Gold smuggling from Gulf countries, Nepal, and Bangladesh has surged due to higher import duties.
Experts in the bullion trade believe that whenever the government increases the import duty on gold, the smuggling business begins to expand. High duties make it expensive to import gold legally, creating a significant opportunity for smugglers.
This situation presents a dual challenge for the government. On one hand, it suffers a massive loss of revenue, and on the other, the flow of black money into the country's economy increases.
According to Surendra Mehta, National Secretary of the India Bullion and Jewellers Association (IBJA), passengers coming from Gulf countries are a crucial link in this smuggling game.
"Most of the gold coming through informal channels originates from Gulf countries. Many passengers wear the gold as jewelry and manage to evade inspection."
These passengers take advantage of the green channel at the airport and exit without any declaration, making it easy to deceive customs officials.
The economics of smuggled gold are quite startling. A bullion trader from Mumbai explained that the landed cost of one kilogram of legally imported gold is approximately ₹1.65 crore.
In this, the actual price of gold is about ₹1.40 crore, while the remaining ₹25 lakh is paid as import duty and GST. This hefty tax opens the door to profits for smugglers.
Smugglers sell illegally brought gold at a price ₹8 to ₹10 lakh cheaper per kg than the market rate. Despite this significant discount, they easily make a profit of ₹15 to ₹17 lakh per kg from the ₹25 lakh saved on taxes. This huge profit makes this illicit business even more attractive.
While previously only Gulf countries were notorious for smuggling, Nepal and Bangladesh have now emerged as new and important routes. The porous borders of these countries make the smugglers' job even easier.
States like Maharashtra, Tamil Nadu, Gujarat, and West Bengal are reporting the highest number of smuggling cases. Recently, gold worth ₹4.19 crore was seized from two passengers arriving from Dubai at Mumbai's Chhatrapati Shivaji Maharaj International Airport.
Kavita Chacko, Head of Research at the World Gold Council, says that once a smuggling network is established, it becomes extremely difficult to dismantle. These networks are so robust that the flow of illegal gold continues even if the duty remains stable.
Data from the World Gold Council confirms the direct link between import duties and smuggling. Between 2013 and 2026, whenever the duty was increased, the import of illegal gold also rose.
For example, when the import duty was increased by 4% in 2013, smuggled gold surged from about 10 tonnes to nearly 70 tonnes. This shows how significantly tax policies can impact the grey market.
Meanwhile, gold prices saw a decline in the domestic futures market. On Wednesday, gold futures on the MCX exchange were trading at ₹1,58,900 per 10 grams, down by 0.28%. Silver also registered a fall of 0.93%.
Overall, while the increased import duty on gold may be intended to boost government revenue, it is inadvertently promoting a parallel illegal economy. This not only results in losses to the national exchequer but also poses a serious challenge to the country's internal security.
*Edit with Google AI Studio
जोगेन्द्र सिंह शेखावत
