Thiruvananthapuram: Keralites' overwhelming affection for gold seems to be emerging as an effective tool to convert black money into legitimate currency.
There perhaps could be no greater relief for a cash-starved Malayali than someone offering him unconditional help to recover the gold he had pawned in a private bank out of desperation.
What if this 'saviour', who had popped out of nowhere like the materialisation of a boon, does not take a commission?
And what if this saviour buys the recovered gold from the poor soul, not at some concessional rate, but at the prevailing market rate? At the moment, Kerala is teeming with such 'saviours'.
So it is not just a Mani Ratnam or a Ram Gopal Varma who have carefully studied Mario Puzo's 'Godfather'.
Some underground gold traders in the state have now put to profitable use the most popular Godfather adage: “Make him an offer he can't refuse.”
And this stunningly attractive offer is made not in secret dingy half-lit rooms, but advertised regularly and openly through classifieds in major dailies.
A parallel gold trade, unofficially estimated to be worth at least Rs 5,000 crore annually or 20 per cent of the mainstream gold trade, is thriving in the state.
It is the tonnes of gold pledged in private finance companies that is finding its way into the warehouses of these underground traders.
Friend in need
The business functions on the basis of the ‘friend in need’ principle. These traders are only too eager to come to the aid of those finding it impossible to cough up the money required to take back their pledged gold.
“We are willing to pay even the interest that has accrued over the months or years the gold was locked in the bank,” one agent told Onmanorama.
They also seem to have a network that can beat the BSNL. When we told the agent that the private bank we had pledged our gold was in Bombrana village in Kasaragod, trying to sound as obscure as possible, he said it was fine.
Less than 10 minutes later we received a call from another person. He wanted to know the way to our place. "Bombrana is just a 30-minute drive for me," the caller said.
He also told us that his 'company' was willing to purchase the re-claimed gold at the prevailing market rate. Intriguingly, profits seemed the least of their concerns.
The question then is why would anyone want to buy up gold in such large quantities if they were not keen on profits. “If you are willing to finance me for free, it can only mean that you have surplus cash,” said R Mohan, former IRS official and now a member of the Kerala Public Expenditure Review Committee. “It is clear that there are people who sit on a stash of black money that they just cannot invest,” he said.
Gold's Midas Touch
These men, guarding a hoard of black money, have seen in gold a different kind of midas touch. It can turn into white all that is black. So first get hold of some gold using ill-gotten wealth, which is what the underground traders do by buying gold from debt-ridden people. No one is asked to account for the gold they have in their possession.
Gold assets need not be shown in a person's IT returns. They need not fear the Wealth Tax either. The Wealth Tax Act 1957, which had put gold above a certain quantity under scrutiny, was repealed in 2015. So the gold so accumulated can be sold to jewellers or any bona fide buyer, without fear of harassment, and passed off as white.
A top official of the state Goods and Services Tax department attributed the sudden surge in underground trade to an accumulation of 'hawala' money in the state. “After demonetisation, it is now virtually impossible to invest this money in any major business activity, be it real estate or even films, without getting noticed,” the official said.
But he also admitted the department's helplessness. “We have no way to net them. They effectively work outside the system. We have also found that the mobile phones the sales executives are using are purchased on fake addresses and even these changed every month,” he said.
