Many papers have been written on the fake currency racket. They say the ISI is tryingto undermine our economy. But why is the ISI doing it now? Why didn't it do thisearlier? Why did the RBI ban notes of certain serial numbers? Can banks themselvesdistinguish between real and fake currency? Answers to these and other questions mightuncover a big crisis.
In the early '90s, Indian currency notes were printed in Madhya Pradesh andMaharashtra. The government decided to add two new presses in Karnataka and West Bengal.
Indian currency notes were always printed on machines supplied by a Swiss firm, Giori.This firm supplies printing presses for 95 per cent of the world's currency. Morethan 160 nations are its clients.
In 1990, the government laid down minimum conditions for firms wanting to supplymachinery for the proposed presses. Of all applicants, only Giori conformed to thegovernment's standards. A committee approved Giori's bid. But the contract waseventually awarded to a Japanese firm, Komori. The dispute between rival commercialinterests culminated in a court case.
But beyond commercial considerations was the aspect of national security. The printingtechniques of Giori were advanced, rendering counterfeiting difficult. Komori had simplertechniques, facilitating counterfeiting. Russia had briefly used Komori machines withdisastrous results.
In July 1995, a public interest litigation was introduced in the Bombay High Court. Thepetitioner sought to debar Komori from printing Indian currency notes for the sake ofnational security. The petition said that notes printed on Komori presses would be"easy to counterfeit" and "the country could face a most severe economicand political crisis".
The RBI admitted the "relative technical superiority of Giori" and thegovernment's "satisfactory experience" with the firm. It also conceded thatKomori's offer was "deficient in certain areas" and there could arise"teething troubles". The RBI still favoured Komori. It wanted to end the"scope of Giori using their monopoly power". The petition was dismissed.
Now the home and finance ministries are trying to figure a way out of the crisis. Theyhave decided not to demonetise the notes for fear of spreading panic. If the crisis isreal they had better demonetise, whatever the cost. In the bargain, black money wouldreduce.
The government can't afford to dither. This isn't Kargil. This could be much,much more dangerous.
Whatever colour the money,
Black, white, life stays sunny!
But brother, for God's sake
Don't pass money that's fake!
