Mona ka Sona is thriving: gold smuggling may see 40% jump

In 1970s a typical Bollywood villain was a rich gold smuggler-a well-dressed, moustachioed and pipe smoking evil businessman. On the one hand, he flaunted his girlfriend Mona and on the other, managed the smuggling business of Sona.

Over a period of time, gold smuggling in the reel life has almost disappeared insignificant, with newer arms and terrorism took over as villains. In the real life, however, the smuggling continues. In fact, it is thriving now.

According to a story published in the Business Standard today, smuggling of the yellow metal is likely to rise 40 percent this year.

The high import duty, local taxes and restrictions on imports are resulting in higher import of gold through illegal channels, the report said. Last year, smuggling accounted for 10 percent, or 102 tonnes, of total gold imported into the country, the report said citing Thomson Reuters GFMS. The consultancy, which compiles data for the Wold Gold Council, estimates the smuggling to rise 40 percent to 140 tonnes this year.

Last year, the government, in its bid to reign in a widening current account deficit, raised import duty on gold by four percentage points to 6 percent. It also changed the method of calculating to ad-valorem. The RBI also asked banks to import gold for domestic sales, on consignment basis. All these curbs brought down gold imports significantly, while already imported gold was sold at a premium.

The BS report quoted Bachhraj Bamalva, former president of the All India Gems and Jewellery Federation as saying that small jwellers are finding it difficult to get gold even if they are ready to pay high premium of Rs 500-600/10g.

In short, the import duty, value-added tax and higher premiums would lead to an increase in smuggling of gold.

Almost for 14 years, the smuggling of gold was on back burner after gold trade was liberalised. But now, payments for gold is being made through unofficial channels like havala.

Looks like the smuggling activities are only going to increase in times to come. We just hope that the great Indian Sona smuggling villain does not make a come back on the silver screen too.

Read whole _Business Standard_story here.