Finance Minister Nirmala Sitharaman on Monday said officials should find out whether there is a correlation between higher gold imports and smuggling, and whether a pattern is emerging in the detection of smuggling.
The reason: whenever there is a surge in gold imports, gold smuggling also typically goes up.
Smuggling on the rise
According to the Directorate of Revenue Intelligence’s (DRI’s) Smuggling in India Report 2021-22, a total 833 kg of smuggled gold, worth around Rs 500 crore, was confiscated in FY2021-22. The year before that (2020-21) had witnessed a decline in smuggling from the Gulf region because flights were cancelled due to the Covid-19 pandemic.
Smuggling in the last financial year was also a lot less than in 2019-20, when the DRI confiscated 2.62 tonnes of the precious metal worth Rs 858 crore. In the three years before that, 2018-19, 2017-18, and 2016-17, gold worth Rs 833.5 crore, Rs 531 crore, and Rs 243 crore respectively were confiscated.
In all, more than 11 tonnes of gold worth Rs 3,122.8 crore have been seized in 16,555 smuggling cases at airports across India in the five years ending August 2020, the government told Parliament in September 2020.
However, this is only the gold that was seized, the smuggling that succeeded could be much more than what the agencies confiscated. According to the World Gold Council (WGC), smuggling could increase by 33 per cent to touch 160 tonnes in calendar year 2022 compared to the pre-Covid period due to the increase in the import duty on gold to 12.5 per cent from 7.5 per cent.
India’s official gold imports
Gold imports through official channels, involving a major outflow of foreign exchange, have also been rising. Imports worth Rs 3.44 lakh crore were reported in 2021-22, up from Rs 2.54 lakh crore in 2020-21 and Rs 1.99 lakh crore in 2019-20.
The quantum of import of gold into India is significantly high to meet the huge demand. While India, the world’s second-biggest gold consumer after China, imports about 900 tonnes of gold a year, consumption in India was 797.3 tonnes in 2021, the highest in the past five years, according to the World Gold Council.
India being a negligible producer of gold, the huge demand for gold in the country is met through imports. India imports gold dore bar as well as refined gold. In the last five years, imports of gold dore bars made up 30 per cent of the total official imports of the yellow metal in India.
The Northeast smuggling route
The trends of gold smuggling and seizure data show that 73 per cent of the gold caught had been brought through Myanmar and Bangladesh, the DRI report said. Many international reports suggest that smuggled gold is brought into Myanmar from China through the towns of Ruili and Muse on the Chinese and Myanmarese sides of the border respectively. Muse is located in the Shan State in Northeastern Myanmar and Ruili is in the Dehong Dai Prefecture of Yunnan Province.