In India, 2,500kg of gold is being flown in every month

Deeptiman Tiwary, TNN | Jan 29, 2014, 04.20AM IST

NEW DELHI: High customs duty on gold has skewed the jewellery market in such a way that not only is the yellow metal being smuggled in huge quantities, a fact admitted by finance minister P Chidambaram, but there has been an unprecedented rise in legal import of gold through air passengers.

December saw 2,500kg of gold brought in this way. Sources said gold brought in legally by passengers flying into India never crossed 30-40kg a month. Financial agencies said this reflected that there was huge premium in the market on gold due to high demand and short supply.

Air passengers, living abroad, are allowed to carry 1kg gold into India after paying duty. Many jewellers, instead of risking smuggling, are tapping such frequent flyers, paying for their ticket and making them carry gold legally. "Most of this duty-paid gold has been brought in by passengers from the Gulf into south Indian states. Because duty is paid on it, we can't do anything. Smugglers are slowly shifting to this method as despite paying 10% duty, the shortage of supply is getting them such high premium on the price that it covers the money they spend on these couriers and still make decent profits without risking anything," said an official from Directorate of Revenue Intelligence (DRI), adding that the trend had also caught up because of massive crackdown by enforcement agencies on smuggling.

Sources said some of these passengers were also bringing some extra gold on the sly without paying duty. "Since they have already declared their consignment and paid duty, no one checks them thoroughly. We have had intelligence that some of them are also smuggling small amounts," the official said.

Only last week, customs at IGI airport in Delhi arrested four passengers coming from Bangkok, Mumbai, Hyderabad and Amritsar with 6.2kg gold worth over Rs 1.5 crore. The passenger fromBangkok had divided the consignment among three Indian passengers to carry to Delhi.

Announcing impending easing of import curbs on gold, Chidambaram on Monday said around 1-3 tonnes of the yellow metal was being smuggled into the country every month based on seizures made by agencies. World Gold Council has, however, estimated the smuggling to be around 200 tonnes a year.

Financial agencies, however, refute such figures saying if such high amounts of gold were being smuggled, it would show as there are only as many gateways (ports).