The Telegraph
Since 1st March, 1999
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Money laundry bill Rs 2200 crore

New Delhi, Oct. 16: The government wants to buy new bank-notes at an estimated cost of Rs 2,200 crore after a gap of three years to replace worn-out notes that are swirling about the financial system. But the twist in the tale is that the new security features introduced in the notes imply that only one or two suppliers will be able to make the kind of notes that it now wants.

The high security paper that the government wants is being tendered through the Reserve Bank of India. It will have to be machine-readable with an optically active magnetic thread, with the size of the thread varying with denomination.

Earlier, the government used to buy bank notes with costly security features only for high-denomination notes of the value of Rs 100 or above and slightly cheaper security paper for lesser denominations.

With spurious Rs 500 notes flooding the market and fears of foreign intelligence agencies being involved in this, the government has wisened up and has decided to go in for security features for all denominations, which could save it the embarrassment of warning its own citizens to look out for bad money.

However, sources said rival, cheaper but equally effective security features are on offer by almost all the other suppliers of bank notes to the Indian government. All of them have been approved by a high-level committee that had earlier been set up to go into the issue.

These include bar-coded watermarks that allow machines to not only detect fakes but also allow sorting in denominations. It will also have optically active printing on both sides of the note, which changes colour with the way the note is read. The highly specialised market for bank notes till now has been shared by Luisenthals of Germany, Portals of the UK, Arjo of France, Tumbabruk of Sweden, which has now been bought over by US company Crane, Dutch security notes firm VHP, and National Bank of Ukraine.

But for some reason, the government has decided to not only stick to certain specifications which gives two of them an edge over all others, but also ignore the high-level committee’s recommendations that it should change the way notes are printed now, which allows high security features on only one side of the note with hardly any on the other side.

The last time that the government bought security notes in 1999, it cost it Rs 1140 crore to buy 31,000 tonnes. This time round the government is buying 36,000 tonnes of bank notes at an expected cost of about Rs 2200 crore.

The government also plans to procure machinery to eventually plastic coat these notes, which is estimated to cost another Rs 600 crore. At one time, the government had toyed with the idea of bringing in plastic currency with built-in high security features, but eventually dropped the plan.

Last time round, when the bank notes were bought, there were two note tenders — one put out by the department of economic affairs for its two note printing presses at Nasik and Dewas and another by the RBI for its Mysore and Salboni presses.

However, this time round the entire requirements of the Indian government is being routed through the RBI quote. This means that RBI will be the final deciding authority. The department of expenditure, which used to be involved in vetting the decisions will now no longer be party to the purchase.

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