Case Study

Smuggling along the India and Nepal Border

India is both a major producer and consumer of CFCs. In several instances in the mid-1990s illicit material from India was seized in the US and Indian-based brokers attempted to supply illegal ODS to the EU, even acting as brokers for Chinese-produced material. Yet India is now experiencing a growth in black market CFC imports. Between early 1999 and March 2000 around 880 tonnes of ODS were smuggled into India, which is approximately 12 per cent of national consumption.

The role of the neighbouring countries of Nepal and Bangladesh is key to understanding the mechanics of India's growth in illegal imports. In February 2000, EIA travelled to the India-Nepal border to probe the burgeoning smuggling of ODS in the region and to expose the methods and operators involved.

Nepal's Inflated Imports

As a mountainous land-locked country Nepal has a customs arrangement with India to enable it to import goods via India, called the 'Customs Transit Declaration'. Cargo is landed at Indian ports such as Calcutta and is sealed by Indian customs. The containers are then transported by road under seal to one of the authorised India-Nepal border points, for clearance by Indian customs. If the seals are intact, the goods are transported over the border to Nepal where the seals are opened and the goods inspected.

CFCs are imported into Nepal by this method effectively unhindered by the lack of import controls and low level of import tax (approximately 5 per cent compared to India's rate of 54 per cent for CFCs). The material is then delivered to various locations in Nepal, where a small percentage is used for domestic consumption, the rest is turned-around and smuggled back into India. The prevalence of this fraud is vividly illustrated by the import figures for Nepal; between January 1999 and June 2000 Nepal imported more than 422 tonnes of ODS, although the country's annual consumption is only approximately 50 tonnes.

Study of Customs Transit Declaration and Customs Clearance Documents reveal that a large quantity of the CFCs imported into Nepal and then smuggled into India were produced in Europe. A name which continually cropped-up as a manufacturer of the CFCs was Elf Atochem (Atofina). This French company exports large quantities of CFCs, manufactured and frequently shipped from Spain but trans-shipped via Dubai or Singapore. Many companies in Singapore are involved in the shipment of CFCs to Nepal including; A&P Air Conditioning Engineering Works, Elf Atochem (Atofina) and Kaltech Engineering & Refrigeration Pte Ltd. Other companies that exported significant quantities of CFCs included Naser Al Sayer & Co. and ASHAI General in Dubai, and Shanghai High Pressure Container Company Ltd in China.

Smuggling Operations

One of the first indicators of widespread smuggling of CFCs into India was the emergence on the market of 13.6kg disposable cylinders, which are widely used on the international market but banned in India. Through scrutiny of seizures made by the Indian authorities and conversations with industry sources EIA traced the route followed by the contraband material to Nepal, and the border town of Birganj - the base of operations for a smuggling network headed by Shanker Todi.

EIA's on-the-ground investigations reveal that Todi is the main broker for the illicit trade in ODS passing through Nepal. He is linked to most of the Nepalese companies importing ODS, and works through an associate called Ashok Agarwal to move the material back into India, mainly through the Birganj border crossing.

Consignments of CFCs in 13.6kg cylinders, which are enclosed in cardboard cartons, are taken to storage facilities in Birganj town. EIA observed cylinders of CFCs being moved between different storage areas before being packed in sacks. The disguised cylinders are then taken to the village of Inarwa on the Indian border. Under the cover of night these are smuggled into India in small batches. Alternatively smugglers move greater quantities of CFCs by night, in tractors and trailers, by more remote and dangerous routes via Biswaha or Sikta.

A second smuggling route exists at the border town of Biratnagar. Here smugglers decant CFCs from the easily recognisable 13.6kg disposable cylinders into larger 105kg cylinders widely used on the Indian market. This method emerged as a response to the seizure of disposable cylinders made by the Indian authorities.

A company called Hilltake, whose principal business is the manufacture of water storage tanks, a process which does not require CFCs, is also involved in smuggling. It imports large quantities of CFCs in disposable cylinders through the Customs Transit Declaration system via Calcutta. In the Hilltake plant on the outskirts of Biratnagar, the CFCs are decanted into larger cylinders. Frequent deliveries of ice are arranged by Hilltake to aid the decanting process. Until recently Hilltake moved considerable quantities of these cylinders across the Indo-Nepal border, declaring them as empty. Acting on a tip-off, Indian Customs officials at Patna intercepted and seized 79 full cylinders in April 2000.

Since this seizure Hilltake has altered its method, and has been using rickshaws to move one or two cylinders at a time to the border crossing at Jogbani where they cross unchecked. The cylinders are stored overnight at the Jogbani bus stand and loaded the next morning on to public buses bound for Patna. Surveillance of this new smuggling method has allowed customs to seize a further six cylinders on the 5th February 2001 and six cylinders on 9th February. Displaying the adaptability of this illegal trade, EIA is now aware of a new route used by the smugglers to the east of Biratnagar and Jogbani.

Fighting the Tide

When EIA met with government officials in India and discussed the smuggling problem it was clear that although some officials refused to admit that a problem exists with illegal ODS trade, others were dedicated and were having significant, but isolated successes, often in very difficult conditions. One senior customs officer in the town of Motihari has been responsible for the confiscation of 676 cylinders in nine different seizures in a year, while another official in Patna organised the seizure of cylinders smuggled via Hilltake in April 2000. These two individuals have combined their expertise and recently seized over 12 tonnes of illegal CFCs.

Despite the brave efforts of some dedicated officials, they are fighting a losing battle given the magnitude of the smuggling operations and length of the India/Nepal border; it is simple enough to circumvent the official crossing points unchecked. It is evident that the officials are only able to capture a small proportion of the material that crosses the border every day. Additional staff, extra vigilance and training could have significant positive effects, but the solution to this illegal trade must lie in restricting the source - the excessive import of CFCs into Nepal.

Other Smuggling Methods

CFCs are also smuggled into India by mis-declaration through various ports and 'Inland Container Depots' (ICDs). EIA obtained information about the efforts of customs officials at the Varanasi ICD who made a massive seizure of CFC-12 in 13.6kg disposable cylinders on the 3rd April 1999. This seizure of 1100 cylinders came from a single consignment, the value of which was underdeclared, and the importer, who promptly disappeared, did not hold an import licence.

Similar seizures have been made all over India by customs officials at ICDs such as Mumbai, Jaipur and Indore, where consignments of CFCs have been seized which were illegally imported through mis-declaration and under-invoicing.