Fake Indian Currency Note – The root of it all

Can Pakistan actually print fake Indian currency? Not unless Pakistan is supplied with inks, printing machines and security paper by government regulated companies.

Security features of Rs.500 note

The RBI had in 1997-98 outsourced printing of 2,000 million pieces of Rs 100 notes and 1,600 million pieces of Rs 500 notes to US, UK and Germany amounting to Rs 1 lakh crore. The committee, after questioning central bank officials, said the reasons provided were far from convincing. (via House panel pulls up govt for outsourcing printing of currency notes – India – The Times of India).

Twenty months ago

On September, 10th 2008, 2ndlook analysed the Indian counterfeit currency problem. Unlike the popular impression, it is quite beyond Pakistani capability to print the high quality fake Indian currency notes (FICN) that Indians have been seeing. Especially the Rs.500 notes.

An Indian paramilitary trooper shows fake currency and ammunition at a paramilitary camp in Srinagar on Monday. A paramilitary official said they recovered at least 4 million rupees of a total of at least 5.7 million counterfeit currency that had been circulated in Kashmir. — AFP photo

German paper, fake Indian notes

Eight months after the 2ndlook report, in June 2009, the Indian press reported that FICN coming into India had a common factor – German paper. Reporting on this issue, Mumbai Mirror Bureau, on June 29, 2009 said,

Sources said the seized notes are of high quality, achievable only in a government press. The paper used is from the same German company that exports material to both India and Pakistan for printing currency notes.

An officer said, “Earlier there used to be rackets operated from a room with currency notes printed through a laptop. But notes seized in the past couple of years have everything right, from watermark and paper quality to UV features. A Rs 1,000 note costs close to Rs 350 for printing. Add to it the risk and it becomes an unsustainable business unless funded by a state agency.”

7 months later, The Times of India reported much the same thing, on January 14, 2010.

On 4th August 2009, The Times Of India reported that the Indian Government had decided to tackle this problem at its source – the vendors who are supplying the paper, the inks and the printing presses, which allows Pakistan to duplicate Indian currency. Good move.

On 13th August The Economic Times reported that

The secret template India uses to print currency notes has been “compromised” and that is possibly why fake but real-looking Indian currency notes are being pumped in to subvert the country’s economy, says the Central Bureau of Investigation … The government is also indigenizing the production of a special paper to print Rs 500 notes, the most frequently counterfeited currency in the country. (ellipsis mine).

Fake Indian Currency Note (FICN) trail. (Image courtesy – India Today). Click for larger image.

The Indian Government stopped release of paper machinery order to a German-Austrian-Scandanavian manufacturer, reported The Indian Express on Sep 28, 2009.

“the Home Ministry has turned down a Finance Ministry proposal to purchase currency paper machines from Germany, pointing out that the company, Voith Paper, has been supplying identical machines to Pakistan. “The manufacturers said they will make some modifications for the machines they supply to Pakistan so that the currency paper is not identical. But we decided to be cautious in view of the serious problem of distribution of FICNs. The Finance Ministry, at a high level, has agreed with the Home Ministry’s view,” the official said.

Indian Parliamentary committee shocked

Some 20 months after this post was published, on May 1st, 2010, newspapers reported that Committee on Public Undertakings (COPU), an Indian Parliamentary committee,  had seriously faulted the decision to use European firms for printing Indian currency.

The CoPU felt that “India’s currency being printed in three different countries is alarming and during that particular fateful period our entire economic sovereignty was at stake.” The value of the currency notes given for printing was in “all amounting to a sum of Rs 1,00,000 crore.” It was further revealed that

“2,000 million pieces of 100 rupee denomination and 1,600 million pieces of 500 rupee denomination of notes were outsourced for printing at American Banknote Company(USA) – 635 million pieces, Thomas De La Rue-UK – 1,365 million pieces (100 rupee denomination) and Giesecke and Devrient Consortium (Germany) – 1,600 million pieces (500 rupee denomination).”

FICN Seizures (Image Source – India Today).

The world of security printing

Now security paper is not the kind that is sold over the counter, or something that one can order from any, odd paper mill in the world.

The entire currency and security-grade printing business is dominated by less than a dozen European companies. These companies will dare not support ‘counterfeiting’ operations – unless there is official cover or support given to them, by their respective Governments.

The Indian security paper manufacturer has been neglected

some quantity of paper used for currency is manufactured at the unit in CNP and the Hoshangabad Paper Mills, the rest is met through imports from four firms, Arjo Wiggins of France, Portal of the UK, Gane of Sweden and Paper Fabric Luisantel.

The Banknote Press in Dewas makes the offset ink, while the ink for intaglio printing is procured from SICPA, a Swiss firm with one of its units in Sikkim. There is a strong view among the security agencies that procurement from foreign agencies could compromise security. An intelligence report indicated sometime back that Pakistan had managed to purchase ink from SICPA and similarly, there is evidence to prove that Portal is supplying paper to both India and Pakistan.

Looking deeper, in May 2009, some 5 kg of Optically Variable Ink (OVI) intaglio-ink went missing during transportation from SICPA’s Sikkim unit to Bharatiya Reserve Bank Note Mudran in Mysore. In August 2009, SICPA landed in Customs trouble for evasion of customs duty. There seems to be more than meets the eye.

In the last 20 years, India has lowered its guard – and has become fixated on the Pakistan bogey. The Pakistan Fixation is a cover-up of India’s laziness or lack of resolve. Pakistan has neither the focus nor the persistence to do this fake currency racket over so many years. The Pakistan Fixation hides Indian ineptness at confronting this problem.

All this begs a 2ndlook at India’s knee-jerk blame Pakistan syndrome!

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