Gold smuggling seems to have its own cycle, says Sitharaman
Referring to the ‘Smuggling in India Report’ for 2021-22, Union finance minister Nirmala Sitharaman said two bar charts that showed gold imports, and gold smuggling, respectively, showed “some kind of relationship”.
Union finance minister Nirmala Sitharaman on Monday said smuggling of gold “seems to have its own cycle” irrespective of high or low customs duty while releasing the latest report on smuggling that showed Myanmar becoming the main transit corridor and China as the origin country for gold smuggling.
“If in our country, 800 kg [of smuggled gold] have been detected on an average, per year, I’m sure this is an elephant in the room. Can we do lot more data-based, artificial intelligence-based, better mapping of… cycle of gold smuggling into India,” she said at the 65th Founding Day celebrations of the Directorate of Revenue Intelligence (DRI). She also released the ‘Smuggling in India Report’ for 2021-22.
Referring to the report, she said two bar charts that showed gold imports, and gold smuggling, respectively, showed “some kind of relationship”.
“I don’t know whether there is a tendency or cyclic impact… of very high imports of gold… just before and after… higher detection of smuggling [of gold],” she elaborated, asking DRI officials to study the trend and use the data to stop such activities.
It is not customs duty on gold that determines the extent of smuggling, the finance minister said dismissing any significant correlation between higher levy leading to higher gold smuggling or lower duty, less smuggling. “No, smuggling seems to have its own cycle. Smuggling seems to have its own pattern.”
She expressed concerns over the menace of drugs trafficking, which she suspected is making India a consuming country from a transit point for smugglers. “I find, drugs, particularly… CBIC Chairman Vivek Johri was telling me just now that cocaine has also started coming in a big way in this country. And again, here I want to ask a question, is it because India is no longer a transit country for smugglers? And, is it because India is now becoming a consuming country?,” she said asking DRI to examine the cause and effect relationship to check such crimes.
The DRI report gave detailed insight on such matters that can be converted into actionable intelligence, a senior finance ministry official said. Increased surveillance at the international airports has changed the gold smuggling trends in India, with Myanmar becoming the main transit corridor and China , the origin country, the report said.
The apex anti-smuggling agency registered only four cases of gold smuggling in April 4, which rose to 22 by March this year. In all, it seized 833 kg gold worth ₹405 crore in 160 cases probed by it in Financial Year 2021-22.
“Although Switzerland is the biggest source of licit gold bullion entering India, historically gold has been smuggled from middle east countries into India through air routes for a long time. However, alertness of Indian law enforcement agencies has compelled the gold smuggling syndicates to adopt new modus operandi and strategies. Increased surveillance at international airports has forced the change of route from West Asia by air to land route i.e., through the China-Myanmar-India borders,” the report said.
The report names China as the main origin country for smuggling gold into India.
“The geostrategic location and the presence of China and other Southeast Asian countries on either side has been crucial in effectively transforming Myanmar as the transit corridor for smuggling of gold into India,” the report said, while adding that probe in its cases has revealed that Myanmar has now emerged as one of the major transit points of gold being smuggling into India.
The report added that smugglers use China’s Ruili and Myanmar’s Muse for the illegal activity. “Many international reports suggest that smuggled gold is brought into Myanmar through China at Muse, one of the bordering cities on the Myanmar-China border. Gold enters Myanmar from China, primarily through the border towns of Ruili (Yunnan Province) on the China side and Muse (Shan state) on the Myanmar side.”
The gold, the report said , is then further transported from Muse through Mandalay-Kalewa route to the Indo-Myanmar border.
“Two flagged routes for smuggling of gold from Myanmar into India are Muse-Mandalay-Kalewa-Tedim-Zokhawthar and Muse-Mandalay-Kalewa-Tamu-Namphalong-Moreh. The former route is connected to Mizoram in India, whereas the latter route opens to Manipur in India.”
The shift in gold smuggling route to Indo-Myanmar border “may be attributed to the crackdown on insurgency, leading to the well-established routes and network of carriers engaged in erstwhile arms smuggling being lured into the lucrative world of gold smuggling”, the report explained.
Another emerging trend noticed in gold smuggling is concealing it as machinery parts in the cargo. Citing a covert intelligence operation code-named ‘Molten Metal’ undertaken by it on November 19, 2021, DRI said that several Indian and foreign (Chinese, Taiwanese, and South-Korean) nationals involved in smuggling gold into India, disguising it as machinery parts , from China/Hong Kong, using the air cargo route, were identified. Overall, 85 kg gold worth ₹42 crore was seized during this operation. At several rented farm houses/apartments in Chhattarpur and Gurugram, four foreign nationals (two from South Korea and one each from China and Taiwan) were using sophisticated metallurgical techniques to remold the smuggled gold into bar/cylindrical shapes.
India is the world’s second-largest consumer of gold after China. India imported gold worth $34.62 billion in 2020- 21; this rose by 33.34% to $46.14 billion in 2021-22.
Discussing other smuggling trends in the country, DRI said Free Trade Agreements (FTAs) are misused by “unscrupulous” traders who misclassify imports deliberately.
“Though measures have been taken up to prevent the misuse of FTAs, through changes brought about in the Finance Act, 2020 and Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR 2020), unscrupulous traders have attempted to misuse the FTA provisions, as seen from the investigation of such cases. A very common transgression noticed is regarding the misclassification of imports to such categories of CTH (change in tariff heading) which is eligible for benefits under Free Trade Agreements (FTAs),” the reportsaid.
As of April 2022, India has signed 13 Free Trade Agreements (FTAs) with its trading partners. An FTA with the UK is in the works.