Gold smuggling rampant, WGC expects trend to continue

40-50 tonnes of gold may have been smuggled into India in July-September; industry seeks duty cut

The 10 per cent import duty on gold and stringent import rules have resulted in huge quantities of the precious metal coming through unofficial channels into the country. Despite much lower levels of official imports -- which averaged 10 tonnes in August and September — barring a few organised players, jewellers have not refused to entertain customers for want of gold.

Industry players and analysts tracking gold Business Standard spoke to were not in a position to specify the quantum of gold smuggled into the country. But back of the envelope calculations suggest 40-50 tonnes could have entered Indian borders unofficially after July. The availability of gold in general has been an issue and the country’s premier jewellery body has sent an SOS to the finance ministry to cut duty, arguing that since the 80:20 norms — to import 80 tonnes of gold for the domestic market, 20 tonnes have to be exported — is in place, no other controls are warranted.

In its gold demand trend report for the quarter ended September, the World Gold Council (WGC) said net imports fell 62 per cent to 85 tonnes. The council’s import data do not specify official or unofficial imports. Against this, official gross gold import data for the September quarter, according to the ministry of commerce, are 70 tonnes. A Gem and Jewellery Export Promotion Council (GJEPC) spokesperson said, quoting the council’s export figures, that exports of gold in the form of jewellery were between 35-38 tonnes during the period. The discrepancy in import data gives indication of smuggling, though the WGC prefers not to draw any conclusion from this.

The council, however, noted that, “Gold entering the country unofficially through India’s porous borders helped to meet pent-up demand. We have seen some increases in demand in other countries, which have close links with India, some of which may be making its way back to the country through illicit channels, which have reopened in recent quarters following a long period of inactivity. It is likely that unofficial gold will continue to find its way into the country to satisfy demand.”

The WGC also said that “reports that a good market for 10-tola bars is re-emerging, due to the relative ease with which they can be concealed, reinforce this view (of an increase in unofficial imports in India).” Notably, 10-tola bars or gold biscuits are banned to control smuggling.

Higher smuggling and shortage of gold have provoked the industry body to send an SOS to the finance ministry. Haresh Soni, president of the All India Gems and Jewellery Trade Federation (GJF), said, “We have represented to the government that the 80:20 rule is enough to curb gold imports and there is no need to have other curbs. The government should reduce import duty, which is at 10 per cent now, and also relax norms by allowing jewellers to procure gold on loan as it used to be in the past.”