Gold smuggling in to India is on a rise ahead of the festival and wedding months just around the corner, as new taxes begin to bite jewellers amid sharply higher prices of the yellow metal.
Instances of people trying to smuggle in gold from places such as Dubai is on increase and authorities have caught men and women – including airline pilots — trying out new methods to get the metal in past eagle-eyed customs at airports.
A woman was caught trying to smuggle in 2.2 kg of gold at the Mumbai airport, and customs across all international airports are on guard to catch errant travellers trying to get the metal in without paying duties.
Smuggled gold into India could double to as much as 300 tons in 2016, director at All India Gems and Jewellery Trade Federation to Reuters, nearly one third of the country’s demand that would see the government lose up to $1 billion in taxes.
The World Gold Council (WGC) has put the figure at 160 tons.
Buying smuggled gold makes sense for bullion dealers and small jewellers as they pay up to $100 an ounce below official domestic prices.
According to reports, domestic gold refiners are being forced to shut down operations as a sharp increase in smuggling has wiped out their margins.
India’s battle with its huge gold imports, which negatively impacts its current account, goes back decades. From the time when gold imports were banned, India moved to open them up and actually reduced duties that killed smuggling.
However, three years ago the government raised the import duty to 10 percent in its efforts to narrow its current account deficit. Since then other levies have been introduced as part of government efforts to bring gold out of lockers and temples and introduce gold bonds.
A 26 percent increase in gold prices this year, however, has created on-ground problems as jewellers struggle to make ends meet.
According to available data, India’s official gold imports fell 57 per cent in the first seven months of 2016 to 215 tonnes, and could fall more than 60 per cent for the year to 350 tonnes to 400 tonnes, the lowest level in two decades.