New Delhi, Dec. 13: Polymer notes will be introduced on a trial basis in five cities, finance minister P. Chidambaram said in the Rajya Sabha today.
Such notes are more environment-friendly because they last longer than paper, he said, adding the project will start with 10-rupee notes because they are among the most used and barely last a year.
But the minister knocked down one major argument often advanced for the use of plastic (polymer) currency — that they are tough to fake. He said it was difficult to claim such notes could not be counterfeited and clarified that was not the objective of the project either.
The minister stressed the experiment was modest in scale and that its results would determine whether more such notes would be printed.
“The face value of Rs 1,000 crore must be measured against the (total) currency in circulation, which is Rs 11,00,000 crore. So it is a drop in the ocean.”
Twenty countries use plastic notes. “In respect of three, Australia, New Zealand and Romania, all notes are plastic. But I must also say that Thailand introduced and withdrew it.” Australia was the first to go plastic over two decades ago, and Bangladesh too has experimented with it.
Polymer notes are more expensive to produce in the short term, although their cost-effectiveness comes into play in the long term.
The project follows the conclusions of a study by The Energy and Resources Institute — formerly Tata Energy Research Institute — that polymer notes are more environment-friendly. The RBI had commissioned the study.
The minister clarified, however, that the existing paper notes did not mean “cutting trees” as they were made from a special type of cotton. “We are actually not cutting any trees to make any currency notes, whether it is paper or polyester. No tree is being cut. Therefore, both are, in a sense, environment-friendly.”
But he said the report had prodded the Centre into toying with the plastic option. “The study found plastic currency more environment-friendly. Therefore, I think, from an environment point of view, it is, perhaps, wise to experiment with this. Let us see what the results are.”
The 10-rupee notes stay in circulation barely a year and millions of pieces have to be printed, Chidambaram said, explaining why they were picked for the project.
The minister said the RBI printed 5,000 million pieces of Rs 10 notes in 2010-11 and 5,700 million in 2011-12.
“They go out of circulation in one year which is why we think we should experiment with plastic currency. This is a project that will not take off immediately. We have shortlisted the firms (to print the notes). We have to get security clearance and do it on a pilot basis.”
On questions from members about the fake threat, the minister said he “cannot say with certainty that plastic currency notes cannot be counterfeited”.
“Counterfeiting means access to the same technology that we use and access to the same raw material. If a counterfeiter has access to the same raw material and the same technology, surely he can counterfeit plastic currency as well as paper currency.”
Much of the fake currency was smuggled in from across the border and both Bangladesh and Nepal, two of the main sources, had extended good co-operation in checking the problem, the minister said.
Chidambaram said fake notes were being printed in Pakistan with “state support”. “Until those who are across the border realise that good relations with India is a pre-requisite for being good neighbours, we have to fight this menace as and when we face this menace.”
He said security features of notes were upgraded regularly to stay ahead of counterfeiters. “The last time we introduced security features was in 2005; and this is an ongoing exercise. As and when we have access to better technology, we will introduce new security features.”