Dubai: What does gold mean for Indians? Clearly, It’s become more than just a need.

It has for years fueled a multi-billion dollar “parallel” industry, where gold – mostly in the form of bars and coins – are sent with passengers from the Gulf into Indian airports in the hope they will be able to evade all the checks. And then these bars and coins are passed on to middlemen and other conduits before they finally end up with the actual buyer.

This movement of gold is now getting a check… and it will burn deep. India has now launched a far-reaching investigation into gold smuggling, first centred on the airports in the south Indian state of Kerala and, then, likely to be extended to other entry points into India. Because it’s not just being treated as a financial crime, but also the possibility that the gold being brought in without any papers is actually funding terror activities against the Indian state.

Even then, some people in the “business” still haven’t got that message.

Despite intense customs checks on all incoming flights into Kerala over the last 10 days, three passengers on repatriation flights from the UAE still wanted to try their luck on Monday. And ended up getting caught for 1.5 kilograms of gold. The only thing they can look forward to for their efforts are years of legal hassles and with the real risk of doing jail time.

And for what? These three would have been the cheapest links in the chain, and would have been paid between 20,000-50,000 rupees for their troubles. But for the kind of trouble they are in right now, that money wouldn’t get them far.

Industry sources say that the repatriation and chartered flights would have been the perfect cover to get gold moving into India, especially as airport authorities were more intent on maintaining health and safety protocols. “There would have been loose monitoring of baggage and there were other technical constraints,” said an official at the Thiruvananthapuram airport.

Getting gold into India from the Gulf states by avoiding customs checks had been going on for decades – but right now, it can prove extremely hazardous to health. More so as the issue has escalated into a full-blown international crisis after Indian investigation agencies on Monday confirmed that there were multiple instances of gold being brought into Kerala using forged seals of the UAE consulate in Thiruvananthapuram, the state capital.

They were caught for a consignment of 30 kilos and with a street value of Dh6 million plus. But it’s only part of 100 kilos and over that got channeled into India through this particular way.

Some of the perpetrators of this particular racket are in custody, and more will come under the investigators’ net. One of those in custody is a former UAE resident, Swapna Suresh, and named as a principal link in getting in gold using the cover of the UAE consulate.

The UAE authorities have also launched a simultaneous investigation into the matter at this end, and thus putting a squeeze on all activity to move gold from here to India.

According to Joy Alukkas, Chairman of the gold and jewellery network that bears his name, is not too surprised by the turn of events.

“For far too long, the “parallel” trade in gold was allowed to flourish in India,” he said. “And it was happening because with Indians, gold is a way of life. There may be declines in consumption patterns at some points, but gold will never disappear as a choice. No wedding is complete without it.

“It’s in the India’s DNA – and that’s why I don’t buy the argument that young Indians will not favour gold.

“But the gold industry in India needs to be fixed up – too much of it is still in the urorganised sector, and that’s where the problems are. I hope the exposure of the latest smuggling racket will not be limited to a political drama.”

The retail price of gold in India carries a 12 per cent import duty, and that in short explains why bringing in gold from the Gulf offers smugglers such a lucrative payoff.

The spike in smuggling attempts is taking place even with gold prices now at their highest point since 2011. It was recently that gold got past $1,800 an ounce, once again proving its status as a safe haven asset.

“That 12 per cent creates an immediate cushion – even if the smuggled gold is sold at a 6 per cent margin, it’s still a windfall,” said a leading jewellery retailer here. “It’s an organized racket – the gold brought into India already has a confirmed buyer. No one is going to take these kind of risks, bring the gold into the country and then wait for a buyer to turn up.

“Once it reaches the buyer, it’s shape and form can be changed to suit any purpose.”

What has caught India’s investigation agencies’ attention is the use of smuggled gold as a currency by itself. Transactions could be sealed by dealing in gold bars and eschewing cash altogether. That would have meant the removal of bank transfers and such sundry details.

The NIA (National Investigation Agency) is looking into whether gold as currency was being used to fund possible terror-related activities.

Apart from the NIA, some of India’s top investigative agencies are on the trail – their aim is to home in on the actual buyers of the smuggled gold.

“The people who get caught at the airports are just the mules – they take on most of the upfront risk,” said a senior police officer with the Kerala state government. “The central agencies now have a wide mandate to pursue both the source of the gold as well as potential end-users.

“That’s what’s different with this investigation – if all goes well, it will not stop with capturing the in-betweeners.”

Gold industry sources say that a combination of higher customs’ scrutiny and sky-high prices of gold will mean a marked decline in pushing gold into India through parallel routes. But for how long?

“As long as demand exists in India, someone or the other will try to get it into the country and sell below the official rate,” said a jewellery retailer. “Indians’ craze for gold will not end.”