Of the total gold smuggled during these years, 113 mt worth over Rs 5,148.28 crore was smuggled in 1997 alone. The numbers were definitely lower in the pre-liberalised regime. Thus, in 1996 it was 109 mt (Rs 5,658.19 crore), in 1995 128 mt (Rs 6,142.72 crore), and in 1994 it was 115 mt (Rs 5,349.8 crore).

Top-level industry sources, however, point out that though the profit margin has declined considerably gold smuggling continues to be profitable. How? According to sources, there exists a clear nexus between the smugglers and customs department. The new modus operandi is to use NRI route to bring in the gold.

The carrier, with NRIstatus and working for the Gulf-based syndicates, brings in double the permissible quantity and declares half the quantity of gold brought in and pays the duty on that quantity at Rs 22 per gm while the balance is quietly smuggled out of the airport. Thus, if one were to calculate the import duty loss to the exchequer on 465 mt of smuggled gold it works out to a whopping Rs 1,023 crore.

Add to this, the country losing valuable foreign exchange as most of smuggling transactions are settled through havala route. The rate differential between the domestic and international markets is because of import duty levy of Rs 22 per gm.

This duty has been hiked further to Rs 25 per gm in the latest budget What has also dented government's revenue further is its policy of shifting gold import to open general licence (OGL) category in addition to special import licence (SIL) category. On this front, the exchequer has lost heavily because SIL was one of the major channel of gold import. Both gold and silver are allowedto be imported under SILs. However, in the second half of 1997, silver imports under SILs declined considerably and the SILs were used for importing gold, says the survey.

These SILs were issued as bonus to the recognised exporters like super star, star trading and export houses for their respective export performances.

This, in other words, meant earnings in foreign exchange through exports.

These recognised export houses could sell their respective SILs for a premium ranging between 2 per cent and 14 per cent. And most of these were used for importing gold.

With the introduction of OGL imports by banks in 1997, against which banks were allowed to pay duty in rupee, the government not only diluted the export promotion scheme but also lost foreign exchange. On total import of Rs 61 crore in 1997 alone, the centre could not earn foreign exchange worth $ 35 million as the duty was paid in rupee.