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Spiralling gold prices and a sagging economy may have dampened the spirits of both consumers and jewellers. But, there are a few people making the most out of this situation.
As gold prices skyrocketed during FY20, smuggling activity also touched an all-time high. According to data shared by Chennai Customs, Chennai International Airport seized as much as 375 kg of gold in FY20 as against 271 kg seized in the previous year. The seizure, in value terms, had more than doubled to ₹134 crore in FY20 as compared to ₹87 crore a year ago.
Surge in gold price
The depreciation of the rupee in relation to the dollar and the US-China trade war crisis made investors find a safe haven in the yellow metal, which led to a price hike. In addition, the high customs duty made the legal import of gold costlier. All of these pushed some people to choose the smuggling path.
“Not only has the customs duty gone up from 10 per cent to 12.5 per cent, even the price of gold has gone up multifold, so it has become more attractive for smuggling,” said N Anantha Padmanaban, Chairman, All India Gem and Jewellery Domestic Council (GJC).
In the 2019-20 Union Budget, the government had raised customs duty on imported gold to 12.5 per cent from 10 per cent. The GST was also increased to 3 per cent from 1 per cent, while an additional 5 per cent GST is applicable on the making charges of the gold ornaments.
“Today, if anyone brings 1 kg of gold (through smuggling), they earn more than ₹6 lakh, which is a bonus for anybody who wants to do the business,” Padmanaban said, adding, “Unfortunately, people who were not willing earlier, have also started doing it and that’s the reason why you see news about smuggling every one or two hours.”
The GJC has been asking the government to bring down the customs duty to 6 per cent and also appoint jewellers, instead of bankers, as agents for the Gold Monetisation Scheme (GMS), which is aimed at attracting excess (or unused) gold from the households.
Modus operandi
Smugglers are also coming up with new and innovative ideas to bypass the customs scrutiny at airports. Some of the tricks up their sleeves include concealing gold in laptop hard-disks, skateboards, in parcels inside the rectum and packed food tins. For instance, on February 14, Chennai customs caught a passenger who tried to smuggle 1,164 g of gold valued at ₹44.33 lakh, hidden in a meat cleaver.
According to Chennai customs data, a total of 924 cases of gold smuggling were booked in FY20, marking a 100 per cent jump over 461 cases booked in the previous year. Around 136 persons were arrested for attempted smuggling as against 56 persons in FY19.
Lockdown impact
Gold prices in India touched a historical high last week, breaching the ₹47,000-mark per 10 g. Since the beginning of the year, panic sentiment has been prevailing in the financial markets due to the pandemic, which has turned the focus of investors towards the yellow metal.
While this historically high level could have been a great opportunity for the smugglers, the lockdown and cancellation of flight services have paused smuggling activities, at least for now.
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