India has vibrant colours, rich traditions, and mesmerising cultural tapestries. Amidst all these goodies lies a hidden world of gilded intrigue and audacious underworld dealings – gold smuggling.
Over the years, as the nation witnessed rapid economic growth between 1991 and 2016, a burgeoning “Middle India” emerged, boasting newfound wealth and an insatiable affinity for the shimmering metal. Investments in gold promised higher returns than the stock market, luring urban elites and rural dwellers alike to embrace the allure of this precious commodity to safeguard their wealth from prying tax authorities.
As the glittering demand for gold soared, so did the ingenuity of the smugglers who sought to exploit every opportunity to evade authorities and ferry their illicit treasures into the country. This piece is an enthralling story of cunning manoeuvres, illusive networks, and an irresistible dance between legitimate aspirations and illegal allure.
The History of Gold Smuggling in India
We trace the history of gold smuggling in India back to maritime business using dhows to circumvent customs checks and bribe officials. Haji Mastan, a famous landing agent in the 1960s and 70s, was a prominent figure in these early smuggling operations and mentored Dawood Ibrahim, who later became notorious for various criminal activities.
The mass emigration of people from Kerala to the Gulf during the 1960s and 70s, driven by economic reasons, resulted in a significant Muslim workforce and solidified Kerala’s obsession with gold. This obsession perpetuates income inequalities in India, as Kerala’s economy relies heavily on expat remittances and diaspora entrepreneurship, making it one of India’s most prosperous regions.
By 1983, half of all Indians working in the Gulf were from Kerala, and remittances played a significant role in the province’s economy. The smuggled gold primarily comes from the Middle East, where gold demand and perceived quality are higher. But Gold smuggling is not confined to Kerala alone; other regions, like Batala in Punjab, also serve as endpoints for smuggled gold consignments.
The Underdealings of Gold Smugglers in India
Gold smuggling in India is a complex and widespread illicit activity involving diverse methods and intricate networks that span various regions and ethnicities.
With its international connectivity and proximity to key smuggling routes, Mumbai has emerged as a central hub for gold smuggling. Smugglers utilise ingenious tactics to evade detection, such as hiding gold in their bodies or using concealed compartments in clothing and accessories.
Gold smugglers are often seen locally as lovable rogues who have succeeded in an unfair world, earning admiration for their accomplishments abroad.
Two main hubs for gold smuggling into India are the Western hub, centred around Persian Gulf countries with UAE and Dubai at its core, and the Eastern hub, comprising Thailand, Myanmar, and Nepal, which receives gold from China and re-exports it to India. The Western Corridor is often associated with people of Malayali origin, the dominant ethnic group in Kerala. The control of smuggling along the Eastern corridor is less obvious. Still, all evidence points to the involvement of expatriate Tamil communities in South East Asia.
The western gold route begins in the UAE and ends in Kerala, Punjab, and Maharashtra, with Indian nationals dominating this route and setting up infrastructure in Dubai for disguising gold.
The hawala system significantly facilitates payments for gold smuggling, with money transferred between West Asia, South Asia, and possibly Africa to finance gold purchases.
Smuggled gold from Myanmar usually consists of bars or small slabs concealed inside vehicles or transported via railways. Overland smuggling through Manipur and Mizoram in the northeast is employed to transport gold to other parts of the country, avoiding detection at airports. Smuggling syndicates prefer moving gold domestically through surface transport to reduce the risk of interception.
The complex supply chains and various levels of integration with the legitimate gold industry make gold smuggling in India a challenging issue to address. Couriers involved in the trade are often unaware of the end-receiver, adding to the complexity of dismantling the entire network.
Bangladesh also plays a role, with transnational organised crime groups involved in smuggling, particularly at airports, where most of the gold traded locally enters from the Middle East.
Eastern and central parts of India, especially near the Nepal border, are known smuggling hubs due to underinvestment in security infrastructure and weak law enforcement. Tamils with historical connections to Myanmar play a prominent role in gold smuggling in the Moreh area and Chennai, with some smuggled gold originating from Singapore and Malaysia. Gold smuggling between Tamil Nadu and Kerala is also prevalent, with Thrissur being used as a cache point before distribution to other parts of Kerala.
Sea-borne smuggling occurs through ports like Mundra and Mumbai in Gujarat, Ramanathapuram district in Tamil Nadu, and the coastline near Thiruvananthapuram in Kerala. On the other hand, air couriers are preferred for gold smuggling from the Middle East or East Asia due to the price volatility during transportation.
The under-dealing of gold smugglers in India presents a multifaceted challenge, requiring comprehensive efforts from law enforcement, international cooperation, and targeted measures to disrupt the complex networks involved in this illicit trade.
The Operation “Golden Dawn”
Gold smuggling in India remains a persistent issue, with recent incidents revealing the ingenuity and audacity of the smugglers. A pan-India operation by the Directorate of Revenue Intelligence (DRI) uncovered a gold smuggling syndicate comprising Sudanese nationals operating through the Nepal border. In a series of well-coordinated interceptions in Patna, Pune, and Mumbai, the DRI seized 101.7 kg of smuggled gold, valued at approximately ?51 crore.
The modus operandi of the smugglers was both diverse and inventive. In one instance, DRI officials intercepted three Sudanese nationals boarding a train from Patna to Mumbai with 37.126 kg of gold paste concealed in specially made cavities of their sleeveless jackets.
The operation further nabbed two more Sudanese ladies travelling from Hyderabad to Mumbai via bus with 5.615 kg of smuggled gold hidden in their handbags. Yet another interception at Mumbai Railway Station led to the recovery of 38.76 kg of gold paste concealed similarly.
Northern Kerala, especially districts like Kasaragod, Kozhikode, and Malappuram, is a hotspot for gold smuggling and appears predominantly influenced by Muslim mafia-like networks.
The close association between gold smugglers and local politicians grants them influence and protection, allowing them to evade law enforcement.
After the 1973 oil boom, Indian business people in the Gulf took control of gold smuggling routes, exploiting the discontent of low-skilled migrant workers.
Couriers involved in gold smuggling receive generous fees, but the size of consignments and payments has reduced over the years. These couriers are recruited through various means, including the Deira gold souk in Dubai, and are often asked to hide gold in their body cavities or luggage. If caught, couriers frequently vanish, making it challenging for law enforcement to pursue them effectively.
Consequences and Challenges of Gold Smuggling
Gold smuggling fuels criminal networks and fosters corruption, posing significant legal challenges. Various innovative smuggling methods make detection difficult. Combating smuggling requires robust border security, intelligence sharing, and stricter offender penalties.
A comprehensive approach is needed to address the issue of gold smuggling effectively.
Recent incidents show that the smuggling operation does not end with the apprehension of carriers; it often leads to the discovery of more extensive networks involved in illegal trade. For example, follow-up actions based on leads provided by smugglers led to the arrest of additional individuals and the seizure of substantial amounts of smuggled gold and currency.
India has witnessed a range of ingenious methods employed by gold smugglers to bring the precious metal into the country. These methods include using courier services or logistics companies in northeastern India and concealing gold in vehicles. In some instances, smugglers have even gone as far as retrieving gold from the seabed in Tamil Nadu from fishing boats.
Mumbai has emerged as India’s largest hub for gold smuggling, surpassing Delhi and Chennai. A significant portion of the smuggled gold originates from the Middle East, where the perceived quality of gold is higher. Moreover, many Indians from Kerala work in the region, making airports prominent smuggling hotspots.
The scale of gold smuggling into India is staggering, with an estimated 340 tonnes of gold smuggled annually, accounting for nearly half of the country’s total gold imports. This thriving illegal trade escalated due to the lure of duty evasion profits, corrupt officials facilitating smuggling, and the influence of Gulf links in Kerala.
Despite the authorities’ efforts to curb gold smuggling, the practice continues due to its lucrative nature and the constant demand for gold in various forms. The “Golden Dawn” operation by the DRI sheds light on the challenges faced in combating this illicit trade. However, further investigations are ongoing to dismantle the smuggling networks and reduce the flow of smuggled gold into India.
Addressing gold smuggling requires a holistic strategy involving law enforcement agencies and policymakers and raising public awareness. Strengthening border security and intelligence gathering is essential to disrupt smuggling networks effectively. Cooperation between different agencies and international collaboration can aid in tracing the origin of smuggled gold and identifying key players in the illegal trade.
Promoting legal channels for gold trade and educating the public about the consequences of smuggling are crucial steps in reducing the demand for smuggled gold. Encouraging transparency and incentivizing individuals and businesses to engage in legal gold transactions can significantly diminish the attractiveness of smuggling.
Smuggled gold has become a means to launder black money, replacing traditional smuggling methods. Impoverished Indian labourers working in the Middle East act as couriers to transport gold back to India for wealthy business people, allowing them to avoid paper trails and tax scrutiny.
The impact of taxes on gold smuggling is noteworthy. During the 1990s and early 2000s, low import taxes on gold (1%) made smuggling unviable, leading to increased legitimate purchases. However, as the government started raising duty rates in 2012 to generate revenues, gold smuggling saw a noticeable spike. The intensification of smuggling was a direct result of the rising import taxes, with rates reaching 10% in 2013 and 12.5% in 2019.
Demonetization in 2016 aimed to improve financial surveillance and reduce tax evasion, but it had unintended consequences for gold smuggling. As tax evaders sought to convert black money into gold and then into legitimate “white” cash, there was a surge in gold smuggling activities. Sellers charged double the value of gold and accepted old currency notes, which buyers later exchanged for new ones, making the transaction untraceable.
Despite government efforts to curb gold smuggling, the illicit flow persists due to high demand, price differentials, and opportunities for converting black money. The illegal gold trade continues to evade customs duties, depriving the government of substantial annual revenues.
Addressing the issue of gold smuggling requires a multifaceted approach. Creating alternative investment opportunities and reducing the appeal of gold hoarding may also help to curb the illicit gold economy. For instance, exploring the best options trading platforms in the UK can provide individuals with legitimate investment avenues that can potentially deter them from engaging in gold smuggling.
Strengthening border security, intelligence sharing, and imposing stricter penalties on offenders are essential components. Additionally, the government must carefully evaluate tax policies related to gold imports to prevent unintended incentives for smuggling. Improving financial surveillance and promoting transparency in gold transactions can help reduce opportunities for money laundering.
But gold smuggling remains a complex challenge in India, calling for concerted efforts to combat it are necessary for fiscal stability and effective law enforcement. The “Golden Dawn” operation underscores the importance of continued vigilance and cooperation among authorities to curb the flow of smuggled gold and protect the integrity of the country’s financial system.