Gold Duty Hike Leads to Rise in Smuggling

June 11, 2013 at 07:46

truthing

Days after government increased duty on gold from 6% to 8% to curb its import, Customs authorities are already witnessing a spurt in smuggling. In two separate operations on Sunday, Customs authorities at the IGI Airport here held two men with over 2.6 kg gold. Both were smuggling the precious yellow metal from Dubai.

The seizure also revealed a unique modus operandi, where one smuggler had converted the gold into silver coloured pins and stapled them on the box of a TV he was legally importing from Dubai. The other man had wrapped jewellery around his legs.

Sources said the Customs had information about some gold being smuggled in from Dubai by the accused, identified as Abul Sattar of Muzaffarnagar in UP and Abdul Patel from Bhatkal. Based on the information, authorities apprehended Sattar as he alighted from the flight (no. 9W 545) and was trying to pass through the Green Channel. The authorities found him carrying a TV with more than usual staple pins on its box.

When these pins were examined by jewellery expert, they turned out to be gold. In all 109 silver coloured staple pins, weighing 755 gm and valued at Rs 19.64 lakh, were recovered by the authorities. “Had it not been for the specific information, we would have never suspected the pins to be made of gold. It’s an example of how smugglers keep evolving with new modus operandi. We were expecting spurt in smuggling post the duty increase and so have increased surveillance,” said a senior Customs official.

In a similar operation, Patel was arrested as he alighted from the flight (no. 6E 022) and a thorough search led to discovery of jewellery weighing 1.9 kg.

Government in the past one and a half years has increased duty on gold from 2% to 8% to discourage its import that has remained the main contributor to current account deficit (CAD) of over 5% of gross domestic product (GDP) in this fiscal. This has led to a constantly falling rupee now touching Rs 57 to a dollar. However, due to continued demand in the domestic market for cultural and investment reasons and spurred by falling prices of gold in the international market, the move has had little impact.

Reserve Bank of India (RBI) data shows while the average gold price in 2012 was 2.4 times that of 2008 at Rs.29,302 per 10g, the demand was up by 1.6 times during the same period to 1,079 tonne. In May 2013 alone, India imported 162 tonne of gold as compared to 142 tonne in April this year.

DRI had last year recorded a record 800% increase in gold smuggling. This has led to fears of more black money getting infused into the economy as increased import duty and other restrictions are put on gold. “The government is less concerned about black money as it is concerned about rising CAD. Black money in any case is not being accounted into the economy. Government would rather have white money shift away from gold to give a spurt to economy,” said a DRI official.