Hidden Talents of Gold Smugglers

S Sanandakumar & PK Krishnakumar, ET Bureau | 27 Jul, 2014, 10.22AM IST 

Restrictions on gold import: Smugglers resort to ingenious methods to sneak in the yellow metal 


Spare a thought for the person who tries to sneak in a brick of gold by hiding it in the rectum. You've heard of drug mules, people who clandestinely transport drugs at greatrisk — they have to evade strict laws, including the death penalty in some countries, and fatality as pouches can explode in the stomach. The odds against gold mules are more favourable from these standpoints — the maximum punishment is seven years of jail and there have been no known fatalities — but are equally challenging.

Concealment in body cavities is just one of the many ingenious methods people have adopted to slip in gold through airports in Kerala. In some cases, gold was ground to powder, used as chocolate toppings and carried in sealed chocolate boxes. There was the odd case where gold was brought in liquid form. Camouflage in appliances and in personal products like shoes and belts is another popular method.

"There was also an interesting case in which gold was hidden inside the metallic rod of a trolley bag," says SAS Navas, deputy commissioner, Customs, Kochi International Airport.

Rewarding Task

The task of gold smuggling, despite the risks and requirement of specialization, always had many takers. The reason was simple: rewards trumped risks. That was before 1991. The government's decision to ease gold import policies rendered gold smugglers jobless. As the India growth story unfolded over the next two decades, the "services" of gold smugglers were no longer required.

But that has changed in recent months. The government's decision to hike the duty on imported gold to 10% last year — "to make it a little more expensive", in the words of the then finance minister P Chidambaram — took some sheen off the yellow metal. Indians love gold, so much that demand has always outstripped indigenous production. That means the country has to import its requirement. But thanks to the duty spike, importing became unattractive and consequently restricted supplies, at least the legal shipments.

A spurt in gold smuggling into the country, particularly into Kerala, seen from this context, was inevitable (see Gold smuggling...). Kerala may not top the gold consumption scales in India, but the pervasive infusion of the metal into the social and cultural sphere in the state is unique. In Kerala, gold is synonymous with marriages because dowry is largely made of gold jewellery.

Spurt in Activity

Any discussion on gold smuggling must be seen from this perspective. While the increasing number of seizures at the airports is an indicator of the spike in smuggling, truth is the seizures do not constitute even 10% of the smuggled gold, according to experts. The methods listed are of course the ones authorities are aware of or have stumbled on, but there are plenty of cases that remain clandestine.

"We have found that the gold smugglers of the yesteryears are being recruited again by the smuggling racket," says Navas. According to him, the people who bring gold are experts in concealment. And after all these years it remains a lucrative business. B Girirajan, president of the All Kerala Gold and Silver Merchants' Association, says the hike in duty increased the profitability of the smugglers. For example, on Friday's price of around Rs 2,600 per gm the customs duty would be 10%. "So for 1 kg of smuggled gold the margin would be roughly Rs 2 lakh", he explains. Earlier there was a sharp difference in gold prices between the domestic and the Middle East markets making smuggling a lucrative affair.


The profit margin for 1 kg of imported gold was around Rs 3-3.5 lakh earlier, he says. But now with the supplies improving, prices have seen a decline in the local market. "The price difference has narrowed and the margins have also fallen to Rs 2 lakh", he said. Agents who transport gold receive Rs 50,000- 1 lakh plus flight fare."

Earlier, non-resident Indians (NRIs) who had spent six months abroad could bring 1 kg of gold after paying duty in foreign exchange. This led to many people who returned to the country turning couriers. It did not last long.

Tough Restrictions

The government notified that the couriers should reveal their sources of forex, resulting in a decline in gold imports. The government also brought in restrictions, insisting that 20% of the imported gold should be exported before further imports can be made.

The new rules have further tightened supplies, giving gold smuggling a major boost. For instance, gold imports through legal channel at the Kozhikode airport rose from 25 kg in 2012-13 to 4,561 kg in 2013-14. But imports have since dropped to negligible quantities. Smuggling typically increases when restrictions are imposed on imports. MK Saveen, customs superintendent, Kozhikode airport says it is actually valid passport holders who turn out to be couriers. They are usually offered free tickets and commissions for their services, according to him.

Girirajan says the smuggled gold usually finds its way to the unregistered jewellers in Kerala. But there is a detour of sorts. A large part of the gold that arrives is taken to Chennai or Bangalore because prices (the per gram rate) are higher in these cities compared with Kerala. It is the recycled gold that comes back to Kerala.


According to officials at the Kozhikode airport, the seizure of smuggled gold has crossed 20 kg in the current fiscal. The seizure is worth Rs 5.8 crore. In one case, the airport authorities found that gold has been brought in after turning it into thin foils. There were also attempts to bring it in the form of ribbons and hide it in marker pens. Gold wires have been found taped in suitcases. Attempts to bring in gold after mixing it with grease were also detected by Customs officials.

Though the main source of smuggled gold is still Dubai, of late, large shipments are also arriving from Singapore and Malaysia. The smugglers hail from Kerala, Tamil Nadu and Sri Lanka. Until the 1990s, there were only four international airports in India (the fifth opened in Thiruvananthapuram). The commissioning of new international airports at different parts of the country has given the smugglers a fillip, according to authorities.

Huge Network

A higher vigil by Customs department officials does not mean that imports will drop, says Navas. On the contrary, gold smuggling will rise substantially to cover the losses. "It is a huge network of suppliers, couriers and hawala money dealers," he says. When authorities turn the heat on one entry point, smugglers simply turn to another, according to him.


To cite an example, look at the airports in Kochi and Kozhikode. Customs officials have stepped up vigilance against illegal transit of gold in these airports. This has forced smugglers to try their luck at neighbouring airports.

A case in point is the Hyderabad airport. A year ago, there were hardly any incidents of gold smuggling in that airport. Today, the situation couldn't be more different. "Last month, we caught around 25 kg of gold which was being smuggled. Some involve even petty cases — small quantities — which invite a penalty in the form of duty,'' says A Dhileepan, assistant commissioner of Customs, Rajiv Gandhi International Airport in Hyderabad. The majority of the people involved in the gold smuggling racket hail from neighbouring states.

That is not to suggest that illegal gold shipments into Kerala are on the wane. Customs officials seized 7 kg of gold from smugglers last month at the Thiruvananthapuram International Airport. A senior Customs officer says this may represent only about 20-30% of what is being smuggled through the airport. Nevertheless, compared with seizures in the previous months, this represented a huge increase. The recoveries from smugglers used to be around 1 kg of gold a month earlier.

Imaginative Lot

The stepped-up vigil at airports has only forced the smugglers to resort to become more resourceful. "Recently, we caught a man carrying several padded brassieres with gold coated linings, hooks and rings that were painted black. Around 450 gm of gold was recovered from the undergarments,'' says a senior Customs officer at the Thiruvananthapuram airport.

In another incident, a man tried to smuggle gold through this teeth. He extracted two molars and fitted two gold teeth, each with 220 gm of gold. The popular means of clandestine transport are trolley bags, buckles, juice makers, big cartons and the like.

As long as the restrictions on import of gold remain, there will be no stopping this clandestine flow of the metal, according to authorities. Until then, airports in the country will remain a hotbed of illegal transport of gold, even if it means the inconvenience of having to carry gold in the rectum. Now, spare a thought for the airport official who has to search for gold in the unlikeliest of places.