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As pandemic hits air travel, gold smugglers take the Myanmar route

Shishir Sinha | | | Updated on: Dec 04, 2021
image caption

DRI reports a jump in seizures in tandem with rising economic activity

 

As the Covid-19 pandemic hits air travel, gold smugglers shifted their route from West Asia to Myanmar to bring the yellow metal into India, according to the Annual Report of the Directorate of Revenue Intelligence (DRI).

The agency, which works under the Finance Ministry, seized gold worth around ₹1,200 crore in FY21 of which over two-thirds originated from Myanmar. About 240 kg of gold of Myanmarese origin was seized. However, the DRI sleuths believe that the actual quantum smuggled in could be many times higher

The agency reported that the number of gold smuggling cases showed a steady increase after economic activity picked up post easing of lockdown restrictions, almost in sync with the rise in legitimate imports. Data showed that imports jumped to worth over ₹2.60-lakh crore in FY21, an increase of 27.62 per cent over FY20. Legitimate imports were also the highest in six years.

The DRI said the largest quantum of gold seized during last fiscal originated from Myanmar as against West Asia in 2019-20. “A factor that majorly contributed to this shift was the disruption in air travel caused by Covid-induced restrictions in major sourcing points like West Asia and South-East Asia,” the DRI report said.

India and Myanmar share a 1,643-km-long border, stretching along four States — Manipur, Mizoram, Nagaland and Arunachal Pradesh. The agency said the two routes that cut through this border — the old Tamu-Moreh-Imphal trajectory in Manipur, which goes through a vast expanse of unguarded but inaccessible area, and the Zokhatwar route in Mizoram — are popular from the point of view of trade and transit, both legal and illegal.

 

Smuggling process

Talking about the entire process of smuggling in the last fiscal, the agency said Imphal was the first stop for the smugglers. Gold would then be taken to Guwahati for aggregation and subsequent distribution to various parts of the country, mainly by road. The report noted that with a spurt in economic activity, post lockdown, and the pent up demand for gold led to smuggling.

One key reason for smuggling is also the higher import duty. The FY22Budget cut the import duty on gold to 7.5 per cent from 12.5 per cent, but levied an additional 2.5 per cent Agriculture Infrastructure Development Cess and another 10 per cent Social Welfare Surcharge. The net import duty added up to 14 per cent, including the GST, compared to 16 per cent before the Budget.

Import duty

According to the World Gold Council, the 2.19 per cent net reduction in import duty this fiscal juxtaposes against a 42 per cent rise in gold prices since July 2019, when the duty was last raised. A one per cent fall in the gold import duty can increase consumer demand by three tonnes per year in the long term. The reduction in the import duty had increased demand by 7 tonnes annually, it said. Though a duty rate of 14 per cent continues to make the grey market attractive, lower Customs duty and recovering demand may also boost official imports, it said. .

Published on December 05, 2021

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