Curbs on gold import leads to high levels of smuggling

Indian gold smugglers are adopting the methods of drug couriers to sidestep a government crackdown on imports of the precious metal - stashing gold in imported vehicles and even using 'mules' who swallow nuggets to try to get them past airport security.

The government is desperately trying to curb gold imports in a country that loves the yellow metal, and is its biggest consumer, in order to reduce its high trade deficit. Amid a record duty on imports, dealers and individual customers are fanning out across Asia to buy gold and sneak it back into the country, says a Reuters report.

Sri Lanka, Thailand and Singapore are the latest hotspots as authorities crack down on travellers from Dubai, the traditional source of smuggled gold. Informers who help bust illegal gold shipments can get a bigger reward in India than those who help catch cocaine and heroin smugglers.

"Gold and narcotics operate as two different syndicates but gold smuggling has become more profitable and fashionable," said Kiran Kumar Karlapu, an official at Mumbai's Air Intelligence Unit. "There has been a several-fold increase in gold smuggling this year after restrictions from the government, which has left narcotics behind."

From travellers laden head-to-toe in jewellery to passengers who conceal carbon-wrapped gold pieces in their bodies in the mistaken belief that it will not set off metal detectors, Indians are smuggling in more bullion than ever, government officials say.

This suggests that official data showing a sharp fall in gold buying may significantly underestimate the real level of gold flows.

The World Gold Council estimates that 150 to 200 tonnes of smuggled gold will enter India in 2013, on top of the 900 tonnes of official purchases. Between April and September alone, India's customs officials seized nearly double the amount of smuggled gold it nabbed in all of 2012.

"Though the quantum of seizures has increased, in our opinion it reflects only 1 to 2 percent of total smuggling," said a revenue intelligence officer in Mumbai who declined to be named. "Dubai is still the number one place from where gold gets in and Singapore is slowly emerging. Sri Lanka has become a staging point."

Grappling with a high trade deficit and a weak currency, India imposed measures this year to crimp demand for gold, the second most expensive item on its import bill after oil. It imposed a 10 per cent duty on gold and a 15 per cent tariff on gold-based jewellery.