Smuggling racket thrusts Kerala’s insatiable love for gold back into spotlight

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For months, Kerala, like the rest of the world, was fixated on COVID-19. On July 5, around 3.30 pm, an event occurred that would give the nearly 3.5 crore Malayalees in the southern state another topic, albeit a familiar one, to be fixated on — gold.

That was when the Customs department seized a 30 kg gold consignment from a piece of diplomatic baggage at the Thiruvananthapuram airport. It belonged to a racket involving a powerful political lobbyist who allegedly enjoyed the backing of the state’s principal secretary and the political leadership.

Since then the state’s political scene has been abuzz with allegations and counter-allegations. Local media is occupied 24x7 to sniff out even the minutest details of the case. That the chief minister’s office is under the scanner for its alleged involvement has added an extra political zing to the case.

The case put the focus back on Kerala’s absurd obsession with gold, tethered this time to an international gold smuggling racket operating from the Middle East, where millions of Malayalees are employed. As details of smuggling emerged, people were shocked and riveted in equal measure.

The case

At the heart of the matter is a Customs seizure of 30 kg gold valued around Rs 15 crore at the Thiruvanathapuram International airport on July 5. What made this confiscation special was the method used for smuggling.

The smuggled gold was seized from the diplomatic baggage, allegedly perpetrated by a group involving former consulate employee, P Sarith Kumar, and political lobbyist, Swapana Suresh, and aided by powerful bureaucrats.

Instantly, the case commanded high-profile nature. The alleged personal relations of M Sivasankar, principal secretary and head of IT department with Swpana Suresh opened up a pandora’s box for the Pinarayi Vijayan-led LDF government.

A controversy erupted soon surrounding the involvement of Chief Minister’s office in aiding Swapna Suresh in executing the smuggling. The National Investigative Agency (NIA) registered a case and a probe is on. The opposition parties have demanded the resignation of Vijayan for his close aide’s alleged connections with Swapna Suresh, a former employee of the UAE consulate who was later hired by a private company to work for a project under the state’s IT department.

Gold smuggling on the rise

The involvement of NIA, the use of diplomatic channels and the links to Vijayan’s office makes this case special. But if one keeps these elements aside, ‘swarnakkadath’ (gold smuggling in Malayalam) cases hardly makes news in Kerala.

Every year, there are numerous cases of gold smuggling reported in the state in different airports. Gold is easy to stock, transport and convert into cash.

And there is a huge demand for the smuggled gold among smaller jewellers who hate the idea of paying duty sourcing the yellow metal through legit channels.

According to reports citing investigative agencies, a least 230 kgs of gold was smuggled to the country using diplomatic channels in 13 consignments in the last one year.

Even after the recent gold smuggling case, there have been three separate gold seizures in Kerala in three different airports. On July 13, Commissionerate of Customs, Cochin, tweeted saying AIU (air intelligence unit) Trivandrum seized 1.455 kg gold in compound form from three passengers travelling from Dubai. The gold was concealed by the passenger inside the waistband and undergarments. Similarly, 2.637 kgs of gold and 2.965 kgs of gold were seized from passengers in Kannur and Kozhikode airports, respectively, in the following days. The Commissionerate of Customs (Preventive), Kochi, seized 540.37 kg of gold worth Rs 187 crore during 2019-20 fiscal, compared to 251 kg in 2018-2019. As many as 802 cases were registered in the state.

If one looks at cases beyond the state, the number is even higher. In November 2019, 30 kg gold worth Rs 11 crore was seized at Tiruchy airport, In July, customs department seized 32 kgs of gold worth Rs 15 crore at the Jaipur airport. These are only a few instances.

Where does smuggled gold go?

A commodity is smuggled only if there is a huge demand for it. Why put your life at risk if it is not worth it? Every time gold is smuggled to the country, the carrier gets Rs 1 lakh to Rs 5 lakh depending on the size of the operation, according to people familiar with the matter.

A walk around Thrissur Swaraj round (the ring road surrounding Vadakkunnatha Temple) will leave one wonderstruck. There are more than a dozen big and small jewellers in just a few kilometres.

Thrissur is the undeclared Gold capital of Kerala. On a normal day, purchases worth crores happen in each of these gold hubs. Big jewellers such as Kalyan, Alukkas and Josco have branches across the states and outside Kerala.

Move beyond the city, you will see thousands of jewellery shops that have mushroomed in recent decades across the state. These are largely concentrated in the central region of the state and particularly in Thrissur district. The number of smaller gold jewellers in Thrissur district itself will be a few hundred, said a local jeweller.

It could be for these jewellers, these small fortune hunters, that the racket, is operating relentlessly, even risking a jail term if caught. The smuggled gold can also be targeting rich individual clients, or to transport to other states on demand.

“Gold is the most manipulated asset. Gold can hide from the eyes of the law, change shape and even remain unseen for centuries beneath your floor. All that is happening now (gold smuggling case) will be short-lived until the next headline lands,” said a small jewellery shop owner.

According to a leading industrialist based in Kerala, a good chunk of the illegal gold that reaches the state escaping scrutiny is consumed by small and medium-sized jewellery units.

“These smaller ones would want to make quick money using smuggled gold so that they can avoid paying taxes,” said the person quoted above. Most of the smuggled gold comes from middle-east countries. The smuggled gold is transported hidden in multiple ways, the most prominent being the use of benamis in small quantities,” he said.

All the individuals spoke to Moneycontrol on the condition of anonymity.

As in the case of any smuggling activity, the idea of gold smuggling is also to avoid duties in regular channels. Gold has an import duty of 12.5 percent, which was raised from 10 per cent earlier. India imports around 800-900 tonnes of gold annually and most of it is consumed by households for marriage purposes.

Malayalee’s love for Gold—power, pride and tradition

Compared to other Indian states, Kerala has a special love for gold jewellery. Much of it is to do with tradition and religious beliefs. In the state, gold is not just an investment avenue but a status symbol for households.

Malayalees want to touch and feel the gold ornament and pass it on from generations to generations. Pledging gold ornaments or selling it for financial necessities is considered as a social stigma. Gold constitutes a lion’s share of the practice of dowry that is rampant in the state.

“This situation has changed and now more people are finding it as a useful asset to generate cash. We have seen business picking up in the recent months,” said George Muthoot, MD of Muthoot Finance, a leading gold loan NBFC.

There is even one special day—Akshaya Tritiya—which is considered auspicious to buy gold. Gold is also considered sacred and is used to adorn temples and religious idols. It is this affinity to the yellow metal that the gold jewellers (and the smugglers) target. Gold is unavoidable in births, weddings and any other special family occasions.

“No matter how big or expensive is your gift is to someone, the glitter of even gram of gold jewellery changes the whole perception,” said Nixon Davis, an employee with one of the biggest gold jewellers in Thrissur. “I see that every day, even during the COVID times,” Davis said.

The Malayali’s love for gold is not vanished even with price skyrocketing but with the COVID-19 scare, sales have taken a hit, say, local jewellers. Gold prices have zoomed this year (MCX Gold prices have surged 23 per cent this year so far).

According to Bloomberg data, India’s total gold consumption stood at 73.85 metric tonnes in the March quarter compared with 125.42 metric tonnes in the year-ago period. Total import value of gold to India since January till June stood at $5.86 billion compared with $31.24 billion in 2019.

Even Gods love Gold here

Not just mortals, even Gods in southern India, especially Kerala, love gold. A Sanskrit shloka puts it thus: “Lord Vishnu likes ornaments, dresses and other finer things/ Lord Shiva likes the sacred bath/ The Yogasana prayer pleases the Sun God/ While a Brahmin is happy with sumptuous food."

God’s love for gold is not confined to scriptures. The  Padmanabhaswamy temple, one of the famous temples in Thiruvanthapuram, is believed to be home to an estimated $22 billion worth gold treasure that is long hidden in the mysterious vaults beneath the sanctum sanctorum of the ancient temple. Numbered with alphabets A to F, the six vaults in the temple are subjects of religious beliefs and endless controversies.

Of the six, five have been accessed already. Vault ‘A’ alone contains treasures worth Rs 1.5 lakh crore. This vault was accessed following a court order in the year 2015. Vault B is yet to be opened. No one knows what’s inside. The temple is controlled by a local royal family that has so far refused to let anyone open the vault arguing that doing this will be against the beliefs and faith of the local Hindu community. Early this month, the royal family received a favourable order from the Supreme Court on its rights to manage the temple.

Many believe the busting of the alleged racket involving Swpana Suresh, M Sivasankar and Pinarayi Vijayan’s office is only the tip of an iceberg—an underworld racket too huge and in existence for too long, run by powerful lobbies comprising bureaucrats, corrupt investigators and politicians. What nurtured the gold smuggling racket so far and will probably keep it alive in future is the undying penchant of Malayalees for the mesmeric glow of the yellow metal.