New Delhi: The government is in talks for a joint venture with Royal Canadian Mint, to start production of plated coins in India amid continued anecdotal reports of shortages of small change across India.
While the Reserve Bank of India, or RBI, has placed a record order of 5.5 billion pieces with the government mint this year, the Security Printing and Minting Corp, the agency in charge of minting coins and printing currency notes, is also looking at an alternative metal composition other than ferritic stainless steel, the non-corrosive steel grade that is currently used for coin manufacturing.
“We are in talks with Royal Canadian Mint,” confirmed Arvind Mayaram, the corporation’s chairman and joint secretary in the ministry of finance. “We are also looking at different metal composition, which will not encourage and result in temptation to counterfeit.”
If a deal goes through, Royal Canadian Mint will tie up with its Indore-based partner, Mittal Appliances Ltd, which is currently manufacturing coin blanks for the new bimetallic Rs10 coin, due to be released by end of this year.
Pitching in: Jindal steel plant in Hisar. The government mint’s supply for stainless steel coin blanks is supplemented by private producers, such as the Steel Authority of India and JSL. Rajeev Dabral / Mint
Mittal Appliances, which manufactures non-ferrous sheet coil, has been producing metal coin blanks for Royal Canadian Mint for the past five years for supply to Thailand and the Dominican Republic.
“Multi-plated coins, which is yet to be introduced in India, has an electronic signature which makes the products more secure, difficult to counterfeit and easier for vending machines to detect,” said Dinesh Mittal, chairman.
Plated coins, a patented technology of the Canadian company, are in circulation in Canada, Singapore, New Zealand and The Philippines.
A month ago, the Security Printing completed reviewing the Royal Canadian Mint’s patented process, also known as “multi-ply plated technology” for its ability to use several layers of metals, including nickel and copper, with mild steel as the base.
The life of a coin is said to be about 15 years and India introduced stainless steel coins back in the late 1980s to counter rising nickel prices. In March 2007, the government switched to stainless steel for production of the chubby Rs5 cupro-nickel coins, as copper and nickel prices zoomed.
The government mint’s supply for stainless steel coin blanks is supplemented by private producers, such as the Steel Authority of India Ltd (SAIL) and JSL Ltd (formerly Jindal Stainless Ltd), which have made considerable investments on coin blanks. About 20% of the government’s coin blank requirements are outsourced. SAIL’s Salem plant produces 3,500 tonnes of blank coins a year (one million Re1 coins need 4.85 tonnes).
With higher RBI orders this year, the government’s four mints located in Kolkata, Hyderabad, Mumbai and Noida, outside Delhi, that are being modernized at the cost of at least Rs150 crore and employ 5,000, are working overtime.
Problems galore
Meanwhile, the finance ministry continues to receive a bulk of the complaints about insufficient circulation of coins from states such as, Karnataka, Bihar and Maharashtra.
“We get complaints and we pass it onto Reserve Bank, which gives us the indent for the year’s requirement,” an official said, requesting anonymity. Some observers, including one person who works at a government mint but also didn’t want to be identified, say some of the shortage has been contributed by RBI’s decision to stop production for two years—between 2005 and 2006—as well as uneven distribution of coins within India.
“It’s a headache to manage an idle staff when there is no work,” a coin specialist at a regional mint, said. “We took orders to produce Thai baht for the government of Thailand when there was no order from RBI in those 18 months.”
An RBI spokeswoman insists there is no shortage of coins and points out that the task of distribution rests with banks. “We assess their (customers) requirements and arrange to meet those by giving them the desired quantities at regular intervals,” she wrote in an email to Mint.
“My sense is that there are pockets of places, which are facing shortages. The problem is more of distribution,” adds the finance ministry’s Mayaram.
According to RBI’s 2007-2008 annual report released in August, demand for coins picked up from October 2006 and continued through 2007-08. The total value of coins in circulation increased by 13.3% last year, up from 11.2% in 2006-07, it said.
This year, the 5.5 billion pieces that have been ordered include 2,500 million pieces of Re1 coins; 1,800 million pieces of Rs2 coins; 800 million pieces of Rs5 coins; and 400 million pieces of 50 paise coins.
Sporadic shortages
In July, the Federation of Jharkhand Chamber of Commerce, which has 2,000 companies as members, held a coin mela, or fair, to try and tide over an inadequate supply of coins.
It asked RBI’s regional office in Patna to distribute coins worth Rs2.5 lakh. The coins were taken up in just two days by some 800 buyers, said Manoj Naredi, its president.
Other small towns, such as Jamshedpur, Daltonganj, Dhanbad and Gumla, are also experiencing similar shortages, he said. “We have written to the RBI last month, but have not heard from them so far,” said Naredi. However, RBI general manager V. K. Vohra says that “there was a shortage a few months ago. Now, there’s no problem.”
Paucity of coins also appears to be acute in Rajkot, the southern business hub in Gujarat. “We have been fighting with banks to distribute coins,”said Deepak Suchde who runs a machine tools business and is a member of the Rajkot Chamber of Commerce and Industries.
After several requests in the past six months, the central bank made arrangements to distribute coins worth Rs17 lakh a week ago. An advertisement was placed in a local newspaper, and the response was overwhelming.
“We distributed it to about 3,000-4,000 people, each received a minimum of Rs100 worth of coins. That’s all we were able to give, and that, too, got exhausted,” said Suchde.
The problem, he says, is more acute in villages around Rajkot. “But there’s nobody to listen or receive complaints. In the town, whether you buy petrol or use a Xerox machine, nobody returns the money or you get a chocolate worth Rs2,” he added.
Local solutions
As Mint reported on 16 March 2007, small businessmen were sending their staff out to scour paan shops and big retailers were paying a commission of between 2% and 7% to private money traders to secure supplies.
Maroor Padmanabha Pai, who runs an automobile retail business in Mangalore, still says he depends on a temple, 40 miles away, for supply.
“It’s an all-India problem. Which bank is going to give you coins? There are no coins,” says Pai.
Others have sought to evolve collective solutions. A year ago, the Mumbai-based Indian Hotel and Restaurant Association, tied up with banks— HDFC Bank Ltd, ICICI Bank Ltd and Syndicate Bank to obtain between Rs15,000 and Rs25,000 worth of coins every week. The association has 5,000 members; a group of 50-75 members secure coins by rotation every week.
“I won’t say every member gets their quota. Neither is it sufficient because each of them needs Rs1,500-2,000 worth of coins every day. Those who need more have to now buy from a money trader after paying 8% commission,” says Nikhil Shetty, a committee member. At present, the association is talking to State Bank of Bikaner and Bank of Baroda to extend its reach.
A collective approach is also working for the Retail and Dispensing Chemist Association, a body of 5,500 chemists, which is also based in Mumbai. It has tied up with UTI Bank, HDFC and ICICI and recently with the State Bank of India to replenish stock every week; the RBI informs them where its supply is headed and members visiting the local bank carry a letter from the association for assured supply. About Rs 3-4 lakh worth of coins are supplied every week, which are then divided among 10 selected chemists.
“There is always a conflict between a customer and seller when you can’t give the exact change,” said Prasad Danave, the Association’s secretary. “Some shopkeepers manage because they have contacts with small vendors and peanut sellers, others have tied up with mandirs (temples).
The finance ministry’s Mayaram said the RBI has been asked to draw up a road map by December for coins circulation and disbursal options, such as through rural cooperative banks, post offices and chambers of commerce.