Kerala's gold smuggling den: The racket and the modus operandi

Sleuths at Kozhikode International Airport in Kerala apprehended a 19-year-old girl last week who was attempting to smuggle about ₹1 crore worth of gold from Dubai.

A native of Kasargod, Sahala left her hometown to be with her husband in Dubai. On her return, she was used as a “courier” to smuggle gold into India.

She was able to bypass checkpoints successfully and managed to fool customs agents. When she tried to escape taking advantage of the usual chaos at the airport, police officials, led by Malappuram SP Suchit Das, caught her on the basis of a tip-off. She denied being a gold smuggler when questioned by authorities, and they didn’t discover anything initially.

On closer inspection, however, female police officers found 1,884 gm of gold paste wrapped around Sahala’s waist. Later, she got bail.

Soon after, another gold smuggling team, which included a woman, was caught after being chased in Kozhikode. Deena, 30, smuggled 146 g of gold from Dubai. She managed to sneak outside the airport, duping customs officials, and drove away with her two friends. But the police caught her after a chase, arrested and seized the gold worth nearly ₹800,000.

Like in Sahala’s arrest, Deena was also caught by the police following a tip-off.

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KM Biju, a Special Branch DySp in Malappuram, told The Federal that “Sahala’s case was 87th and Deena’s was 88th this year in Calicut International Airport”.

Kerala turns big hub

The tiny state of Kerala has become a major transit point for smuggled gold, with 586 kg of it worth at least ₹264 crore, entering the state unlawfully in the financial year 2021–22. This was part of around 833 kg of smuggled gold worth ₹405 crore that was seized across the country in the same financial year, according to a Directorate of Revenue Intelligence (DRI) report.

So from where does it come from? DRI found that most of the illegally obtained gold was from Myanmar in 2020-2021. Multiple people from India and other countries, according to the DRI, use air cargo lines to smuggle gold into India from China and Hong Kong.

According to DRI, because of the widespread disruption of air operations caused by the COVID pandemic, gold had to be smuggled into India by ground routes. An extensive amount of the contraband gold into India was reportedly moved over the customary Tamu-Moreh-Imphal trajectory in Manipur, which takes advantage of a broad expanse of open yet difficult terrain, and the Zokhatwar route in Mizoram.

The United Arab Emirates (UAE), and more notably Dubai, is also a source of illegal gold in India. Exports of raw African gold to Dubai, which is refined and then sold to Indian visitors and expats, are commonplace. Yet, to avoid paying taxes, emigres rely on “carriers” to carry gold back to their home nation.

According to The Federal’s source, a gold dealer based in the Arab Gulf, African gold is being purchased by traders of Indian heritage who then ship it to the UAE. The tradesman said the UAE has completely relaxed customs policies.

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“Upon arrival in the UAE, couriers disclose their gold to customs authorities and fill out and sign a gold import form, stating, among other things, a self-reported claim regarding the country of origin. The gold is then sold at the Dubai gold souk, where Indians, particularly Keralites, buy it and smuggle it into Kerala once the documentation is in place,” the source said.

The profile of couriers

It is common practice for couriers to be rural Indian migrant workers in the Gulf. The couriers are directed to a certain individual who communicates with the gold smuggling’s originators.

If the couriers make it past Indian customs unscathed, they are expected to contact a mobile phone number to arrange delivery of the contraband gold.

If they are caught before making the scheduled call, the SIM card will be erased, making it hard for law enforcement to solve the case as the couriers are not informed of the syndicate’s inner workings.

Low conviction rates also don’t help. The police, at most, can confiscate the couriers’ passports and send them to jail for 60 days. Once a courier is released from prison, he or she will apply for a new passport under a new identity.

A female Kerala attorney working in Dubai told The Federal that couriers are typically paid ₹50,000 to bring gold into India and that they are well-trained to make good their escape. Sometimes, not even the couriers know the whereabouts of the gold unless it is on their person.

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People are often requested to look in unusual places, like a refrigerator or a washing machine, in order to find hidden goods, such as gold. Occasionally, the courier will be taken aback by a query from Customs. Gold-plating laptop circuit boards are the newest trend in gold smuggling, along with combining powdered gold with oats to make it practically undetectable.

Koduvally, a tiny village in Kerala not far from Kozhikode city, is notorious as a major centre for the smuggling of gold. National Highway 766, which passes through Koduvally and on to other towns in the state of Karnataka, is lined with more than 85 jewellery stores. In a town with a population of around 54,000, the illegal gold trade provides for about 1,400 households.

How much gold is legal?

An Indian male, who has been residing abroad for over a year, can bring in gold ornaments worth ₹50,000 without paying tax. And a female can bring in gold ornaments worth ₹1,00,000.

To import gold bars, other than tola bars, bearing the manufacturer’s or refiner’s engraved serial number and weight expressed in metric units, and gold coins, ₹300 has to be paid per 10 gm as tax. And if it is tola bars, then ₹750 has to be paid per 10 gm as tax.

Additionally, the duty shall be paid in convertible foreign currency; the quantity of gold imported in any form shall not exceed 10 kg per passenger; and the gold is either carried by the passenger at the time of his arrival in India or is imported by him within 15 days of his arrival in India.

Meanwhile, according to a recent circular, outright smuggling of high-value goods such as precious metals like gold and unauthorised import of goods — where market value exceeds ₹50 lakh — could trigger prosecution and arrest.

“While the Act (Customs) does not specify any value limits for exercising powers of arrest, it is clarified that arrest in respect of an offence should be effected only in exceptional situations,” CBIC says in the note.

What happens to seized gold?

The seized gold (other than ornament/jewellery/ articles), is transferred to the Reserve Bank of India (RBI) through the Security Printing and Minting Corporation of India Ltd. (SPMCIL).

SPMCIL has the facility to melt gold at India Government Mints (IG Mint) located in Hyderabad, Kolkata, and Mumbai. IG Mints carry out processes such as pre-melting, assaying, and weighing in the presence of a Customs Officer. In the Mint, the gold gets converted into standard gold bars; weighing around 11-13 kg per bar.

The SPMCIL then delivers the standard gold bars to the RBI Issue Department in
Mumbai within a month of the seizure.

The math behind gold

In Dubai, the price of 24 karat gold per kg is approximately ₹43 lakh. If one brings a kg of gold into India, it will be subject to a 12.5 per cent import tax and a 3 per cent Goods and Services Tax. That would push the price to nearly ₹50 lakh per kg of gold. And if one brings more than 1kg of gold, s/he should pay an additional 38.5 per cent import tax.

Avoiding taxes is the primary motivation for smuggling gold into India.

(The writer is an independent journalist and author of ‘Undocumented-Penguin 2021)