Outside an ATM in Chandigarh after demonetisation. (File Photo)
It is a demonetisation bonanza that has turned awry.
Currency paper majors across the globe are grappling with implications of recent instructions from the Government of India about destruction of security material and raw material used for manufacturing Indian currency paper.
Reason: more than one-third of the 27,000 tonnes of currency paper contracts finalised in December 2016 — during the cash crunch days after demonetisation was announced — were cancelled in September 2017.
This has resulted in the unprecedented need for destruction of raw material still lying in various foreign paper mills of a range of companies: Arjowiggins of France; PWPW of Poland; Landquart of Switzerland; Komsco of South Korea; Crane of Sweden; Goznak of Russia; Fabriano of Italy; and, Louisenthal of Germany.
The part cancellation came after the RBI significantly lowered its indent for currency notes six months after demonetisation.
On April 2, currency paper manufacturers located in Switzerland, Russia, France, Italy, Germany, Italy, Indonesia, USA and Sweden received a communication from the Bharatiya Reserve Bank Note Mudran Private Limited (BRBNMPL), asking them to specify how many days would be required for each of them to complete the destruction process, since “we have to send our teams to witness the activity”.
The BRBNMPL is a wholly owned subsidiary of RBI that prints notes in two presses, one at Mysuru and the other at Salboni in West Bengal.
The BRBNMPL letter to the foreign firms mentions destruction of all security and raw materials also left over from contracts given by SPMCIL (Security Printing and Minting Corporation of India Limited), the other currency paper printer.
Specific instructions have been given to the foreign firms on how to destroy the stockpile: only in the presence of authorized inspecting officers; paper sheets and trimmings should be shredded and incinerated/recycled within the mill; used/ unused dies and mould covers should be destroyed; ban on any sale of wastage paper to an outside agency.
The Indian Express spoke to several Indian representatives of the currency paper firms who said there was no clarity from the BRBNMPL on what was to be done with the “finished product”, that is currency paper already manufactured to Indian specifications, since the April 2 communication only mentioned spoilt/unused/surplus currency paper sheets and trimmings.
While one company representative said material and paper worth Rs 160 crore were lying with their paper mill abroad and that they were contemplating legal action, another company said the value of their security material was close to Rs 6 crore but that there were estimates of roughly 5,000 tonnes of “finished “ Indian currency paper lying in mills abroad.
“We will not allow the inspection team from India inside the paper mill to witness destruction if all payments for the paper and raw material is not made,” a company official said.
BRBNMPL and SPMCIL paid the suppliers for currency paper until a month after the foreclosure clause was invoked in September 2017 but as the market leaders now point out, the foreign firms had already landed raw material in bulk exclusively for the Indian contracts.