New Delhi, Jan 27,2023: Think Change Forum (TCF), an independent think tank dedicated to generating new ideas and finding solutions for navigating the post-pandemic world, on Friday urged the government to take up a campaign against smuggling and highlight it on the world stage so that it receives adequate international recognition and action.

To make it an important part of the global narrative, different wings of the government – the Ministry of External Affairs, the Ministry of Finance and the Ministry of Corporate Affairs should work in tandem, with Ministry of Finance as the nodal agency. In this regard, the forum has made representations to the Ministry of External Affairs and the Finance Minister.

The Illicit Trade Group, an interdisciplinary research group at the University of Groningen, Netherlands defines smuggling as a form of illicit trade that displaces licit goods through counterfeiting (illegally produced goods) and contrabands (smuggled legitimate goods produced and bought in a low tax country and sold without paying taxes in another country with high taxes and regulation on the particular product).

Smuggling has helped developed economies as their legally produced goods enter developing countries as contraband.

As per WHO (World Health Organization), every year, governments lose $40.5 billion in revenue from the illicit trade of tobacco products. This trade is more prominent in Low and Middle-Income countries than in High-Income countries. Eliminating illicit trade would gain governments at least $31.3 billion every year, and from 2030 onwards more than 164,000 premature deaths every year would be avoided, the vast majority in these in Middle-and Low-Income countries.

According to Ranganath Tannir, Secretary General, Think Change Forum, “It is a curious case where we have international days dedicated to most big and small issues, but there is no International Anti-Smuggling Day so far. This is because smuggling is a bigger challenge for the developing countries rather than the developed ones. Global brand owners’, majority of whom originate from the developed world, are more concerned about counterfeiting than smuggling. This is because smuggling leads to a loss of revenue for the consuming country and an increase of sales for global brand owners, with goods becoming cheaper into the hands of the consumer. India should therefore take a lead in building international consensus around the issue of smuggling.”

“Earlier this month, our Honourable Prime Minister speaking at the 17th Pravasi Bharatiya Divas Convention in Indore said that India’s voice is being heard on the global stage and people look up to India with hope and curiosity. Highlighting smuggling on the global stage is an opportunity for India to further consolidate its position as a world leader, become the voice of developing countries and protect its economy at the same time,” he added.

TCF has suggested a roadmap for the government to take up the issue of smuggling on the world stage. The Ministry of External Affairs should take the lead in the next UN General Assembly (UNGA) session to put smuggling on the agenda. It is the right time to start working as the General Assembly’s regular session begins each year in September and goes onto December and if need be resumes in January.

The preliminary list of items to be included in the provisional agenda of the General Assembly is issued early in the year, usually in February so the Ministry has to start work immediately. India should be able to forge together the interests of similar developing countries such as Indonesia, Brazil and the Phillipines which are facing the impact of smuggling. Apart from the UN, India can also highlight smuggling in other global platforms like the upcoming G20 under the presidency of India.

The Forum has also urged the Indian Government to propose an International Anti-Smuggling day to the UNGA and garner the support of other nations so that the General Assembly can adopt a resolution to establish the day. This will become a rallying point to create more global awareness and action on the issue of smuggling.

While some estimates on the magnitude of smuggling are available but due to its secretive nature and lack of verifiable data, the Ministry of Finance needs to take the lead and collate the data on the depth of the issue and reveal the actual impact smuggling is having on the Indian economy. This should also include downstream economic impact on allied industries as well. This data should be released every year as part of The Economic Survey, as a pre-budget ritual.

The survey should also provide information on the magnitude of smuggling through verified facts and figures and provide the actual impact that it is having on the economy in terms of metrics such as tax loss, job loss, impact on health, rise in crime, among others. This would guide the Finance Ministry’s priorities and actions for the upcoming financial year to mitigate the impacts of smuggling.

TCF recommends that the Corporate Affairs Ministry should hold brand owners responsible if their genuine products are found to enter India illegally. Replicating the idea of the polluter pays principle, the corporate affairs ministry needs to penalise such brand owners.

It is a global practice where many famous international brands establish meager legal operations in developing countries like India with the sole objective of publicising the brand for creating demand while the products are sold through international traders and distributors instead of direct imports by the subsidiary.

A list of goods or products with disproportionately high consumption in the local market as compared to legal imports should be published regularly along with the names of brands.

A FICCI CASCADE (Committee Against Smuggling and Counterfeit Activities Destroying the Economy) report has done so for five categories of goods and estimated the illicit market in India to be an astounding Rs 2.60 lakh crores as of 2019-20.

According to this, the estimated tax loss to the government is a staggering Rs 58,521 crore. This list of five needs to be expanded and authorities should be on the lookout for both counterfeit and contraband smuggled goods.