The Kerala Gold Scam

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Kerala is obsessed with communism, gods and gold. Although the existence of the first two is up for debate, gold is definitely one of the most real things to circulate Kerala through its legal supply chains and illegal hawala rackets. Although it is usually not a surprise to spot gold busts in Kerala’s daily news, what is surprising about this particular one is the alleged involvement of the UAE Consulate General in Thiruvananthapuram, Kerala CM Pinarayi Vijayan’s former principal secretary M Sivasankar, and Swapna Suresh, an influential figure who shortly emerged as the “evil lady boss” in Kerala.

The chronology

On June 30th, acting on an anonymous tip, the Customs officials of Trivandrum International Airport seized diplomatic baggage addressed to the UAE Consulate General situated in Thiruvananthapuram, on the suspicion of smuggling gold. Since the bag came under diplomatic immunity, opening it was delayed until the due procedures were completed, especially after a call claiming to be from the Secretary of the Consulate General of the UAE Consulate asked the Customs to release the baggage.

In presence of the UAE Consulate General and a senior officer from the high commissioner’s office in Delhi on July 5th, the bag was opened and 30kg gold worth ₹14.82 crores was found with plumbing material. It was immediately seized by the Central Board of Indirect Taxes and Customs. It led the National Investigation Agency (NIA) to estimate a damage worth over ₹500 crore to the Indian economy in the past one and a half years.

The investigation then led to multiple arrests such as that of Faisal Fareed (who was revealed to have masterminded smuggling over 230kg gold into Kerala through diplomatic baggage), Swapna Suresh and 18 others. 

Swapna Suresh rose to infamy when the NIA arrested her on July 24 and her links with the CMO through the Chief Minister’s former principal secretary M Sivasankar were disclosed. It is also alleged that she aided in forging Consulate documents to acquire diplomatic immunity for the gold smuggled from the Gulf. It was also known that she went into hiding a day before the Customs decided to open the diplomatic bag.

The causes

Gold smuggling in India was rampant until liberalisation, which repealed the Gold Control Act of 1968 that prohibited the import of gold except for jewellery.

Gold smuggling in Kerala is nothing new. In fiscal year 2019-20, the Commiserate of Customs (Preventive) seized about 540kg of the metal worth Rs 187 crore in the state. Around 802 cases related to gold smuggling were registered in the state in 2019-20. The modus operandi (MO) of these smugglers — couriers or carriers, mostly air passengers attracted by money and free tickets — to move the metal. 

So, why is gold smuggling so prevalent in the state? The infamous Malayali gold smuggler is the result of a misguided gold policy which dates back to the 1960s. In 1962, the Gold (Control) Act, brought out by Morarji Desai, the then Union finance minister, recalled all gold loans extended by banks and banned forward trading of gold. The next year there was an amendment – production of jewellery above 14 carat fineness was banned. In 1968 came the biggest blow to the Indian gold consumer in the form of another amendment which banned people from owning gold bars and coins. Even the licensed dealer couldn’t hold more than 2kg of gold. 

These steps, taken over a period of six years, gave rise to powerful smuggling and hawala rackets in the country. The former brought in the gold mainly by land and air and the latter helped them generate revenue through unofficial routes. A major portion of the gold trade in India moved to the black market, and this continued for nearly three decades. Things started to change when India repealed the Gold (Control) Act in 1990 and the import of gold was liberalised in 1997. 

The controversy

This sparked a massive political controversy in Kerala as adversaries who act as part-time allies in Kerala, the BJP and Congress, began alleging the involvement of the CMO and demanded that CM Pinarayi Vijayan resign from his post. 

BJP state president K Surendran claimed that “The Chief Minister’s Principal Secretary has been a frequent visitor at Swapna’s residence. She had a criminal background in the past. Such a person was appointed in the IT Department with the assent of the CMO,’’ he told the media. He also observed a week-long fast while demanding the CM’s resignation. The CM simply dismissed these claims as “rubbish”.

On the other hand, the Congress-led UDF brought a No Confidence motion to the Assembly which was eventually defeated. Congress leader Ramesh Chennithala of the Congress said the Chief Minister should not remain silent on the issue. “Misuse of diplomatic immunity has international ramifications. For the first time, the office of Kerala CM has come under the shadow of such a serious allegation. Names of two senior officials of CMO are being linked in the media. The whole issue needs a CBI probe,’’ he said.

Meanwhile, the CM took charge of his party members and went on to defend them. He went on to say that “Some people and organisations are trying to create a law and order situation in the state.” He also alleged that the Enforcement Directorate and other Central agencies were unjustly interrogating members of his government.

Is the Kerala Gold Scam a part of a bigger conspiracy?

Speculations are being made that the Kerala gold smuggling case may have been part of a systematic conspiracy to destabilise India’s economy.

Two parallel investigations in the case are currently underway. While the Customs Department is investigating the violation of the Customs Act, the NIA is looking at the possibility of a larger conspiracy – the purpose of the gold smugglers, whether it was for personal benefits or to “destabilise India”.

Satvik Tripathi, Writer

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