight passengers travelling from Nairobi to Mumbai were intercepted and gold collectively weighing 4,434gm found in inner garments, trousers and slippers worn by the passengers. In another case, a foreigner on the same route was intercepted and 1.75kg gold was found concealed in undergarments


* Feb 2024: Customs arrested mobile sales executive Abhishek Singh for being part of a gold smuggling racket. International transit passengers would drop the smuggled gold to his outlet and Singh after finishing his duty would hand over the gold to the racketeers outside the airport

* Mar 22, 2024: DRI arrested two persons for smuggling 4kg of gold worth Rs 2.60 crore from Varanasi to Mumbai by train at the behest of one Dashrath Soni of D J M Jeweller.

* Mar 25, 2024: Customs arrested food outlet manager Ariyanayagam Pandian at Chhatrapati Shivaji Terminal after he accepted a parcel of 3.5kg of gold worth Rs 1.9cr from transit passengers