Gold smuggling surged six-fold in the year ended 31 March from the previous year after the government raised the import duty on gold to narrow the current account deficit, according to data from the Central Board of Excise and Customs (CBEC), the body that regulates and administers customs, service tax and narcotics.
In 2013-14, CBEC seized smuggled gold worth Rs.564.8 crore, with the number of seizures at around 1,757. In the corresponding period in 2012-13, it had seized gold worth Rs.99 crore and number of seizures was recorded at 871.
The spurt in smuggling came about because the government raised the import duty on the precious metal four times over the last two years.
The rise in import duty led domestic prices to spiral. Spot gold prices in India are as much as 10-11% higher than in Dubai, compared with a difference of 0.1% in 2008. Gold is smuggled into India mostly from Dubai.
Higher import prices also meant that there was a 63% decline in gold imports between July and October 2013 from a year earlier, according to a February 2014 report by the World Gold Council.
There was an increase in gold imports in neighbouring countries such as Nepal, Bangladesh and Myanmar from where gold is smuggled into India by land. Dubai, Bangkok and Singapore are the main centres for smuggling by air, according to a March 2014 note by Macquarie Research.
The World Gold Council report said, “We have seen some increase 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.”
The Rs.564.8 crore worth of seized smuggled gold is almost insignificant compared to the value of India’s gold imports—$39 billion (around Rs.2.34 trillion today) till December. And the figure is only for seizures— the actual amount of gold smuggled into India is likely to be much more, according to a senior official of the Directorate of Revenue Intelligence who asked not to be named, who admitted that nine out of 10 cases go undetected.
Analysts expect the trend in smuggled gold to reverse after the general election—the rupee has appreciated 16% from its August lows and the current account deficit narrowed to a four-year low in the fiscal third quarter at 0.9% of gross domestic product (GDP).
“We expect the regulations imposed on gold imports might be eased over the coming months; this may include a partial roll-back of import duty on gold (currently at 10%) and some relaxation of the 80:20 rule,” said Tanvee Gupta Jain, India Economist at Macquarie Capital Securities (India) Pvt. Ltd. India enforced the so-called 80/20 rule in July 2013, making it mandatory to export at least 20% of all gold imports.
Source:- livemint.com
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