Gold import duty hike in India causes rise in smuggling.

INDIA: The Indian government's decision to raise import duty on gold has led to a revival of old-style smuggling of the precious metal into India.

In the last four months alone, Indian customs officials have recorded a nine-fold increase in cases involving gold seizures at various airports.

Vihari Sheth, managing director of Singapore-based Vihari Jewels, was detained at Mumbai airport for allegedly smuggling diamond-studded gold jewellery.

Worth nearly US$400,000, the jewellery was found in her underclothes and on her.

Customs officials acting on a tip-off intercepted Vihari as she was walking through the green channel - indicating she was not carrying any dutiable goods.

Interrogation revealed this was not her first attempt and she had made around 10 to 12 such trips in the past to sneak gold and diamond jewellery into India.

Vihari has been remanded in judicial custody till August 14.

Her arrest offers a glimpse into how even the wealthy may be going into gold smuggling - joining a hoard of small jewellers and organized rings.

They are taking the risks in order to avoid new government taxes on bullion imports that have made gold about 10 per cent more costly in India.

Harmesh Arora, director of Bombay Bullion Association, said: "I do agree that there is a possibility of smuggling inside the country because it is a huge premium which is involved. That's a 10 per cent difference from the international market. So that is going to attract (smuggling), there is no doubt about it."

Experts pointed out that most of the contraband gold in India is sourced from Gulf countries, especially from Dubai, where it is much cheaper, making it lucrative to smuggle gold.

The smugglers also get fixed commission for every gram of gold sneaked in and add-on incentives if they succeed in bringing cash for agents sitting in source countries.

Analysts said tougher measures are needed to curb illegal gold smuggling, which is likely to go up as the demand soars in the upcoming festive and wedding season.

Vikram Dhavan, director of wealth management at Equentis Capital, said: "The best way to stop illegal smuggling into the country is first of all to be very vigilant at your borders. Secondly, you have to see where all this illegal gold is coming into the country. Mostly it is coming from the Middle East or from East Asia. You need to approach these governments at a sovereign level and try to see what can be done from the destination itself."

The Indian government's decision to reduce gold imports was aimed at easing pressure on the current account deficit.

Source : channelnewsasia.com