Saturday, January 11, 2014

India gold smugglers working overtime

Gold smugglers - Bollywood's favourite screen villians of the 80s - are back with a bang.

Gold seizures in India are up nearly 400 per cent this year. In the two months of September and October customs officials seized around a tonne of gold from air travellers. But air is just one of the routes. The Indian demand for gold through unofficial channels have in turn resulted in rising imports by neighbouring countries especially, Sri Lanka, Bangladesh and Nepal. In fact, some of the land seizures of gold were from couriers from these countries.
World Gold Council (WGC) Managing Director (India) P R Somasundaram said: "Gold imports were only 85 tonnes in the third quarter against the demand of 148.2 tonnes for the same period last year ... "If this supply restrictions continue the demand in the fourth quarter will be met through unofficial channel which has grown significantly."

The surge in smuggling is partly as a result of the price differentials. Domestic prices are presently about $40.50 per gramme (Rs 2550) higher by at least 60 US cents per gram.
If the high duties are included then the domestic price is about $44.50 (at present exchange rate of Rs 63 per U S dollar).

The reason for the high price differential stemmed from Indian demand for the yellow metal. India's demand during the September quarter alone was about 148.2 tonnes. A large part of the gold is however savings driven.
At least 72 per cent of India's household savings amounting to about $39 billion are in the form of gold and real estate. But it is not the upper middle classes alone that save in gold. Savers in gold come from all classes, communities and religions. Gold savings were mostly in the form of small coinage and jewellery.

The preferred coinages range from quarter sovereign (2 gram) of 22 carat purity to one sovereign (8 grams). Farm hands, rural labour and industrial workers all park a portion of their incomes in gold. Savings in gold though is not a recent phenomenon. Traditionally such savings were parked in temples, churches and even Kerala's mosques. The clergy of these religious institutions functioned as custodians of the savings that were utilized during period of drought or natural calamities.

Gold stocks as a result of these cumulative savings are estimated to be huge. Thomas John Muthoot of Muthoot FinCorp, a large lender to farmers and rural communities against mortgage of gold, estimates," Gold stocks both in the official vaults and with households will be at least 50,000 tonnes."


MUMBAI (MINEWEB) - Gold smuggling has hit a new high in India, with 32 kilograms of gold found hidden in an airplane bathroom. Based on a tip off, officials from the Directorate of Revenue Intelligence busted a gold smuggling racket at the Chennai airport late on Monday.

Details of the gold heist have just started coming in. Though gold smugglers have been known to stash the precious metal in every known orifice to evade capture, the smugglers decided to dump their sizeable gold reserves in the cramped plane toilet, sensing an arrest.
The gold biscuits were recovered from the lavatory of an Air India flight which had arrived from Dubai. Officials said one of the reasons the smugglers opted to stash the gold there was because of the sheer size of the consignment: 32 gold bars weighing 1 kilo each. The gold is valued at a whopping $1.2 million (Rs 95 million) in the Indian market.

Kochi: In the biggest gold haul at an Indian airport, 20 gold bars valued at Rs. 5.8 crore (about $880,000) were seized early today from two women passengers from Dubai. The women, hailing from Thrissur and Kozhikode, had arrived in Kochi early today by an Emirates flight.

The bars, weighing 20 kg, were found concealed in specially stitched jackets with pouches worn by the burqa-clad women. The seizure is the largest in the recent history of gold smuggling cases detected in the country, the release said.

Prior to this seizure, a total quantity of 23 kg of gold bars worth about Rs. six crore had been seized by customs in the last few months.

India's gold imports hit a record 162 tonnes in May, as Indians along with other consumers took advantage of a global price slide, and totalled about 380 tonnes from April to July. The government, in urgent moves to curb a current account deficit which hit a record in 2012/13, has hiked import duty three times since January 1


India’s obsession with gold has been blamed for its massive current account deficit, but government efforts to restrict its imports have only given smugglers a golden opportunity.
After a long drive from across the border in China, the white truck arrived in Nepal’s capital at dawn with a seemingly innocuous cargo of Chinese-made clothes. However, hidden in a cylinder inside the vehicle’s front bumper was the latest haul of gold smuggled from Tibet — bars weighing about 35kg and worth millions of US dollars on the black market.

Nepal’s police were waiting for the truck and its 24-year-old driver just inside the city, after tracking them for several days along the highway that connects Nepal with China. “We had been informed from our reliable source that a consignment of gold was on its way from Khasa [a border town in Tibet],” said Uttam Kumar Karkee, a senior superintendent who led the operation in July.
India has raised the import duty twice during April to August-- first in June when the duty was increased from 6 to 8% and then in August to 10%. This has increased the margins for bringing gold into India through unofficial channels.
Nepal’s police and inland revenue department say the illegal shipment was ultimately destined for neighboring India, where seizures of smuggled gold, including from its closest neighbors, have reportedly soared this year.

India’s rupee plummeted the most in two decades to a record as a surge in oil prices threatened to worsen the current account and push the economy toward its biggest crisis since 1991.

“The market is in a super-panic stage,” said Samir Lodha, senior partner at QuantArt Market Solutions Pvt. in Mumbai. The rupee slumped 3.9 percent to an unprecedented 68.8450 per dollar in Mumbai, the biggest drop since 1993, according to prices from local banks compiled by Bloomberg. The currency lost 13.7 percent this quarter and 20.1 percent this year, headed for the worst annual loss since a balance of payments crisis in 1991 forced the nation to pawn gold to pay for imports.
“Quite clearly, there is panic in the market which is exacerbated by the fact that the measures invoked so far have delivered limited results,” Madan Sabnavis and Anuja Jaripatke, economists at Credit Analysis & Research Ltd. (CARE) in Mumbai, wrote in a report today. “The Fed meeting in September will provide more clarity on currencies, and till then it is unlikely that the rupee will stabilize.”