Tuesday, August 20, 2013

Diamond jeweller turns smuggler as India gold prices rise

Mumbai: In January, jeweller Vihari Sheth was publicizing a ritzy new line of diamond-encrusted designs. Last week, she was arrested at Mumbai airport with nearly $400,000 of gold jewellery in her underwear and on her person.
The 27-year-old has a store in Singapore and is married to a director of Mumbai-based Siyaram Silk Mills Ltd, a suit maker that is a household name in the country. She is suspected of smuggling to supply a relative’s stores in Mumbai, according to court documents examined by Bloomberg.

Her arrest offers a glimpse into how even the wealthy may be joining small jewellers and organized gangs to skirt new government taxes on bullion imports that have made gold about 9% more expensive in Indian stores.
“The financial incentive to smuggle and bring in gold illegally is just increasing,” said Victor Thianpiriya, commodities analyst at Australia and New Zealand Banking. “The government’s actions have created a shortage of gold in the domestic market,” he said.

India is the world’s largest buyer of gold and the government has doubled taxes on bullion imports this year to shrink a ballooning trade deficit and end a slide in the rupee. Gold is the country’s second largest import after oil. The precious metal cost about $4,185 more, or 9% extra, per kg in Mumbai last week compared to Dubai or Singapore after the taxes. That means anyone who buys cheaply overseas and then evades the taxes can sell at a profit.
“The government’s curbs are fueling a huge gap between the supply and demand for gold,” said Hundia, the former president of the Bombay Bullion Association. “Illegal traffickers of the yellow metal are trying to fill at least part of that gap.”

At Mumbai airport, customs agents confiscated gold worth Rs.9.3 crore from April to June, almost as much they nabbed in the whole of the last year. Airports constitute only a tiny fraction of the gold entering the country illegally: The bulk of the metal smuggled into India comes by road from Nepal and Bangladesh, said Gnanasekar Thiagarajan, director of Mumbai-based commodities consultant Commtrendz Risk Management Services.

Government agencies across the country have so far seized about 160kg of gold from people trying to bring it in illegally in the last four months, according to a senior revenue official, who declined to be named as he isn’t allowed to speak to the media.