Economic Highlights

New Delhi, 11 October, 2013 

CAD Remains High

OIL, GOLD FIGURES FUDGED

By Shivaji Sarkar

It is time the country starts getting wary of official import figures. The latest September ones are quite a puzzle. These say gold imports have drastically reduced and oil imports have fallen by 6 per cent. In reality, this is an attempt at window-dressing to cover up the high current account deficit (CAD).

Apparently, gold imports through official channels have fallen as the import duty has been increased to almost 10 per cent of the value. However, gold arrivals have not fallen. The yellow metal is pouring in from all sides – ports, airports, Pakistan, Sri Lanka, Bangladesh and Nepal. The Government’s glee about falling current account deficit needs to be taken with a pinch of salt.

Additionally, the hawala trade has also got a boost. These are indicators that the Government is unable to manage it. Obviously, the Commerce Ministry is not stating the truth. Besides, oil imports as per Petroleum Ministry figures are coming down every month since April 2013. Some of its statements say that oil companies are importing only 75 per cent of the “need”. It should be good news but it isn’t.  

Normally, such cut in imports and consequent supply should have created long queues at petrol pumps and raised a hue and cry all over. None of the bulk consumers be it railways, airlines, State transport corporations or goods transporters have reduced consumption. So how is the fall in imports keeping the wheels on the move? It raises a moot question. If the country’s needs are being met at that reduced level, the earlier imports were definitely at an inflated level.

This is not the first quarter in which oil import volumes have fallen in recent years. It’s remarkable that apart from these blips, oil import volumes kept on rising in spite of a drastically slowing economy. But oil import volumes stabilized in the January-March quarter and then fell during the July-September quarter.

So even if it has fallen it remains at a high of 41 billion barrels up from 25.3 billion barrels in April 2010. Possibly the petroleum companies are still concealing many facts. If the latest trend, as they claim is factual, then the import at such a high level is simply unwarranted. It requires a proper audit of import figures and the actual requirement in the country.

This apart, petroleum companies have not been transparent on the issue of pricing and the so called “under recoveries”. The Finance Ministry had raised many questions on these issues for the past over three years, which remain unresolved. The profits of the companies in all these years have been soaring. They are also bleeding the Government by forcing it to pledge oil bonds.

Neither oil nor gold situation should be a comfort. Since 1991 gold was being imported on zero duty. It had virtually put an end to smuggling and reduced the cost on policing. As per the Commerce Ministry in May imports were at 62 tonnes, which in June have halved and fallen further in the recent months. This is also the time when arrivals through “illegal” routes increased.

During the past over a year, with customs duties being increased and other RBI curbs being imposed, gold smuggling has doubled in the April-August period. Jewellery industry players and veteran bullion analysts say since April, nearly 60 tonnes of gold has entered the Indian market through smuggling compared to 30-32 tonnes in the corresponding period of the previous year.

The margin for bringing gold into India through unofficial channels has increased. With the RBI linking imports to exports, it added to the confusion bringing official imports to virtually a halt giving enough room to smugglers to have a field day.

In July, a huge quantity was smuggled in from Pakistan as it allows free imports. Later avenues for smuggling have opened up from Bangladesh. Fishermen from Sri Lanka bring it in their boats to dump it on other boats or the shores. Nepal has also emerged as another route. Gold arrives in Gujarat, Rajasthan, Punjab, West Bengal, Tripura, Assam and other North-East States. So it does on western coast in Maharashtra, Karnataka, Kerala and Tamil Nadu.

In the April-June quarter of this financial year, seizure of smuggled gold hit Rs 59.82 crore - an increase of 365 per cent over the same period a year ago. Seizures in 2012-13 had doubled from the previous year to Rs 99.34 crore. This year, authorities expect it to rise to around Rs 250 crore.

Recently, a counselor of a foreign embassy was caught at Delhi airport with 109 gold stapler pins on his jacket. Weighing 6 grams each, the pins were 754 grams of gold, worth Rs 20 lakh. In a similar incident, a counselor-level diplomat travelling from Dubai was nabbed at the airport carrying 37 kg of jewellery worth Rs 10 crore.

A few weeks ago, a fishing boat from Sri Lanka landed at Kodikkarai in Tamil Nadu with gold bars weighing over 18 kg. The gold was to be sold in nearby Chennai. Two separate vehicles carrying the gold to Chennai were intercepted at Shirkazhi in Nagapattinam district and Thiruthuraipoondi in Tiruvarur district. The seized gold had the seal of a Swiss bank. Five people, including a local politician, were arrested. They were offered a commission of Rs 3 lakh to carry the gold bars to Chennai.

A large portion of the gold is now smuggled into India by human carriers in flights from West Asia. Most of the carriers are either poor people who agree to smuggle the gold in small quantities (2 to 4 kg) for a commission or Indian labourers who are happy just to get their trip back home sponsored.

Penalty can be four to five times of the seized value but normally only 20-30 per cent is levied. Smugglers get the seized gold picked up by paying the penalty. If not claimed by anybody, the gold is auctioned off.

So to say that this saves foreign exchange is a misnomer. The Commerce Ministry’s CAD figures window dress a lot and there is no saving on any count. India needs to look at the official figures with circumspection. With elections round the corner such attempts are likely to continue. Who will bell the cat? --- INFA

(Copyright, India News and Feature Alliance)