India, vying with China to be the top buyer of gold, has choked imports to narrow its trade gap and curb the outflow of dollars. The measures included raising the import duty to a record 10 percent and making it mandatory to export as jewellery 20 percent of all gold imports.
But non-residents who have stayed abroad for more than six months can bring in gold on payment of the import duty, irrespective of end use. Such is the demand that some traders are paying passengers' air fares if they agree to carry gold.
About 80 kg of gold was brought in by non-resident Indians (NRIs) this month on a flight from Dubai to Calicut in the southern state of Kerala, said an airport official who did not want to be identified.
Travel agents typically book about 20-30 tickets on a flight on behalf of NRIs, who are accompanied by people working for traders, said Bachhraj Bamalwa, director of the All India Gems and Jewellery Trade Federation, an umbrella body of more than 300,000 jewellers.
"These NRIs pay the duty, so there is nothing illegal about it," Bamalwa said. "These people are mainly labourers from Tamil Nadu or Kerala, who are given a free ticket."
Government officials estimate NRIs have imported a tonne of gold since mid-November, compared to nearly nothing in previous months. That's a boon for jewellers, many of which have been operating at half capacity due to a lack of stock.
Official gold imports fell to about 21 tonnes in November, less than half the monthly requirement, data from metals consultancy Thomson Reuters GFMS showed.
Gold premiums in India rose to a record $160 per ounce on London prices earlier in December.
"To take advantage of high premiums, agents have been increasingly successful in scouting for NRIs, and pay for their partial or full air fare," said Sudheesh Nambiath, an analyst with Thomson Reuters GFMS.
NRIs can save 125,000 to 150,000 rupees ($2,000 to $2,400) per kg on premiums even after paying the import duty, industry officials said.
The import curbs are also encouraging smuggling, with customs officials between April and September seizing nearly double the amount of smuggled gold nabbed in all of 2012, according to the customs department.