Gold dust in diapers, secret land routes, high-seas drops — what's behind gold smuggling surge in India
New Delhi: Gold dust concealed in pen refills, sanitary pads and diapers, melted and moulded into suitcase wheels, valves and electronic parts, and gold capsules hidden in the rectums of human carriers — the myriad ways this precious metal is smuggled in the country range from outrageously innovative to downright bizarre.
Directorate of Revenue Intelligence (DRI) data shows that gold smuggling is on the rise in India. Sources in customs and DRI say that while agencies manage to intercept some of the smuggled gold, several cases go unnoticed. An intricate network of carriers and receivers and well-oiled machinery involving airline and airport authority personnel keep the racket running..
In eastern Ladakh along the China border, 108 kilograms of gold worth Rs 82 crore was smuggled into India this month via a land route authorities are yet to pinpoint. This route has possibly been used at least twice before without detection, it is learnt.
Customs sources said the consignment contained gold bricks of 17 brands from Switzerland, Hong Kong, Dubai, and several European countries. The bricks were collected in China and then smuggled into India through a mountain pass. The DRI is now investigating the case.
The gold smuggling industry has undergone significant changes. Nowadays, gold is rarely smuggled as bricks. Instead, it is chemically treated and turned into dust or paste for smoother transportation.
Multiple sources in the DRI and customs ThePrint contacted said smuggling routes have also evolved. While sea routes were previously preferred, air, and now, land routes are more commonly used.
The profile of smugglers has changed, too. Instead of economically weaker individuals and labourers smuggling gold for a small commission and airfare, foreigners and well-educated people are now recruited to avoid detection.
Apart from hawala transactions, organised syndicates use the proceeds from gold smuggling for fund remittance to families in India. Money is also transferred via digital wallets and cryptocurrency, making the supply chain more complex, layered and opaque, and thus, harder to trace.
Experts in the DRI note that smuggling is no longer just an economic offence. It impacts indirect tax collections, adversely affects direct tax collections and feeds the parallel economy. It fuels the hawala network and is also used as a currency for money laundering.
Before 1991, the Gold (Control) Act prohibited owning gold in the form of bars and coins, inadvertently fuelling the rise of smuggling operations by organised gangs. This illicit trade gave birth to the Dawood Ibrahim phenomenon and the making of the smugglers of the 1970s in Bombay, with syndicates, especially the Mumbai underworld, reaping substantial profits. Smuggling became a highly lucrative business, which financed crime syndicates and their various activities.
Then, when gold import was legalised in 1992, smuggling of the precious metal dropped. Over the years, it has picked up again.
Experts say the prevalence of gold smuggling is linked to import duties, government policies, and regulations — as import duties rise and gold prices increase, the smuggling market becomes more lucrative.
S. Abdul Nazar, the director of All India Gem and Jewellery Domestic Council, told ThePrint, “Currently, one has to pay approximately Rs 10 lakh for 1 kg of gold import, which incentivises illegal transfer of gold clearly, and there are takers for it. If the government can reduce it considerably, from a 15 percent duty to five percent — plus 3 percent GST — it will boost demand and de-incentivise gold smuggling.”
A senior customs officer said most organised syndicates do not see the law as a deterrent because of challenges in prosecution and limited punishment.
“Even if the gold compound is detected, prosecution is difficult. Customs, after investigation, issue a show-cause notice. A criminal complaint comes within six months after the gathering of evidence. If found guilty, the punishment is only a few years or a fine, which is insufficient to act as a deterrent,” the officer said.
Use of foreigners and airline staff as carriers
According to customs sources, using “foreign nationals” and “educated people” as carriers has become increasingly popular to evade law enforcement agencies.
Most often, low-income workers are used as carriers as they do it for a meagre commission and sponsored air tickets. That, however, is now changing, it is learnt.
“The agencies focus on people of Indian origin, most often used as carriers for little money. But now, foreigners and well-educated people are more often used. They operate at busy airports such as Mumbai and Delhi, where many people from abroad land. These carriers are in regular touch with their Indian counterparts,” the customs source said.
In most cases, the carrier and the handler have never met. The former updates their Instagram stories to signal their movements. Upon landing, they post the final location, which may be a café at the airport, allowing the handler to find and collect the consignment, according to the source.
A senior DRI officer also said that, although expensive, syndicates now prefer to hire these carriers. “This is because the chances of getting caught become far more bleak. In one operation named Golden Dawn, we managed to bust a network smuggling gold through the Nepal border — involving foreign nationals — resulting in a seizure of 101.7 kg foreign origin gold and 10 arrests,” the officer said.
According to the officer, airline staffers are another most commonly used intermediary to smuggle gold. “What we saw in Bollywood movie Crew is not far from reality, actually,” the officer said. “International smuggling syndicates have used airline crew members as carriers.”
A third DRI source said international transit passengers are commonly used to smuggle gold.
“The gold carried by the transit passenger is transferred to a person working at the international airport or to a passenger travelling on a domestic flight who, in turn, seeks to take the gold out of the airport.”
Gold in rectum & machine parts, well-oiled network
In May, the DRI apprehended a cabin crew member of Air India Express coming from Muscat at the Kannur airport for allegedly smuggling gold. Surabhi Khatun from Kolkata had allegedly concealed 960 grams of gold in compound form inside her rectum.
In June, Chennai airport customs busted a racket run by a YouTuber, who rented a shop inside the airport terminal and used his staff for illegally transferring metals.
The YouTuber, identified as Sabir Ali, had allegedly rented the shop via a third-party agency working for the Airports Authority of India (AAI) and used his shop as a front for his illegal activities of gold smuggling.
According to sources, he employed seven staffers. Since they had passes issued by the Bureau of Civil Aviation Security, they did not have to go through extensive checking by security.
As part of the module, gold was exchanged in washrooms and subsequently passed over to receivers outside the terminal by the staffers working at the shop.
Customs sources said they suspect that the module smuggled approximately 267 kilograms of gold worth Rs 167 crore over two months — all in capsule form, concealed in their rectums.
“It is extremely difficult to catch these carriers as the gold remains concealed so well. The carriers are well trained. They carry capsules with gold in their rectums, some even ingest capsules with gold compounds. They use metal detectors and X-rays to even check the efficacy of concealment before carrying it out,” the source said.
The source added that most smugglers are caught by “chance” when the department has a prior tip-off or during random checks.
Gold is also processed and converted into items such as rims of bags, triangle valves of plumbing material, parts of machines and electric motors, which are hard to identify.
“Passengers make cavities in vests, undergarments, and specially made knee caps... In one case this year, gold was found concealed inside triangle plumbing valves imported from China. Gold of 24-carat purity was inside valves, imported at the Air Cargo Complex, Mumbai,” the source said.
Officials recovered over 61.4 kilograms of gold worth Rs 32.4 crore in 1,856 valves.
In May 2022, the DRI intercepted an import consignment of electric hammers in Mumbai — which arrived from Hong Kong. An examination revealed 16.054 kilograms of gold concealed in these hammers.
In a separate case, the DRI intercepted another consignment, which, at the air cargo, was declared to contain drum-type drain-cleaning machines. Smugglers had hidden gold in the form of discs in the rotors of these machines.
The smuggling of gold also requires a local logistical network. Sources said that gold gets smuggled in a compound paste form, and to process that, a system is required — people who can melt the paste and recover the gold in pure form for domestic sale. Every 1,000 grams of paste has nearly 700 grams of gold, which one can retrieve using a chemical process.
“Professionals are needed in this supply chain. While some tap and cultivate international travellers or professional carriers, another group specialises in engaging the various stakeholders — insiders — to help the smugglers cross the customs barrier,” the source said.
“The next layer is professionals collecting gold and delivering it to melting units. These units convert the gold into pure form. They either return the purified gold to the smuggler, or the syndicate is paid in cash, typically sent through hawala channels,” the source said.
Changing smuggling routes
In 2020, air routes were affected due to Covid-19, and it forced the smugglers to explore new routes to get in gold.
During the pandemic, the northeastern borders of India were used more than ever before, mainly to smuggle gold from Myanmar and Bangladesh, and the land routes took precedence over air routes, a DRI source said.
According to the DRI's Smuggling in India Report 2022-23, land routes accounted for 52 percent of the total smuggling cases, distantly followed by air routes at 29 percent.
In smuggling via sea routes, the DRI found that gold smuggling consignments were shifted to different vessels mid-sea before dumping them at separate entries to avoid detection
“Smugglers drop gold consignments mid-sea and share the coordinates with other members of the syndicates,” a DRI source said.
The source said that while transporting gold via land routes, syndicates exploit the India-Myanmar corridor to cultivate gold carriers. Gold smugglers across the country have established their camps in northeastern states in the guise of genuine trade and are misusing the same, the source said.
The smugglers also conduct operations at the India-Nepal border.
“Gangs fly the carrier from West Asia or South East Asia to Nepal and then smuggle the gold into India through the India-Nepal border,” the source said.
The DRI highlighted that most of the gold smuggled into India originates from countries such as the United Arab Emirates (UAE) and Myanmar, while Sri Lanka, Bangladesh and China also account for cases.
According to the DRI’s 2022-23 report, the most common originating point of gold smuggling is the UAE, which accounts for 42 percent of cases, distantly followed by Myanmar (20 percent).
A World Gold Council (WGC) report showed that gold smuggling has shifted away from the sea in favour of air and land routes. Two key reasons are “increasing vigilance across India’s 7,517 km coastline, and the impact of gold price volatility, given the time to deliver seaborne freight to its destination”.
According to the WGC report, while 40-45 percent of smuggled gold lands in the states of West Bengal, Manipur and Mizoram — the majority of which comes from Bangladesh, Myanmar and China — 30-35 percent of it lands in Kerala, Tamil Nadu, Andhra Pradesh and Telangana from the UAE and South-East Asia.
The rest of India contributes 20-30 percent of the smuggled volume of gold, mainly sourced from the UAE.
“The growth of smuggling through northeastern states is due to a combination of liberal trade policies such as the Free Movement Regime and porous borders, which allows for ease of cross-border travel,” the report added.
Maharashtra, Kerala, Tamil Nadu account for 60% of cases
The rising number of cases underscores the severity of the problem.
According to DRI data, in 2023, there was an over 20 percent year-on-year surge in gold smuggling cases till October. With 4,798 cases involving the seizure of a total 3,917 kilograms of gold, 2023 saw the highest number of cases in at least three years. Of this gold seized, the DRI alone detected 1,452 kg, an increase of nearly 618 kg compared to 2022.
In 2022, there were 3,982 cases in which a total of 3,502 kilograms of gold was seized. In 2021, there were 2,445 cases with 2,383 kilograms of gold seized, whereas in 2020, there were 2,567 cases with 2,154 kilograms of gold seized.
DRI data also showed that Maharashtra, Kerala, and Tamil Nadu accounted for over 60 percent of the total gold smuggling cases in 2023.
In 2023, Maharashtra recorded 1,357 cases till October, up from 572 cases in 2022 and 210 cases in 2021. Nearly Rs 997.51 kg of gold was seized in 2023.
This year, till July, officials have arrested six Indian nationals at the Mumbai airport while they were returning from the Gulf countries. According to officials, they hid gold in dust form in pen refills.
Tamil Nadu had 894 cases this year till October 2023, up from 888 cases in 2022 and 521 cases in 2021. Nearly 498.84 kilograms of gold was seized in 2023.
Customs officials said that the Chennai International Airport serves as a transit point for several passengers coming from the Gulf countries and set for Colombo. These passengers have ample opportunity to pass on the consignment to ground staff at the airport.
“They do not know each other, nor do they share contact details. They only have a picture of each other for the exchange of the consignment. Customs cannot stop transit passengers from moving around at terminals, and they use this time and leverage to hand over their consignment to their accomplices,” a customs officer from the state told ThePrint.
Although gold smuggling cases are much higher in Kerala than in other states, the state has seen a dip in cases and seizures. Kerala saw 728 cases in 2023 till October, down from 1,035 in 2022 and 738 in 2021. Nearly 542.36 kilograms of gold was seized in 2023.
Explaining the concentration of gold smugglers in Tamil Nadu and Kerala, another customs official said that districts such as Malappuram and Kasargod in Kerala and Ramanathapuram in Tamil Nadu have a lot of people working in the Middle Eastern countries, and a lot of smugglers belong to those places.
The gold smuggling in Kerala created a massive political storm when customs, in July 2020, arrested high-profile people such as UAE consulate employees Swapna Suresh and Sarith Kumar, as well as M. Sivasankar, the former principal secretary to Kerala Chief Minister Pinarayi Vijayan. The case is currently at the trial stage.
An employee of the UAE consulate, Suresh, allegedly smuggled the gold via diplomatic baggage. The gold smuggling case became a three-pronged investigation puzzle as the National Investigation Agency stepped in to probe if the Popular Front of India (PFI) used the money to fund “anti-national” terror activities, over and above an ongoing customs investigation into the network of smugglers used for the transfer of the gold into India.
Section 135 of the Customs Act deals with evasion of duty or prohibitions, implying if a person conceals dutiable or prohibited products, customs can arrest the person. Where the market price of the goods exceeds Rs 1 crore, or the evasion or attempted evasion of duty exceeds Rs 30 lakh, the person can be punished with imprisonment extending up to seven years and a fine.
In other cases, the term of imprisonment may extend up to three years, or a fine, or both. In the case of repeat offenders, imprisonment may extend to seven years.
How high import duties, price rise affect gold smuggling
According to a source in DRI, with no domestic production of gold in India and restrictions on imports in the pre-1991 era, gold smuggling has turned into a lucrative business for crime syndicates, including the Mumbai underworld, which made a lot of profit from it.
During the gold control period between 1960 and 1990, which prohibited Indians from holding gold bars and coins, gold was mainly smuggled into India from West Asia and the Middle East via the sea route and landed in Maharashtra, Gujarat and parts of southern India. That, however, changed in 1992 when the then finance minister Manmohan Singh legalised gold imports while imposing a duty of roughly 15 percent on the value of gold imported, the source said.
Subsequently, the government reduced duties over the years, and gold smuggling was no more lucrative, considering the risks involved. However, that was only the case till 2012, when duties were re-imposed, leading to the revival of gold smuggling.
Gold imports then rose sharply, reaching a high of Rs 2,922 billion by FY 2012-13, nearly 20 percent of total imports to India, according to the 2023 World Gold Council report, ‘India’s Gold Market Reform and Growth’.
The report said a combination of rising demand for gold, reduced demand for Indian exports, and soaring oil prices had negative implications for India’s current account deficit (CAD). From less than Rs 116 billion in 2001, the deficit soared to Rs 4,796 billion in FY 2012-13, equivalent to 4.8 percent of India's GDP.
Due to this fiscal imbalance, the government-imposed restrictions on imported goods, including gold and duties on gold imports increased five-fold in less than two years, from 2 percent in January 2012 to 10 percent in August 2013, the report said.
Then, in July 2019, the import duties were raised further to 12.5 percent, as part of a series of tax-raising initiatives designed to improve the government’s fiscal position.
According to the report, the dynamics of unofficial trade have changed in the past five years. It says that structural changes, including demonetisation and the introduction of GST, led to a drop in unofficial flows but the smuggling revived in 2019 as the duty hike provided a renewed incentive to buy gold unofficially. It then again collapsed in 2020 after Covid hit.
In January this year, the Center again increased duty of the import of gold and silver coins to 15 percent from the existing 10 percent. This includes basic customs duty of 10 percent and Agriculture Infrastructure and Development Cess (AIDC) of 5 percent. It also increased duty on spent catalysts, which are used to extract precious metal, to 14.35 percent.
The WGC report says that the more pervasive India’s unofficial gold market becomes, the more difficult it is for the mainstream market to advance and develop.
"A reduction in tax rates could therefore confer benefits on two fronts. Lower duties would almost certainly boost overall demand for gold. And lower tax rates could create more opportunities for the compliant and organised sections of the gold market by squeezing out the unofficial, or ‘grey’, market,” the report says.
Edited by: Madhurita Goswami
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