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October 28, 2020

Smuggled Gold worth Rs 3,122 crore seized over five years across Indian airports

by CA Shivam Jaiswal in Circular and Notifications

Smuggled Gold worth Rs 3,122 crore seized over five years across Indian airports

India is a society that attached a lot of importance to gold, as an asset and in the form of jewellery from ancient times. India has been a net importer of gold throughout history.

Indians still have this fascination for gold. Gold prices soared to new record highs as investors sought safe haven due to health of the global economy ravaged by the COVID-19 pandemic. Gold is a unique asset – highly liquid, yet scarce. It is a luxury good as well as an investment. There are many ways to buy gold. Different products can be used to achieve a variety of investment objectives.

Gold smuggling was rampant in India until liberalisation, which repealed the Gold Control Act of 1968 that prohibited the import of gold except for jewellery. The huge gap between demand and supply is the prime driver behind the thriving gold smuggling activity. Smuggling happens because of high import tariffs, corruption, and shortages in supply. In India, all these factors are responsible for the activity.

Former Reserve Bank Governor Y V Reddy once mentioned that 80% of the gold consumption in India is for ornaments and only 15% goes to investment and 5% to industrial uses. Thus, the money spend on gold is not productive.

The macroeconomic side of it is even more deleterious. The more the gold imports, the larger the deficits. Petroleum and gold are main the drivers of India’s trade and current account deficits. Smugglers use foreign exchange to purchase gold, driving down the value of the rupee.

Kerala Gold Smuggling Case

During July 2020, the Office of the Commissioner of Customs (Preventive), Cochin, informed the Ministry of External Affairs (MEA) of the suspicion of gold consignment in a Diplomatic bag. Following due procedure, MEA provided clearance to Customs authorities to intercept the consignment containing gold which was addressed to a diplomat of Consulate General of UAE in Thiruvananthapuram. Customs authorities and NIA have launched the investigation and the department of Custom seized 30,244.900 gram of Gold and booked case under Customs Law and arrested 16 persons.

Directorate of Enforcement (ED) has also initiated Prevention of Money Laundering Act (PMLA) investigations in two Gold Smuggling cases related to Kerala. ED has also taken up investigation in five cases under the provisions of Foreign Exchange Management Act (FEMA), 1999 all over India. It was reported to the court that one of the prime accused was influential. However, Government is taking effective steps for fair and proper investigation.

On October 26, 2020, the National Investigation Agency (NIA) arrested Rabins K. Hameed, a fugitive involved in the Kerala gold smuggling case. He was arrested at the Kochi International Airport on his arrival from Dubai.

Gold seized at Chennai Airport

Customs officials at Chennai airport seized 2.88kg gold, worth Rs 1.32 crore, from three passengers from Dubai on 10th October, 2020 and arrested them. Customs said based on specific intelligence that gold was likely to be smuggled from Dubai, three passengers who had arrived in Chennai were intercepted and searched.

They confessed to carrying gold paste bundles concealed in their rectums. Twelve bundles (four each) of gold paste were recovered from their rectums. A total of 2.77 kg of gold was recovered after extraction. Three gold bits, weighing 116 gram, were recovered from their pants pockets (one each).

More than 11,000 kg gold worth Rs 3,122 crore seized over five years across Indian airports

The Ministry of Finance recently stated that, it came to the notice of the Government/ Enforcement Directorate/ Customs that Gold smuggling through various airports in the country including Kerala airports was increasing and had adversely affected the economic stability of the country.

The details of such cases of gold smuggling reported from various airports of the country including Kerala airports during the last five years and the current year, year-wise along is as follows:

YearNumber of Cases of Smuggling of Gold at various AirportsQuantum of Gold Seized (in Kg.)Number of people bookedValue of Gold seized (Rs. In Lakhs)
2015-1626962452.147140860667.29
2016-171453921.80578824375.62
2017-1829111996.930152553133.32
2018-1948552946.097214183354.89
2019-2044442629.549233985795.50
2020-21 (up to August, 2020)196103.1652004955.566

The international airports in Mumbai, Delhi, Chennai, Kozhikode and Kochi saw the maximum amount of seizure of smuggled gold in the last three fiscals even as gold smuggling fell marginally in 2019-20 compared to the previous year.

Airports, however, seem to be the preferred mode of gold smuggling with only a fraction of the smuggling being detected at seaports. Data shared by the finance ministry further shows that three of the four international airports in Kerala (Kozhikode, Kochi and Thiruvananthapuram) were in the list of top 10 airports where the maximum quantity of smuggled gold was seized.

The international airport in Kannur that began operations in December 2018 was the only exception. The other airports in the top 10 include international airports in Bengaluru, Kolkata, Tiruchirappalli and Hyderabad. Among the seaports, the Chennai seaport in Tamil Nadu and the Hazira and Mundra seaports in Gujarat saw the maximum amount of gold seizures.

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